Over the past two decades, China has developed into a global manufacturing powerhouse, thanks to low wages, high availability of manpower, and a fast-growing domestic market, claiming the leading spot from the US in 2010. However, its labor cost advantage has been gradually eroding as wages in China have risen much faster than in the US. In 2004, China’s manufacturing wages were only 3% of those in the US, but increased to almost 10% in 2012,1 and PricewaterhouseCoopers expects this figure to rise to 50% by 2030. Adjusting for the lower productivity in China and other higher costs such as transportation costs or duties, the cost advantage of manufacturing in China compared to the US is less than 5%2.
However, robotics and automation can help Chinese companies to reduce costs and improve the quality and speed of production. Robots carry out work that is dangerous, tedious or impossible for humans. In addition, new generations of robots are cheaper and more agile than ever, and can work safely and effectively alongside humans.
The Chinese government has recognized the benefits of increased automation such as improved safety, quality, resource efficiency, and has set ambitious targets for automation. For example, the city of Guangzhou – a key manufacturing center – has a stated goal of automating 80% of its manufacturing by 2020, and offers subsidies for the purchase of automation equipment.3
In 2013, China was the largest market for robots, accounting for 20% of global sales. The combination of rising wages in China, declining costs of robots, and very low robot density – only 23 robots per 10,000 manufacturing employees in China compared to 330 in Japan, 396 in South Korea, and 141 in the US – offer considerable of room for growth in the robotics market. Or, put differently, China has approximately 8x the number of people in manufacturing compared to the US, but uses approximately ½ of the number of robots, corresponding to approximately 1/16th of the number of robots per manufacturing employee. China is expected to be a major driver of demand for robots over the next few years. Accordingly, the IFR4 expects robot shipments to China to grow 26% per year, or more than double the growth of global shipments, through 2017. As a result, robotics manufacturers such as Kuka, ABB, Fanuc and Yaskawa Electric stand to benefit from a growing market for robots in China over the next few years.
1 http://www.bls.gov/opub/mlr/2006/11/art4full.pdf; http://www.jetro.go.jp/en/reports/survey/pdf/2013_05_01_biz.pdf
2 BCG, April 2014
Senior Analyst RobecoSAM Smart Materials Strategy"Rising wages in China and declining costs of automation technologies are expected to offer attractive growth opportunities for manufacturers of robotics equipment."