[Industry Observation] How is China's robotics industry distributed?

(Source: Robot Global News)

Source: New Wealth

With the transition and upgrading of the economic structure and the push to tackle hard-core technologies, domestic robot species are increasingly making a name for themselves, unlocking the unmanned era in depth through AI technologies such as autonomous driving, construction robots, and non-contact medical robots. Especially against the backdrop of the continued spread of the COVID-19 pandemic, robots adapted to different scenarios have become a rigid demand for industrial development.

At present, China has become the world’s largest robot market (table). According to the classification of the China Electronics Society, robots can be divided into industrial robots, service robots, and special robots. Data show that in 2021, the size of China’s robot market will reach RMB 84 billion, of which industrial robots account for RMB 44.6 billion, or 53%; service robots RMB 30.3 billion, or 36%; and special robots RMB 9.1 billion, or 11%.

Robots are hailed as “the pearl at the top of the manufacturing industry’s crown,” and they are also an important indicator for measuring a country’s technological innovation and the level of high-end manufacturing. Advanced manufacturing industries represented by robots are becoming a new engine for China’s economic growth. So how is China’s robot industry distributed?

01

Regional distribution: “major strongholds” are in the Pearl River Delta, with Shenzhen forging far ahead

As the world’s second-largest economy, China’s economic growth and transformation and upgrading have attracted major well-known global robot brands to set up in China—such as Fanuc, ABB, etc.—all vying to establish production bases. Data from Debon Securities show that since 2013, China has become the world’s largest industrial robot application market, and from 2013 to 2018, China’s industrial robot annual sales had a compound growth rate of 33%. By 2020, China has firmly secured the position of the world’s largest robot consumer country.

With the advancement of independent innovation in hard-core technology and the domestic substitution strategy, China’s local robot companies have risen rapidly, giving birth to a batch of homegrown brands such as Estun (002747), Inovance Technology (300124), Efort (688165), Canop, and RoboBoZhilee, among others. According to MIR statistics, in 2020, the localization rate in China’s industrial robot sector reached 29%.

As an important carrier for applying AI across diversified industries, the robot sector in recent years has attracted a large amount of capital. According to Qichacha data, over the past 5 years, the number of robot-related companies has increased significantly: in 2015, there were 13,632 robot-related companies; in 2016, it surpassed 20,000; in 2019, it rose to 43,352. As of now, there are 212,600 robot-related companies nationwide that are in operation and still in existence.

From a regional perspective, robot companies are mainly concentrated in five regions: Guangdong, Jiangsu, Zhejiang, Shandong, and Shanghai. Guangdong has the most robot-related companies in operation and still in existence, reaching 55,000, accounting for 25.87% of the national total. Jiangsu ranks second, with 28,800 robot-related companies, accounting for 13.55% nationwide. Zhejiang, Shandong, and Shanghai each have over 10,000 robot-related companies: 17.2k, 16.6k, and 11.7k respectively. Guangdong holds 1/4 of all robot companies in China, making it the “major stronghold” of robot companies in the country.

According to data from the China Business Research Institute, in Guangdong province, there are 12 prefecture-level cities with an intelligent robotics industry. Among them, Shenzhen has the largest total added value of its intelligent robotics industry, reaching RMB 6.15 billion, accounting for 80.7% of the province’s intelligent robotics industry; other cities with larger shares include Dongguan (8%), Huizhou (4.1%), and Foshan (2.9%). Guangdong’s intelligent robotics industry is mainly concentrated in the Pearl River Delta region, especially Shenzhen, which forges far ahead.

In recent years, Foshan has made rapid progress in the robotics industry and has performed impressively. In 2017, Midea Group (000333), the “biggest home appliance” firm, made a take-over offer to acquire German robotics giant KUKA (KUKA) for RMB 29.2 billion, a cross-border acquisition that caused quite a stir at the time. The company, together with ABB, Fanuc, and Yaskawa Electric, is known as one of the world’s “four major families” of industrial robot manufacturers, holding a dominant position in certain core component technologies.

In March 2018, Midea Group first publicly disclosed its plan for KUKA. The former intended to inject capital into KUKA China’s subsidiary businesses to jointly establish three joint ventures, expanding businesses in three major areas: industrial robots, medical, and warehouse automation.

That same year, in July, another corporate giant in Foshan, Country Garden (02007.HK), announced that it would establish its wholly owned subsidiary Guangdong RoboBoZhilee Robotics Co., Ltd. (abbreviated as “RoboBoZhilee”), concentrating efforts to research, develop, produce, and apply construction robots, preparing for large-scale, systematic application of autonomously developed construction robots across most stages of construction work—“so that robots work intelligently, just like humans.”

Over the past more than three years, RoboBoZhilee has enabled construction robots to evolve from autonomous R&D and small-batch production to engineering testing, engineering services, and mass commercial use, and has carried out comprehensive end-to-end planning and practice, building a complete full-cycle closed loop. RoboBoZhilee is the world’s first company to attempt to conduct large-scale, systematic construction work with robots, aiming to become a globally leading provider of intelligent construction solutions.

It is understood that due to harsh working environments, large scenario variability, and complex and ever-changing construction surfaces, construction robots have significantly different requirements from industrial robots and other products in terms of core components and core algorithms. Targeting eight major core systems for construction robots—servo systems, sensors, navigation, vision, software, and so on—RoboBoZhilee has invested substantial manpower and material resources to achieve full coverage through autonomous R&D. Among these, technologies such as motion control algorithms based on fuzzy adaptive control, intelligent vision sensors, robot cluster work planning and scheduling systems, and construction robot work simulation systems have filled gaps in the global construction-robot field.

By the end of November 2021, RoboBoZhilee had submitted 3,461 patent applications that were effective, with 1,640 authorized; related R&D products subsequently won many awards, including the China Patent Award, IF Design Award, Red Dot Award, IDEA Award, Red Star Award, and Golden Reed Award.

Entering the robotics field is undoubtedly a key choice for the transformation and upgrading of traditional industries. Midea Group and Country Garden have both moved into the robotics industry: one achieves a “curve-topping advantage” through mergers and acquisitions, while the other completes the leap “from 0 to 1” through independent R&D. Though their approaches differ greatly, they ultimately lead to the same destination—undoubtedly a classic snapshot of China’s transformation and upgrading of traditional industries.

As can be seen from the preceding discussion, the distribution of robot companies is highly consistent with the current level of development of the economy and industries. Under the trend of “the strong get stronger,” this may mean that regions with rapid economic growth such as the Pearl River Delta and the Yangtze River Delta are expected to lead far ahead in the robotics field.

02

Industry distribution: automobiles and electronics see the most applications; real estate holds huge potential

As mentioned earlier, currently more than 43.15% of the global robot market is industrial robots, and 37.2% is service robots—these two categories account for more than 80% of the robot market. In a recent report, the International Federation of Robotics (IFR) stated that, as of now, the number of industrial robots operating in factories around the world has exceeded 2.7 million units, setting a historical high. China is the world’s largest and fastest-growing robot market, and its development speed has no precedent in the history of robotics.

Data from Qichacha show that, from the perspective of industry distribution, nationally, robot-related companies that are in operation/existing mainly cluster in the wholesale and retail industries, accounting for 34.7%; second is the scientific research and technical services industry, with companies accounting for 23.0%; manufacturing and the industries of information transmission, software, and information technology services account for more than 10%, at 15.1% and 13.7% respectively. Education and construction have relatively fewer robot-related companies, with shares of 2.2% and 1.6% respectively.

Research from Debon Securities indicates that, from both the global and China perspectives, automobiles and electronics are currently the two industries with the most robot applications, the largest number of participants, and relatively mature related technologies.

As early as 2010, the market was mainly driven by automobile applications. With the rapid development of areas such as 5G and new energy, new downstream application scenarios for robots have continued to expand. In the industrial robotics sector, in 2020, four major industries—automobile parts, metal products, complete automobile vehicles, and household appliances—accounted for 41% in total, of which more than 90% are vertical multi-joint robots. Electronics, lithium batteries, and photovoltaics together account for 38%, of which 70% are SCARA robots, and the remaining 30% are vertical multi-joint robots. The demand in manufacturing processes of these industries has some similarities.

As robot technology advances and the economic efficiency gained by using robots improves, robot applications in industries such as real estate construction, metal manufacturing, and food and beverage are also increasing continuously.

Public information shows that RoboBoZhilee has formed 12 construction robot product lines, including concrete construction, concrete finishing, bricklaying and plastering, and interior wall decoration. Most of these robots can be used simultaneously for cast-in-place concrete processes and for prefabricated construction. RoboBoZhilee is exploring the formation of an intelligent construction end-to-end solution in which construction robots cover the entire lifecycle of construction engineering.

A concrete interior-wall grinding robot from RoboBoZhilee performing grinding work

In early February 2021, the Ministry of Housing and Urban-Rural Development issued a letter approving the launch of smart construction pilot programs, confirming that seven projects in Shanghai, Chongqing, and Guangdong will carry out smart construction pilot work. The Fengtong Garden project located in Shunde District, Foshan, Guangdong, became RoboBoZhilee’s first commercial application project for construction robots. It is reported that as of the end of November, RoboBoZhilee had deployed 18 types of construction robots for commercialization, with services covering 25 provinces, more than 280 projects, cumulative deliveries of over 600 units, and cumulative application of construction area exceeding 5.5 million square meters.

In fact, China is a major construction country, with the world’s largest construction market. The construction industry is a pillar industry of the national economy, accounting for about 26% of China’s GDP in 2020. What does not match the huge market capacity is that in the construction industry today, the aging of migrant workers is serious, and young labor force willingness to work continues to decline. Data from the National Bureau of Statistics show that in 2020, the total number of migrant workers nationwide was 285.60 million, down 1.8% from the previous year. In the future, issues such as labor shortages, rising labor costs, and labor safety will become even more prominent.

Against the backdrop of achieving high-quality development in the construction industry, the “robot builds houses” solution is expected to be widely promoted in China’s real estate industry, leading to a revolution in the construction industry that will arrive quickly, and the real estate industry may become another area among the biggest beneficiaries after automobiles and 3C electronics.

03

In the dual-carbon era: robots are expected to show their full potential

After China first proposed “achieving a carbon peak before 2030 and achieving carbon neutrality before 2060” at the 75th session of the United Nations General Assembly in September 2020, in March 2021, at the “Two Sessions” (the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference), “carbon neutrality” was written into the Government Work Report as one of the eight major priorities for 2021, and China quietly entered the “dual-carbon era.”

Without doubt, “carbon neutrality” will further stimulate downstream market demand for robots and intelligent manufacturing, thereby benefiting the development of the robotics and intelligent manufacturing industries.

A report from Tianfeng Securities shows that in the consumption sector, the share in direct emissions is the highest, while in the real estate sector, the share in indirect emissions is the highest. As mentioned earlier, sectors such as consumption and real estate are likely the industries with the broadest robot application scenarios.

Taking the real estate industry as an example, the “China Building Energy Consumption Research Report” statistics show that carbon emissions from China’s building sector account for about 20% of the nation’s total carbon emissions.

As an important carbon-emitting subject within the real estate industry chain, the construction industry is “big but not excellent.” Most companies are still at the level of “moving bricks, tying rebar, pouring concrete, and installing formwork.” The overall adoption level of advanced process technologies and engineering technologies is low. Despite creating many world “firsts,” the industry still faces problems such as poor product performance, massive resource waste, prominent safety issues, serious environmental pollution, and low production efficiency. In 2018, China’s total carbon emissions across the entire process of building construction were 4.93 billion tons of standard coal, accounting for 51.3% of the national carbon emissions. Achieving “carbon neutrality” with “high carbon emissions” is truly a long and arduous task.

Within the construction industry, in 2020, China produced 2.385 billion tons of construction waste, about 30%-40% of the total waste. This figure is also increasing year by year as urbanization construction accelerates and the market size of the construction industry expands. China’s construction waste is growing at a rate of 8%-10%; in the future, more than 60% of cities may be surrounded by construction waste.

In Foshan, Guangdong, a mobile brick-making vehicle for reusing construction waste developed by RoboBoZhilee, in the form of a special-purpose work vehicle, uses a nomadic style of operation to deep-process construction waste on-site. The vehicle integrates functions such as crushing and screening, batching and mixing, compression molding, and finished product palletizing. It has characteristics of high automation, small footprint, and convenient, quick relocation. It can quickly transform construction waste in waste pits into recycled concrete products and directly apply them to the project site.

A mobile brick-making vehicle for reusing construction waste producing bricks

RoboBoZhilee said that as of September 15, 2021, the company’s mobile brick-making vehicle for reusing construction waste had cumulatively processed 450 tons of construction waste, produced more than 200,000 pieces of road-colored paving bricks (230×115×60mm), and had already filed 11 domestic invention patent applications and 3 overseas invention patent applications.

In recent years, a series of related policies and opinions have been issued, including green construction and construction waste management, showing China’s attention to and determination for sustainable development in the construction industry. Driven by both government policies and market demand, robots represented by RoboBoZhilee’s mobile brick-making vehicle for reusing construction waste are expected to become widespread across China’s construction industry.

In fact, China’s robotics industry has been flourishing under the guidance of policies such as Industry 4.0. During the COVID-19 pandemic prevention and control period, robots for disinfection, delivery, temperature screening, inspections, and other tasks went “on the front lines,” allowing everyone to see robots’ service capabilities and economic value. Sustained high levels of application demand have strongly boosted technological innovation, product R&D, system integration, talent cultivation, and the construction of public service systems for China’s robotics industry, creating a favorable ecosystem for the development of China’s robotics industry.

To promote the healthy development of China’s robotics industry, the Ministry of Industry and Information Technology and other government departments have successively introduced a series of subsequent measures to promote industry development. Many provinces and cities have also released multiple industrial promotion policies around “robots.” In particular, provinces and cities such as Beijing, Tianjin, Liaoning, Shanghai, and Zhejiang have issued robotics-related industry plans, and robots are entering a high-brightness moment.

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