In China, high demand for robots but too many robot manufacturers
In China, high demand for robots but too many robot
manufacturers
By Pete Sweeney
8 hours ago
By Pete Sweeney
SHANGHAI (Reuters) - China wants domestic companies to
buy more locally made robots to lift productivity, but industry insiders have
warned its policies are over-stimulating the market and that robot
manufacturers were "coming up like mushrooms."
Government officials, worried that productivity growth
may have turned negative since 2009, see the promotion of automation as a
policy that will increase efficiency.
Chinese manufacturers, struggling with increasing costs
of labor, also favor more use of robots where possible.
The confluence of policy support and market demand made
China the world's biggest buyer of robots in 2013, overtaking Japan.
At the same time, both central and local governments are
encouraging new domestic players to capture market share from established
foreign brands. In its five-year economic plan for 2011-2015, Beijing
specifically targeted robotics as a key sector for development, hoping to
create four or five domestic robotics "champion" firms to meet an
annual production target of about 13,000 robots.
But Stefan Sack, CEO of robot manufacturer Comau Shanghai
Engineering, warned that the government policies carried a risk.
"Government intervention can help industry to grow
but it can also create bubbles," he said at a robotics industry
conference, adding that small manufacturers in the sector were "coming up
like mushrooms".
"Everybody wants to become a robot manufacturer now
because it's sexy," Sack said.
The official Xinhua news agency reported on Monday that
China now has 420 robot companies, adding that more than 30 industrial parks
devoted to robotics were being built or were already functioning around the
country.
Beijing's industrial policies have a history of going
astray, most recently in renewable energy, where official endorsement of what
was seen as a cutting edge technology resulted in duplicated investment around
the country, ending in a wave of bad debt as profit margins were wiped out.
EARLY SIGNS
Although analysts said the robotics industry is not at
that stage, there are already early warning signs.
"China's market is totally fragmented; you've
basically got 31 provincial markets," said Andrew Polk, resident economist
at the Conference Board research house in Beijing. "You get a directive on
the central front to build robots or whatever, and everyone moves to create
their own local champions."
"They are doing this at a point where wages are
rising, but their comparative advantage is still relatively cheap labor,"
he added. "They could be pushing this too hard too early."
According to the China Robot Industry Alliance, about
37,000 robots were sold in China in 2013, almost three-fourths of them manufactured
overseas.
The number of domestically produced industrial robots
tripled to about 10,000 units, on track to meet Beijing's goal of having
domestic brands account for a third of sales by 2015.
Official media said that by mid-summer, 54 listed Chinese
companies had invested in robotics firms, of which 80 percent were first-time
investors, causing the number of robot stocks to nearly triple since July 2012.
The mergers have been welcomed by mainland investors:
when JS Corrugating Machinery Co Ltd said it would acquire a robotics firm in
June, its stock spiked by 60 percent in a few trading days.
Established players are also doing well. Shanghai Siasun
Robotics & Automation, one of China's best-known robot makers, is up over
50 percent this year and pricing at around 84 times earnings, far outperforming
benchmarks.
GENUINE PROBLEM
Few economists dispute that the export powerhouse
provinces of Zhejiang and Guangdong, China's main manufacturing hubs, are
facing a genuine problem.
"Zhejiang province is facing a worker shortage. We
have new constraints on resources, input factors, and the environment; we need
to adjust our economy's structure," said Zhou Tufa, division chief at the
province's industrial investment department.
"We hope to substitute machines for laborers doing
heavy physical work," he said in an interview in the provincial capital
Hangzhou.
Local governments have adopted a variety of different
stimulus tactics in robotics. Dongguan, a manufacturing center in Guangdong,
has been particularly aggressive, creating a 200 million yuan ($33 million)
investment fund to subsidize robotics investments by local firms.
Wang Dayong, president of Zhejiang Sanhua Automotive
Components, told Reuters that his major challenge is attracting and retaining
workers, a problem he hopes robots can solve.
"We are automating for long-term
competitiveness," he said.
But customers warned that demand for more robots does not
equate to demand for more robot suppliers.
Frank Chuang, assistant director of manufacturing
operations at Ford Greater China, said that since most robot manufacturers use
customized operating systems and components, his company is conservative
regarding suppliers.
"If we don't carefully select the robots, then in
the near future we will generate not just programming language issues but also
maintenance issues."
It is also possible that firm owners are over-estimating
the potential benefits of automation.
For example Foxconn, a major supplier for Apple, said in
2011 that it aimed to have one million robotic arms in operation by 2014. It
subsequently scaled back its plans, with managers saying the robots were not
able to replace humans as effectively as expected.
Even automation enthusiasts like Wang of Zhejiang Sanhua
are careful.
"There are still areas where robots aren't as good
as people," he said. "Excessive automation carries its own
risks."
($1 = 6.1385 yuan)
(Additional reporting by the Shanghai Newsroom; Editing
by Raju Gopalakrishnan)
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