China: Robotics juggernaut FEATURE
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The country continues to make headway in its goal to be a world leader in robots.

When it comes to robotics, China is thinking big—and long-term. The goal: to turn its own economy into a powerhouse powered by robots, while also becoming the world's leader in manufacturing the technology.

"They're investing in long-term strategic planning and have the muscle to enforce it," says Frank Tobe, editor of The Robot Report.

Lots of planning

Specifically, back in 2015, officials announced the ambitious Made in China 2025 plan, a government-backed initiative to become a leader in a wide range of key industries ranging from food production and car manufacturing to electronics and home appliances. At the center of that effort is robotics, which is seen as vital to automating manufacturing.

Of course, for the plan to succeed, the country needs to have enough robots. To that end, last April officials launched a five-year Robotics Industry Development Plan. This was to boost China's capacity to manufacture the technology, the better to not be dependent on manufacturers outside the country. Already the world's largest user of robots, the objective is to make 100,000 robots a year by 2020.

In addition, there's also a strategic plan to be a leader in AI, giving robots the ability to learn and improve with experience.

Why is this happening? Industry experts point to a few trends. One is rising labor costs and a simultaneous need to cut production expenses. Example: Manufacturing giant Foxconn replaced 60,000 workers with robots in one factory in 2016, according to Chinese media reports. "The government wants to transform China from a low-cost labor-intensive manufacturing giant into a technology-based world manufacturing power," says Tobe. In addition, further motivating the Chinese government, there's the matter of the high prices companies pay for robot wares they buy from foreign manufacturers.

Buying and manufacturing

Certainly, China already is a major user of robots. The country has the biggest share of robots in the world, according to the International Federation of Robots (IFR) and has the largest number of industrial robots. From 2010 to 2015, Chinese companies installed 90,000 industrial robots; that's compared to 80,000 in Asia, Europe and the United States in total. By 2019, China is on track to comprise 40% of worldwide sales of robotics (87,000 units) from 27% in 2015, according to IFR.

As for manufacturing, the number of companies that make or are involved in producing robots has skyrocketed—over 500 compared to around 190 in 2015, according to The Robot Report; other reports cite around 800 firms. That increase is all about meeting an overall goal for Chinese companies to manufacture most of the robots China uses: more than half by 2020 compared to 31% in 2016, according to Tobe. Chinese robot makers' market share was 31% in 2016, a 120% increase from the year before, according to IFR.

Advantages

Of course, Chinese industry has some advantages. Most important is the role of government. To meet their goals, officials are giving businesses everything from low-interest loans to free rent. In 2015, for example, the government of Guangdong Province reportedly invested around $150 billion to boost automation and robotics innovation. Also there's the existence of tightly knit ecosystems of suppliers in Shenzhen. "You can get everything you need. All the suppliers are there," says Tobe. Because companies don't have to wait, say, for a part to come from overseas, they can move especially quickly.

Challenges and acquisitions

Still the country faces many challenges. "They've grown at a dizzying pace but there's still a long way to go," says Jeff Burnstein, president of the Association for Advancing Automation. For starters, China needs to be able to make more sophisticated robots—say, the six-axis kind from companies in Germany and the US, according to Tobe. Most articulated robots have six axes, which allows for greater flexibility and the ability to perform more applications than other brethren. In addition, many industry observers say that Chinese companies need to become more innovative. For example, half of China's robotics firms do not produce new products, according to Chinese researcher Zi Yang, writing in The Diplomat, and 70% to 80% are agents for other companies.

One way to get that sophistication is through acquisition. Earlier in 2017, Midea, a Chinese consumer products manufacturer, closed a $4 billion deal in which it bought Kuka AG, one of the top four leading industrial robot makers, based in Germany. "That acquisition was a big step toward building capacity," says Chris Nicholson, CEO of Skymind, a deep learning AI platform, who works frequently in China. "And there will be more such acquisitions—as many as they can manage."

Another hurdle: the ability to make high-priced, complex components, like speed reducers and control panels. For now, Chinese companies have to buy them from Japanese, German and U.S. companies. But according to Tobe, plans are in the works to increase their market share to more than 30% by 2019. "They recognize there are parts they don't make in China and they need to do a better job of making them—or they'll have to acquire them," says Burnstein.

 Ultimately, a preponderance of industry experts think the country is likely to meet any challenges facing it. There's both the will and the way. "When they want to do something, there are few things that can stop them," says Nicholson.

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About Anne Field

Anne Field has covered entrepreneurship and small business for the New York Times and Bloomberg BusinessWeek.