In the debate over the rise of China and the reindustrialization of America, many claim that China threatens America’s lead in industrial automation. But that’s plain and simply not the case.
Japan and Europe overtook America in the cutting-edge field long ago and they, not China, are currently the world’s leading suppliers of industrial automation equipment.
There are many aspects to leadership in industrial automation, but industrial robots are an indicator of both the sophistication and scale of a nation’s manufacturing. China buys a lot of industrial robots, but it is not yet a major producer. America also buys a lot of industrial robots, but not nearly as many as China.
According to the International Federation of Robotics (IFR), the Chinese market for industrial robots has been the world’s largest since 2013 and has quadrupled in size since then. In 2018, China accounted for 36% of total worldwide installations, followed by Japan (13%), the US (10%), South Korea (9%) and Germany (6%). The latest year for which complete and finalized IFR statistics are available is 2018.
The IFR’s industrial robot statistics include handling, welding, assembly, dispensing, cleanroom, processing and other machines readily recognized as industrial robots. They do not include components such as precision gears, sensors, control units or software.
By region, the breakdown of industrial robot installations in 2018 was Asia-Pacific 67%; Europe 18%; the Americas 13%; and others 2%. By industry, robotics were used in automotive 30%; electrical and electronics 25%; metal and machinery 10%; plastics and chemicals 5%; food and beverages 3%; and not specified 19%.
The IRF does not provide statistics on industrial robot suppliers but based on industry sources and Lightstream Research findings Fanuc, Yaskawa, Kawasaki and other Japanese manufacturers account for at least 60% of the global installed base. ABB, Kuka and other European companies contribute close to 30%. In terms of the value of shipments, Fanuc, Yaskawa, ABB and Kuka have an estimated 70% or more of the global market.
But that gets us to the issue of what is and isn’t counted. Kuka, a German company, was purchased by China’s Midea Group in 2016. The Chinese have also bought a dozen other European and American industrial robotics companies over the past five years.
China’s government-supported acquisition campaign, which now faces strong headwinds in both Europe and the US, is aimed at advanced technology. Siasun, China’s top industrial robot maker, is affiliated with the state-linked Chinese Academy of Sciences.
So far, the campaign has been a success. According to a Siasun executive quoted by the Nikkei Asian Review, “We have bridged the gap with outside players in terms of quality and technology.”
In addition to supplying Chinese and multinational companies in China, Siasun now exports to more than 30 countries. It has relationships with 17 countries participating in China’s Belt and Road Initiative (BRI).
IFR data indicate that Chinese-made machines in 2018 accounted for almost 10% of total worldwide industrial robot installations and 27% of installations in China – up from zero in 2012.
And while America distances itself from China in the name of decoupling, European and Japanese companies are helping to build China’s industrial robots. In September 2019, Swiss-Swedish multinational ABB started construction of a new factory near Shanghai.
According to the press release on the project’s initiation, “It will be the most advanced, automated and flexible factory in the robotics industry worldwide – a center where robots make robots. The new factory will also host an onsite research and development center, which will help accelerate innovations in Artificial Intelligence.”
ABB refers to itself as “China’s #1 robotics manufacturer” and calls the factory, which is scheduled to open next year, “a critical global growth investment for the company in the world’s largest robotics market.”
Japanese industrial robot makers Fanuc, Yaskawa Electric and Kawasaki Heavy Industries have also expanded their operations in China over the past three years.
However, after eight years of growth, installations in China declined by 1% in 2018 while rising 21% in Japan, 22% in the US and 26% in Germany. Installations also fell by 5% in South Korea. Weakness in cellphone markets undercut demand in China and South Korea, while auto-related and other factory upgrades surged in Japan, the US and Germany.
Growth in total worldwide installations slowed to 6% in 2018 from 32% in 2017 and 20% in 2016. The IFR’s latest estimate for 2019, when the cellphone and auto markets were both down, is for a decline of 10%. Complete data should be announced in September.
What about 2020? With Covid-19, it will be bad. Perhaps as bad as 2009, when the Lehman shock led to a 47% decline in total worldwide industrial robot installations. Even if installations are down by only half that amount it would still be a major setback for the industry.
Fanuc, Japan’s top pioneering robot maker, reported a 19% year-on-year sales decline in the three months to June and is girding for a 17% decline in the fiscal year ending March 2021. This comes after a 20% drop last fiscal year.
When demand does recover, the US could become a bigger player via the Endless Frontier Act, “an initiative to solidify the United States’ leadership in scientific and technological innovation” proposed by Republican Senator Todd Young and Senate Democratic Leader Chuck Schumer.
Democratic Presidential candidate Joe Biden’s proposed $700 billion “Buy American” program to support American manufacturing and technology could also help.
The Trump Administration’s policy of telling the Chinese and others that they are not allowed to advance without American permission is not a sufficient or credible response to a US competitiveness problem that has been decades in the making.
Scott Foster is an analyst with Lightstream Research, Tokyo.