The COVID-19 pandemic has hit the global manufacturing industry hard in 2020, but is driving the increased penetration of industrial automation, more specifically industrial robotics.

 

The COVID-19 pandemic has hit the global manufacturing industry hard in 2020, but is driving the increased penetration of industrial automation, more specifically industrial robotics.

After an extreme shock in the first quarter of 2020, the manufacturing sector of China is now recovering at almost full speed. This is good news for industrial robotics, as China has been one of the most rapidly growing markets for this technology in the last few years. The share of Chinese industrial robotics has grown notably, from 27% in 2015 to 44% in 2019.

The industrial robot market slowed down during 2018 and 2019 due to the downturn in the automotive industry, with automobile manufacturing one of the largest consumers for industrial robotics. However, recent statistics from China show that industrial robotic manufacturing in the region is taking off again, despite the continued downturn in automotive.

In the first half of 2020, China automotive manufacturing declined by 16% YoY due to widespread COVID-19 shutdowns. However, the industrial robotics market grew by 10% YoY for the same period. The production of robotics increased 26% in June along. This deviance of growth between automotive and robotics shows that robotics is penetrating China’s manufacturing sector faster than ever, as more manufacturers are deploying industrial robotics.

The Chinese market for industrial robotics has very high potential due to a huge manufacturing sector, government incentives and targets, and a lower-than-average industrial robotics penetration rate.

The Chinese market for industrial robotics has very high potential due to a huge manufacturing sector, government incentives and targets, and a lower-than-average industrial robotics penetration rate.

 

The penetration of industrial robotics in China is around 144 robots for every 10,000 workers. This is much lower than other major manufacturing economies, as well as being lower than the average for advanced economies. It seems reasonable to estimate that the penetration of industrial robotics in China will reach the advanced economies’ average in the long run, which promises at least a 200% increase on today’s market size.

There are two factors backing up this estimation: strong market demands and government incentives. The main drivers of investment in industrial robots in China are the rapidly soaring labor cost and declining manufacturing labor force supply. According to the China National Bureau of Statistics, the average salary of manufacturing employees has increased 9% from 2013 to 2018, while number of manufacturing employees as a percentage of the population declined from 3.9% to 3.0% in the same period. As a result, industrial automation, especially robotics, have rapidly penetrated the China manufacturing sectors for the last few years.

When compared with the manufacturing sector of advanced economies, such as that in the US, the salary growth in China will continue for years before it aligns with the GDP growth rate. Furthermore, the aging population of China will further press the labor supply. Therefore, Omdia expects that the industrial robotics and other industrial automation equipment will continue to penetrate this region with above the average rates of growth.

 

While the labor shortage and cost concerns are forcing companies to deploy robotics, the high-tech manufacturing movement in China also requires Chinese manufacturers to be more automated, more efficient, and more intelligent. The Chinese government has set up goals specifically for industrial robotics, as a crucial part of its plan for “Smart Manufacturing”. China industrial robotics penetration is estimated to reach the advanced economies average by the end of the next decade.

Besides the shipment goal, China’s government also expects China’s domestic players to gain increasing market share during the above period. This is because the current China industrial robotics market is dominated by foreign players.

In early 2014 when the incentives first came out, Chinese industrial robotics suppliers only accounted for around 10% of the total Chinese market. By the end of 2019, the market share of Chinese suppliers had increased to 35%. However, most of the market is still dominated by global tier 1 suppliers such as Fanuc, Yaskawa, ABB, and Kuka. Omdia estimates that under the government’s incentives and schemes for Industrial 4.0, domestic Chinese industrial robotics suppliers market shares will increase to 55% by 2025, while the global tier 1 supplier market share is likely to decline to 40%. Other suppliers in the industry are likely to be acquired or merged during the forecast period, as Chinese suppliers look to gain market share.

The main opportunities for China domestic industrial robotics suppliers are from general manufacturing sectors. According to the China Robot Industry Alliance (CRIA), in 2017, global suppliers have less domination in the robotic market for non-metal and metal mining processing, chemical, and food beverage sectors. In the automotive and electronic manufacturing sectors, global brands hold 90% and 70%, respectively, of the market share in China. This is because the automotive and electronic product manufacturing industries were two of the first sectors to start deploying industrial robotics, due to their highly standardized assembly lines. Global companies such ABB and Yaskawa already had years of experience in the market, so had a competitive advantage in the early stages. However, global tier 1 suppliers are in a similar position to China domestic suppliers in the general manufacturing sectors, with fewer use cases. Therefore, as industrial robotics continues to penetrate rapidly in general manufacturing industries, Chinese domestic suppliers are more likely to possess leading positions due to the “home advantage”.

Overall, the government incentives and strong market demands in China offer the largest market potential and strongest growing momentum to industrial robotic industry, for both global tier 1 and its domestic suppliers. While the global tier 1 are likely to hold their leading positions in automotive and electronic manufacturing sector, there is a larger market for domestic suppliers in certain downstream sectors and products.

What is Next

Omdia recognize large potential in the China’s industry robotic market and the robotic part supply market. Domestic robotic OEMs all rely heavily on oversea supplier for the servo system, precise gearbox and control unit. This situation will remain for a relatively long term, providing market opportunities for oversea robotic part suppliers to enter the China’s market.

Omdia’s research teams are working together on the research of these markets. If you have any interest or questions, feel free to reach out to me at Chris.jia@informa.com