Can the “New infrastructure” save China's Motion Controls market?
On July 16, the National Bureau of Statistics stated that China's economy grew 3.2% in the second quarter of 2020, compared to the previous year. This recovery has not come easily, as seen by a 6.8% year-on-year decline in the first quarter of 2020. Enterprises that rely on overseas markets, as well as those in the machine tool industry, have seen a sharp decline in performance in the first half of this year. Under such adverse conditions, China’s government is greatly promoting the “New infrastructure” policy to save the Chinese domestic market.
Thanks to the effective control of COVID-19 in China, Chinese local companies recovered quickly in the second quarter and all production resumed to normal levels. Business orders and deliveries of PCBs (printed circuit boards) increased significantly compared with the same period last year, as a result of increased demand from new 5G smartphones.
In the wake of the COVID-19 outbreak, the Chinese government has ramped up investment in new infrastructure in the hope that it will spur economic growth and lead to a recovery in the manufacturing sector. The electronics manufacturing industry (driven by 5G), the machine tool industry (driven by AI and new energy vehicles), and the equipment manufacturing industry (driven by lithium batteries and industrial robotics) are all major opportunities for the motion control industry, created by China’s focus on new infrastructure.
Chinese motion control: A changing landscape
In 2011, the top three industries in the Asian motion controls market were machine tools, textile machinery, and packaging machinery. By 2015, electronic assembly and industrial robots began to account for a rapidly growing share of the market. In 2019, according to the Omdia Motion Controls 2020 report, machine tools, semiconductors, electronic equipment, and industrial robots were the four largest markets in Asia-Pacific. (For more, please visit Global Motion Controls report - https://technology.informa.com/Services/574779/motion-control-intelligence-service-annual).
Under China’s new infrastructure policy, CNC machine tools and industrial robotics are vital. The CNC machine tool industry is seen as the foundation of advanced manufacturing, whilst for industrial robots, China is already the world's largest market.
China accounted for 30 percent of industrial robot sales in 2019, according to Omdia, but the domestic market still has a lot of room for growth. First, the density of industrial robots in China is still relatively low. Second, policy promotion has led to the rapid increase in demand for Chinese local manufacturing components. According to the 13th Five-Year Plan, the density of industrial robots in China will reach 1.5 robots per 10,000 workers by the end of 2020 and the localization rate of core components of industrial robots should exceed 50% by the end of 2020. An industrial robot contains a motion controller and each joint is equipped with a servo drive and servo motor for transmission. Omdia estimates that the industrial robotics industry, once revived in the context of new infrastructure, will rapidly expand the size of the servo market in China. COVID-19 slowed down the recovery from 2019, and Omdia estimates the China domestic economy and manufacturing market will boom in early 2021 as a result of these initiatives.
In terms of lithium-ion equipment, the Chinese government has recently sent two signals to market - the construction of charging piles for new-energy vehicles and the new energy vehicle policy adjustment. In order to stimulate the market for new energy vehicles, the quota of new energy vehicles has been relaxed in cities with purchase restrictions. Furthermore, the subsidy policy for new vehicles has been extended for a longer period. These new policies will continue to increase the demand for new energy vehicles and expand the market share in the Chinese market.
Additionally, the construction of 5G base stations drives the supporting energy storage industry to heat up rapidly. China Mobile and China Tower have successively issued bidding notices for centralized procurement of lithium iron phosphate battery products, with the visible market worth roughly RMB 4-5 billion yuan at present. With the continuously decreasing cost of lithium iron phosphate batteries and increasing demand as power supply and 5G base stations need to be upgraded and expanded urgently, it is an irresistible trend to use lithium electricity to replace lead acid as the energy storage battery in the future, enhancing demand for lithium-ion manufacturing equipment.
With the continuous expansion of the domestic lithium battery market, the supporting production equipment industry has also ushered in an era of rapid development, providing a good development space for the motion controls market. Furthermore, the production equipment for lithium batteries requires high control precision and high stability. Lithium battery back-end production equipment, such as forming, volume division and testing, and pack assembly equipment, have higher requirements for production line flexibility so improving the degree of automation in the back-end equipment is vital for quality and throughput.
Overall, 2020 has been a difficult year for all countries due to the impact of COVID-19, but there are signs of improvement. China was the first to be affected and has been the fastest to recover, with government policies and incentive providing extra opportunities for motion controls suppliers. The “New Infrastructure” policy of the Chinese government presents opportunities in CNC advanced machine tool, robotics, and the equipment of lithium-ion which will provide new stimulus to the motion controls market. However, China's domestic economic recovery still presents many unstable factors, such as the lack of confidence in the consumer market, the weak purchasing power of large commodities, and the direction of china-us trade issues. Omdia predicts that the Chinese Motion Controls market will return to growth in 2021, but the growth rate is expected to be less than before COVID-19.