China's industrial automation is bringing structural change that will continue to play out for many years to come. We explore a few key trends in China that will underpin industrial automation growth, such as low penetration, demographic changes, rising labor costs, and government support.
We predict that automation in China will experience double digit growth to 2020, most pronouncedly in the robots category. According to our channel checks, there still is a significant technology gap that exists between Chinese players and developed market counterparts in Japan, Korea, the US, and Europe. The gap is closing with higher Chinese research and development investments that are set to accelerate.
KEY EVENTS & TRENDS
Made in China 2025 – In the Footsteps of Japan: Based on the Japanese experience, China's market has already entered the fast-growth phase with absolute robot ownership and density of units at similar levels to Japan 25 years and 30 years ago, respectively.
Rise of the Robots: Labor is contributing less and less to economic expansion worldwide, putting the onus on improved productivity to sustain growth prospects, particularly true for China that is ageing rapidly. Occupational preferences for safer white collar professions in cities are also boosting robot adoption.
In-House vs. Imported Machines: We believe that the market share of Chinese players will grow once costs drop, performance improves, and mass adoption takes off. We expect these forces to converge within the next few years.