challenges and strategies for china’s industrial … · division from world robotics industrial...

Yuki Matsuda [email protected]

Industry Research Division, Mizuho Bank

[Summary] ○ In promoting automation, more specifically, the installation of industrial robots, it is hoped that the

various contingent merits will contribute to the shift in China’s economic growth model and to the maintenance of a robust growth rate that are being advocated by Beijing, and the expectation is that efforts to encourage industrial robot installations will intensify in years to come and that the Chinese government will actively promote the development of a domestic industrial robotics industry.

○ China’s industrial robot shipments are growing rapidly and it has already overtaken Japan to become the world’s largest industrial robot market. To date, the automotive industry has been the driving force behind demand for industrial robots in China, but this trend is expected to change in the future as demand from the electrical and electronics manufacturing sectors and new China-specific industries expands.

○ In terms of policy, the Ministry of Industry and Information Technology has published Guidelines on Promoting the Development of the Industrial Robotics Industry, which are being employed by regional governments in the formulation of specific measures to encourage the growth of the Chinese robotics industry. In terms of the direction of policy support for industrial robotics, central government measures to be included in the nation’s 13th Five-Year Plan are expected to focus on support for domestic robot manufacturers, including steeper tariffs on imports, financial subsidies for research and development, and the establishment of testing and evaluation centers.

○ Japanese robot manufacturers currently dominate China’s industrial robotics market, accounting for 51.6 percent of total sales, with European manufacturers accounting for 32.1 percent, local manufacturers for 3.3 percent, and makers from elsewhere accounting for the remaining 13.0 percent. Together, Japanese and European suppliers have a share of more than 80 percent of the market and foreign robot makers are currently the driving force behind industrial robotics in China.

○ Robot manufacturers are engaged in a running battle to create dominant sales channels ahead of their competitors. With the various robot makers embarked on the road to building sales channels, it is now critical for Japanese suppliers to establish their presence in China’s fast-growing market for industrial robots. This report looks at the various strategies available for creating sales channels and increasing market share in China’s industrial robotics market.

Mizuho Industry Focus

March 2015

Vol. 169

Challenges and Strategies for China’s Industrial Robotics Market ~ Successful Sales Channel Management Tactics for Japan’s Robot Manufacturers ~

Challenges and Strategies for China’s Industrial Robotics Market


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[Contents]

Challenges and Strategies for China’s Industrial Robotics Market — Successful Sales Channel Management Tactics for Japan’s Robot Manufacturers —

I. The Importance of Promoting Industrial Robotics in China....................................................... 2

II. Trends in China’s Industrial Robotics Market............................................................................ 5

III. Robotics Industry Policy Trends in China ............................................................................... 11

IV. Foreign Robot Manufacturers in China .................................................................................... 16

V. A Review of the Strategic Directions Open to Japan’s Robot Manufacturers ........................ 23

VI. Conclusion ................................................................................................................................... 29



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I. The Importance of Promoting Industrial Robotics in China

Whilst China is learning to accept a slower pace of economic growth as the “new normal”, maintaining a robust growth rate remains a primary policy objective for the Chinese government

China’s economic growth has been slowing gradually (on a quarterly basis) since 2010 but it has continued to try to maintain the government’s indicative target rate of 7.5 percent (annualized) (Fig. 1). The policy agenda set forward at the Central Economic Work Conference (CEWC: the highest level economic conference in China, this is an annual meeting that is convened by the Central Committee of the Communist Party and the State Council to set the economic policy agenda and growth targets for the year to come) held in December 2014, is indicative of the strategic direction of economic growth in China in the coming year. According to the CEWC statement, the Chinese economy is transitioning to a “new normal”, including a shift in gear from the previous high-speed growth to medium-to-high-speed growth, a shift from an extensive model of growth in scale and speed to an intensive model focused on quality and efficiency, and a shift in the economic structure from quantitative expansion to qualitative progress, in the face of which, the government has come to terms with the slower pace of economic growth. At the same time, the CEWC cites “maintaining stable economic growth” as its primary mission in steering the economy, suggesting that, whilst high-rate growth may not be attainable, maintaining a robust growth rate will continue to be a key task for the Chinese government and one of its overarching policy objectives.

Fig. 1: (Quarterly) Transitions in China’s Economic Growth Rate

Source: Compiled by Mizuho Bank Industry Research Division from National Bureau of Statistics of China data

With labor costs increasing and China poised to enter a “population onus”, the nation faces mounting pressure to affect a growth model shift

Currently, the Chinese government is advocating the transformation of the economic development model and has put promoting a “shift in the pattern of economic development” (转变经济发展方式) at the top of its policy agenda. Changing production methods offers one means of affecting this shift in the development pattern, but this necessitates promoting a shift from increasing inputs in manpower and capital as production factors to raising productivity. The mounting pressure to shift to new modes of production increases has

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been driven by labor inflation, with manufacturing labor costs increasing at a rate of more than 10 percent annually, primarily in China’s coastal regions (Fig. 2), and the emergence of problems securing personnel as China enters a “population onus” (Fig. 3). Such premises are no longer viable under the existing economic growth model, which is founded on cheap labor supplies, hence the pressure on China to rebalance its economy away from the traditional growth model towards a new model of growth, ergo a shift to new methods of production.

Fig. 2: List of Average Wages in Prefecture-level Cities

2012 ranking

City 2007 2012 CAGR (07-12)

1 Shanghai 49,310 89,601 12.70% 2 Beijing 46,507 85,307 12.90% 3 Karamay, Xinjiang Uyghur 30,884 73,510 18.90% 4 Ordos, Inner Mongolia 31,583 66,892 16.20% 5 Guangzhou, Guangdong 40,561 63,752 9.50% 6 Tianjin 34,938 62,225 12.20% 7 Nanjing, Jiangsu 35,907 60,404 11.00% 8 Shenzhen, Guangdong 38,797 59,010 8.70% 9 Suzhou, Jiangsu 31,404 57,622 12.90% 10 Huainan, Anhui 31,368 57,559 12.90% 11 Zhoushan, Zhejiang 32,580 57,294 12.00% 12 Huaibei, Anhui 25,326 57,012 17.60% 13 Dongguang, Guangdong 35,280 57,007 10.10%

Source: Compiled by Mizuho Bank Industry Research Division from National Bureau of Statistics of China and CEIC data

Fig. 3: Transitions in China’s Dependent Population Ratio

Source: Compiled by Mizuho Bank Industry Research Division from National Bureau of Statistics of China and CEIC data

Given this, the drive to automate, to mechanize production with industrial

robots, has risen rapidly into the spotlight. The merits of installing industrial

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robots are summarized in Fig. 4.

Promoting industrial robotic applications and industry growth a solution to China’s growth model shift problem

Specifically, the increases in productivity and the savings from reduced head counts and worker wages (items (1) and (2) in Fig. 4) offer a direct solution to the aforementioned challenge of affecting a change in production processes. Moreover, these and the other merits cited can potentially contribute to the transformation of the economic growth model and the maintenance of a robust growth rate that are being called for by the Chinese government. In consequence, efforts to encourage the installation of industrial robots are expected to intensify over the coming years, whilst the Chinese government will actively promote the development of a domestic industrial robotics industry.

Fig. 4: The Merits of Industrial Robot Installation

Source: Compiled by Mizuho Bank Industry Research Division

(2) Less need for recruitment, lower costs from manpower savings

(3) Stable, improved product quality

(4) Addresses need for high product mix

(5) Resource and energy savings

(6) Improved working conditions and occupational safety

(1) Increased productivity



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II. Trends in China’s Industrial Robotics Market 1. Shipment Volumes and Operational Stock

Chinese robot shipments reach 36,500 units in 2013 making it the world’s biggest market for industrial robots

In 2013, worldwide shipments of industrial robots increased by 11.8 percent to 178,100 units, up from 159,300 units in 2012. The increase in shipments from China was rapid, with sales rising from 22,900 units in 2012 to 36,500 units in 2013 (or 59%), transforming China into a driving force in the global robotics market and making it the biggest robot market in 2013 in terms of annual sales, as it outstripped Japan (Fig. 5: shipments; Fig. 6: sales growth).

Fig. 5: Robot Shipments by Region Fig. 6: Robot Shipment Growth Rates by Region

Source: Compiled by Mizuho Bank Industry Research Division from World Robotics Industrial Robots 2014, IFR


In 2013, China had 132,700 industrial robots working in the nation’s factories giving it the world’s third largest operational stock after Japan and Germany

Moreover, the total worldwide stock of operational industrial robots in 2013 was 1,332,200 units, up 7.8 percent from 1,235,300 units, the figure recorded in 2012. China’s operational stock increased 37 percent from 96,900 units in 2012 to 132,700 units in 2013, putting it into third position behind Japan (304,000 units) and Germany (167,500 units) (Fig. 7: operational stock; Fig. 8: growth rates).

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Fig. 7: Operational Robot Stock by Region Fig. 8: Growth Rates in Operational Robot Stock by Region



China’s presence in the global robotics market is growing in terms of both shipments and operational stock, and it is becoming a key market for Japanese robot makers

In sales terms, China’s share of the global robot market increased to 21.5 percent in 2013, whilst its share of the worldwide stock of operational industrial robots climbed to 10 percent (Fig. 9: share of shipments; Fig. 10: share of operational stock). China is expected to remain a driving force with an ever-greater presence, as the market for robots continues to expand worldwide. This expands the business opportunities open to Japanese robot makers, and the importance of establishing market position in China is rising steadily as a result.

Fig. 9: Share of Global Robot Shipments by

Region Fig. 10: Share of Global Operational Robot Stock

by Region



52 133

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2．Applications of Industrial Robots in China and the Potential for Future Trend Changes

In China, automotive manufacturing accounts for over half of all industrial robotic applications

Looking at industrial robot applications by industry, the automotive industry is China’s largest industrial robot customer, accounting for 56 percent of total sales, followed by the electrical/electronics industry at 17 percent, and the metal and machinery sector with a share of 13 percent (Fig. 11). The automotive industry accounts for more than half of total supply in China, which is a considerably larger percentage than the Japanese market (Fig. 12).

Fig. 11: Applications of Industrial Robots in China

by Industry, 2010-2012 (average %) Fig. 12: Applications of Industrial Robots in Japan

by Industry, 2010-2012 (average %)



The dominance of auto manufacturing in demand for robots is a result of the rapid expansion of China’s auto market

The scale of robot investment in the automotive industry is largely a product of the rapid expansion in China’s car market in the last few years. In 2009, China became the largest auto market in the world, outstripping the United States with new car sales of 13,640,000 units. The latest figures show car sales continuing to expand, with sales topping 23,490,000 units in 2014 and ensuring that China retains its position as the world’s largest auto market in terms of annual sales (Fig. 13). This rapid growth in the car market combined with industrial robot installations in the automotive industry has propelled a surge in demand for robots from the automotive industry, which has been the driving force behind the expansion of China’s market for industrial robots to date.

Rapid growth in demand for robots from electrical and electronics manufacturing sectors a possible long-term trend change

The next task is to consider the potential for change in the structure of industrial robot customers. One possibility is that demand from the electrical/electronics industry will increase. Many processes continue to be worked by hand in China’s electronics industry, meaning that there is substantial scope for further automation and industrial robot installations. Moreover, with a lot of electronic products for which China’s share of global production is more than 70 percent, the demand potential for industrial robots

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is huge (Fig. 14). In fact, electronic manufacturing services (EMS) giant, Foxconn Technology Group (Taiwan), has unveiled plans to add one million robotic workers and is promoting the automation of its production processes and the installation of industrial robots. Accelerating demand for robots from the electrical/electronics industry is thus expected to continue and given the size of the potential demand, the pace of this expansion is likely to be rapid.

Fig. 13: Transitions in Car Sales in China, the US and Japan

Source: Compiled by Mizuho Bank Industry Research Division from various materials

Fig. 14: Production of Major Electronic Products by Country, 2013

Source: Compiled by Mizuho Bank Industry Research Division from Worldwide Electronics Market 2014 - Comprehensive Study, Fuji Chimera Research Institute

Rapid growth in demand for robots from China-specific industries sectors a second possible long-term trend change

Growth in demand for robots from new industries represents another possibility. As seen with electronics products above, China boasts an overwhelming lead in terms of production volume across a wide range of product categories that is unattainable in both the world’s leading industrialized nations and elsewhere. With China’s huge production volume, scope for new industrial robot investment could emerge in production processes that traditionally failed to secure sufficient volume to necessitate industrial robot installation. Currently in China, interest in industrial robot

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installation is mounting in sectors in which levels of robot investment in the world’s leading industrialized nations have been limited, such as home appliances, furniture, bricks, tiles, explosives, food items, pharmaceuticals and cosmetics. Were progress to be made on the installation of industrial robots in these sectors, it would follow the automotive and electrical/electronic industries in ushering in a new trend and lead to further growth in China’s market for industrial robots.

3．Trends in Import Tariff Rates

The final section of this chapter examines trends in import duties in China. The view that China will impose tougher duties on imports in order to protect domestic robot manufactures has been gaining ground in recent years, attracting increased levels of interest from industry watchers.

The setting of new levies for imported robots hints at tax rate hikes in practical terms

Fig. 15 lists those industrial robots that are subject to import duties and the corresponding tariff rates, though since many of the industrial robots that are currently imported into China fall under HS code 8479.5010: multifunctional robots, the most-favored-nation zero tariffs (free trade) apply. In recent years, however, there have been signs that China plans to affect a de facto increase on industrial robot import duties, including moves to add new items to the list of robots that are subject to taxation. Specifically, five items were added in 2014: spray painting robots, conveyor robots, resistive spot welding robots, arc welding robots and laser welding robots. Accordingly, where an industrial robot previously classified as a “multifunctional robot” falls under the “conveyor robot” category, the tariff rate has effectively increased from zero to 5 percent.

Fig. 15: Tariff Rates on Imported Industrial Robots, 2015

HS code Name Provisional 2015 tariff

rate

Most favored nation

tariff rate

Ordinary tariff rate

Agreed tariff rate (ASEAN)

Remarks

8424.8920 Spray painting robots 0% 30% Added in 2014

8428.9040 Conveyor robots 5% 30% 0% Added in 2014

8479.5010 Multifunctional robots 0% 20%

8486.4031 Conveyor robots for integrated circuit plants

0% 20%

8515.2120 Resistive spot welding robots

5% (automotive applications)

10% 30% 0% Added in 2014

8515.3120 Arc welding robots 10% 30% Added in 2014

8515.8010 Laser welding robots

5% (automotive applications)

8% 30% 0% Added in 2014

Source: Compiled by Mizuho Bank Industry Research Division from various materials



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China’s 2015 Tariff Execution Plan introduces no notable changes from the 2014 plan, but…

There were, however, no changes of note in the number of relevant HS code items and tariff rates contained in the 2015 Tariff Execution Plan (2015 年关

税实施方案) that was published on December 12, 2014, which retains the 5-percent provisional tariff rate on resistive spot welding robots and laser welding robots.

Stricter application to taxable items means that concerns over a substantive increase in tariff rates linger

Regarding the current status of HS code classifications and applications, import records from the Shanghai Customs District show that 35,000 industrial robots were imported into China in the first ten months of 2014, of which approximately 98 percent were classified as multifunctional robots. Concerns over a de fact increase in the relevant tariff rates remain, however, since China’s tax administration could elect to begin classifying multifunctional robots under taxable HS codes and applying the relevant tariff rates accordingly. Were this de facto increase in import duties to occur, it would have a negative impact on the price competitiveness of imported industrial robots, and the situation will need to be watched.



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III. Robotics Industry Policy Trends in China 1．Policy on Industrial Robotics

Policy support for the robotics industry aims to cultivate domestic robot makers, increase the domestic market share of high-end products, and increase robot density

Current policy on industrial robots is set forward in the Guidelines on Promoting the Development of the Industrial Robotics Industry (工业和信息

部关于推进工业机器人产业发展的指导意见), which was promulgated by the Ministry of Industry and Information Technology on December 22, 2013 (Fig. 16). The guidelines set three main industry development goals to be achieved by 2020: (1) the cultivation of 3-5 internationally competitive leading enterprises and 8-10 auxiliary industrial clusters, (2) the raising of China’s market share of high-end products above 45 percent, and (3) robot density (the number of units for every 10,000 workers) of 100 or above. The Chinese government is thus committed to cultivating domestic industrial robot manufacturers and increasing the presence in the market of robots manufactured by domestic makers, whilst increasing the rate of industrial robot installation. It is worth noting that development of China’s industrial robot industry has been progressing under the 12th Five-Year Plan, which focuses on the restructuring and upgrading of the manufacturing industry (改造提升制造业) and the cultivation of strategic emerging industries (培育发

展战略性新兴产业), and suggests that the robot industry occupies a key position in central government policy.

Fig. 16: An Overview of the Guidelines on Promoting the Development of the

Industrial Robotics Industry

Industry development goals

• Foster 3-5 internationally competitive leading enterprises and 8-10 auxiliary industrial clusters by 2020

• Raise levels of technical innovation and international competitiveness, achieve a market share of high-end products of over 45% and bring robot density (the number of units for every 10,000 workers) above 100

Key tasks

• Make automobiles, shipping, electronics, explosives, and national defense priority sectors • Promote the development of system integrators, design, manufacturing, testing and other

technologies and increased productivity of core components • Nurture leading enterprises • Formulate industry development plans specific to local industry needs in all regions • Promote wider use of models and industry upgrades • Organize the compilation of a system of industry and technical standards • Strengthen international cooperation with a view to improving technologies

Safeguards

• Establish a framework for cooperation that spans government departments and industries • Disclose information on the match between demand and supply to create an environment

conducive to the development of the robotics industry • Provide policy support in terms of funding and tax benefits • Strengthen the role of industry groups • Support personnel training

Source: Compiled by Mizuho Bank Industry Research Division from the MIIT Guidelines on Promoting the Development of the Industrial Robotics Industry

Specific regional support policies are being consolidated on the back of the

central government’s guidelines, primarily in the coastal provinces and prefecture-level cities where there is a heightened urgency for industrial robot installation.



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Guangzhou (Guangdong Province) has put concrete support policies in place, including financial subsidies

On April 3, 2014, the city of Guangzhou in Guangdong Province published an Implementation Opinion on Promoting the Development of the Industrial Robotics and Intelligent Equipment Industries (关于推动工业机器人及智能

装备产业发展的实施意见), which sets forth the city’s policy on promoting the development of this industry (Fig. 17). This implementation opinion makes explicit provision for financial subsidies of up to 20 percent per unit (or a maximum of RMB 30,000) and up to 10 percent per set (or a maximum of RMB 500,000) on purchases or leases of locally manufactured industrial robots. Thus progress towards concrete support policies, including subsidies, is being made.

Fig. 17: An Overview of Guangzhou’s Implementation Opinion on Promoting the Development of the

Industrial Robotics and Intelligent Equipment Industries

Industry development goals

• The development of an intelligent equipment industry with robotics at its core with a cumulative worth RMB 100 billion by 2020

• Annual production of robots and intelligent equipment of 100,000 units • 5-10 enterprises with intellectual property rights in the region of RMB 10 billion, 2-3

robot industry parks, robot/intelligent equipment applications in over 80% of the city’s manufacturing industry

Key tasks

• Attempt to prioritize application in the machinery, automobiles, foods, pharmaceuticals, electronics and hazardous goods sectors

• Promote the development of associated components industries, including core components

• Support the development of leading enterprises • Develop and build industrial parks for the robot industry • Strengthen efforts to attract robot-related enterprises • Promote investment and loan services for related industries

Safeguards

• Inject funding from special funds into leading enterprises • Provide funding to support projects such as R&D, production, system integrators and the

establishment of public platforms • Provide subsidies of up to 20% per unit (up to a maximum of RMB 30,000) and 10% per

set (up to a maximum of RMB 500,000) for purchases (or leases) of locally-manufactured products for three years commencing in 2014

• Introduce preferential taxation, including lump-sum payments equivalent to 10% of automation costs for robot application model projects established in Guangzhou (up to a maximum of RMB 500,000), deductions for R&D costs, and high-tech enterprise certification

• Provide support to talented personnel from overseas, including coverage for relocation expenses, school admission for children, and housing

• Provide one-to-one support for expansion into influential projects

Source: Compiled by Mizuho Bank Industry Research Division from the Guangzhou Implementation Opinions on Promoting the Development of the Industrial Robotics and Intelligent Equipment Industries

Changsha (Hunan Province) is prioritizing the fireworks and firecrackers sector in an effort to reflect local industry characteristics

In the face of rising labor costs and difficulties securing workers, the city of Changsha in Hunan, a backwater province to the north of Guangdong, on September 18, 2014, announced a Three-year Action Plan for the Development of the Industrial Robotics Industry (工业机器人产业发展三年

行动计划), which establishes a three-year timeframe for promoting the manufacture and installation of industrial robots through 2017 (Fig. 18). Changsha encompasses the city of Liuyang, a major firework and firecracker



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production center that accounts for around 70 percent of domestic production, and one feature of this action plan is its positioning of this industry as a key sector with an emphasis on improving working conditions and occupational safety through the installation of industrial robots in fireworks and firecracker production. As this demonstrates, support policy in Changsha has been drafted to reflect local industry characteristics.

Fig. 18: An Overview of Changsha’s 3-Year Action Plan for the Development of the Industrial

Robotics Industry Industry development goals

• Industrial robot production capacity of RMB 10 billion by 2017 • Expand application of robotics in key sectors and bring robot density above 100

Key tasks

• Designate model enterprises for robot applications in the automobile and automotive parts, electronic information, construction materials, food processing, medical equipment, fireworks and firecrackers, and logistics industries, and establish model production lines

• Develop technological innovations and core components for system integrators, design, manufacturing, and testing, etc.

• Attract companies to the city, with a focus on nurturing local companies • Strengthen the construction/development of Yuhua Economic Development Zone • Establish a robotics research institute • Train human resources

Safeguards

• Provide subsidies of up to 20% per unit (up to a maximum of RMB 100,000) and up to RMB 2 million per company on purchases (or leases) of locally-manufactured products

• Provide subsidies of up to 10% (up to a maximum of RMB 500,000 per set) or RMB 5 million to companies purchasing (or leasing) local production lines

• Where a prominent company is investing in excess of RMB 100 million in the establishment of a production base, offer lump-sum payments of RMB 10 million in the case of head office relocation, RMB 5 million in the case of regional head office relocation

• Tax breaks, exemptions/reductions on standard factory rents for Yuhua Robot Demonstration Zone tenants

Source: Compiled by Mizuho Bank Industry Research Division from Changsha’s Three-Year Action Plan for the Development of the Industrial Robotics Industry

In addition to the examples given above, regional governments across China are hammering out unique support policies aimed at promoting industrial robot installation and the development of the robot industry (Fig. 19).

Fig. 19: Regional Promotion Policies for the Robotics Industry

Name of issuing organization Date of publication Name of policy

Chongqing Municipal People’s Government October 2013 关于推进机器人产业发展的指导意见 (渝府发

[2013] 74 号)

Hangzhou Economic and Information Technology Commission November 2013

关于印发杭州市开展机器换人工作三年行动计划 (2013-2015) 的通知 (杭经信技术 [2013] 563号)

Zhejiang Provincial People’s Government May 2013 关于促进企业技术改造的实施意见 (浙政发

[2013] 30 号) Nanjing Municipal People’s Government September 2013 加快推进南京市工业机器人产业发展的工作意

见 (宁政发 [2013] 234 号)

Fujian Provincial Economic and Trade Commission September 2013

关于印发推动福建省机器人、传感器及智能化仪器仪表产业发展的若干意见的通知 (闽经贸技术 [2013] 708 号)



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Name of issuing organization Date of publication Name of policy

Luoyang Municipal People’s Government January 2014 洛阳市工业机器人及智能装备产业三年攻坚行

动计划 (洛政 [2014] 3 号) Zhejiang Economic and Information Technology Commission February 2014 关于 2014 年加快推进“机器换人”工作的实施意

见 (浙经信投资 [2014] 78 号)

Amoy Municipal People’s Government April 2014 关于进一步推动工业稳增长促转型十三条措施的通知 (厦府 [2014] 108 号)

Wufu Municipal People’s Government April 2014 芜湖市机器人产业集聚发展若干政策 (试行) (芜政办 [2014] 10 号)

Hubei Economic and Information Technology Commission July 2014 湖北省推动工业机器人产业发展实施意见 (鄂经

信机械 [2014] 191 号) Dongguan Municipal People’s Government August 2014 关于加快推动工业机器人智能装备产业发展的

实施意见 (东府 [2014] 94 号) Weihai Municipal People’s Government October 2014 关于鼓励支持机器人产业发展的意见 (威政发

[2014] 30 号) Shenzhen Municipal People’s Government November 2014 深圳市机器人、可穿戴设备和智能装备产业发展

政策 (深府 [2014] 97 号) Shanghai Economic and Information Technology Commission November 2014 关于上海加快发展和应用机器人促进产业转型

提质增效的实施意见 (沪经信装 [2014] 785 号) Shenyang Municipal People’s Government December 2014 关于支持机器人产业发展和科技创新的实施意

见 (沈政发 [2014] 52 号)

Source: Compiled by Mizuho Bank Industry Research Division from Chinese regional government websites and other sources

2．Future Trends in Policy Support for the Robotics Industry

The Ministry of Industry and Information Technology, the Ministry of Science and Technology and other central government organs are currently working on the formulation of support policies for the industrial robot industry in anticipation of China’s next five-year plan.

Based on its understanding of the issues facing the industry, the central government is to focus its support for industrial robotics on Chinese robot makers

China’s market for industrial robots is forecast to grow in the coming years, but the existing market is dominated by foreign robot makers, Chinese manufacturers have an extremely small market share and there is a high degree of dependence on foreign manufacturers for core components such as reducers and servomotors. The Chinese government thus regards the improvement of the technological capabilities of domestic robot makers as a priority issue for the domestic robotics industry. Based on this perception of the issue, future support policy for the robot industry is likely to focus on increasing the market share of domestic robot manufacturers and improving the technological foundations of the industry, with the Chinese government expected to take the following actions.

Tougher duties on imports As discussed in the previous chapter, the government could opt to impose tougher duties on imports as a means of protecting domestic robot makers, and there are signs that this is already beginning to occur.

R&D subsidies for select companies

Financial subsidies for domestic robot makers engaged in R&D on industrial robots and the key components used in their manufacture are another option. In recent years, however, the government’s stance on subsidies has shifted



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away from pork barrel spending towards the provision of limited subsidies to specific companies that meet set technical and investment requirements to avoid problems of overproduction down the line. The central government is thus expected to provide subsidies in respect of specific domestic robot manufacturers, and there are signs that it has already begun contacting certain domestic manufacturers for selection.

Establishment of testing and evaluation centers

Another option is the establishment of government-funded testing and evaluation centers for industrial robots, a move that would contribute to improvements in the product quality of domestically manufactured industrial robots through the verification of manufacturing processes and assessments on robot performance.

Promote widespread use of industrial robots in new sectors by designating priority industrial fields

The designation of priority industries is another measure that is being used to promote industrial robot installation in new sectors of industry. On December 29, 2014, the Ministry of Industry and Information Technology announced an Implementation Plan for an Automation Project for Civilian-Grade Explosives Production Safety (民爆安全生产少(无)人化专项工程实施方

案) targeting the installation of robots in the production of explosives. As this demonstrates, in designating specific sectors as priority industries, developing R&D equipment for the construction of automated production lines and providing R&D subsidies, and subsidies for the installation of industrial robots, China’s government aims to encourage the spread of industrial robot installations to new industries.

Such government-led actions are expected to be fleshed out in specific industry support policies going forward. As might be expected, such actions will be of significance to the business development initiatives of Japanese robot makers operating in China. The imposition of tougher import duties on industrial robots will become a precondition to inquiries on the shape of production systems, whilst the selection criteria for subsidy eligibility will help to determine which Chinese robot manufacturers will become more competitive and the designation of priority industries will determine the industries requiring focus. Japan’s robot makers will thus need to keep a careful watch on industry policy trends as work to consolidate the next five-year plan progresses within the Chinese government.



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IV. Foreign Robot Manufacturers in China 1．Japanese Robot Manufacturers in China

Japanese robot makers account for more than half the industrial robots sold in China, and European and other foreign manufacturers currently dominate China’s robotics market

Data on the nationality of industrial robot suppliers to the Chinese market show Japanese robot makers to have the dominant share of the market at 51.6 percent and reflect the predominance of Japan’s robot makers in the global market for industrial robots (Fig. 20). By contrast, Chinese robot makers have a share of just 3.3 percent, which constitutes a marginal increase of 2.1 percent over 2012 but means that local manufacturers remain a tiny presence. Currently, Japanese and European robot manufacturers (with a share of 32.1%) account for more than 80 percent of industrial robot sales in China, meaning that the market is dominated by foreign players.

By company, the four leading suppliers: Fanuc (Japan, 16.9%), ABB (Switzerland, 15.9%), Yaskawa (Japan, 13.2%) and KUKA (Germany, 13.1%), have a market share of a little less than 60 percent (Fig. 21).

Fig. 20: Share of China’s Industrial Robotics

Market by Country, 2012-2013 (articulated robots)

Fig. 21: Share of China’s Industrial Robotics Market by Company, 2013

(articulated robots)

Source: Compiled by Mizuho Bank Industry Research Division from China Industrial Robot Market Investigation Pandect, FNA


Japan’s robot makers were relatively quick to tap China’s robotics market

Japan’s robot makers began advancing into China in the 1990s and were relatively quick to tap China’s industrial robot market (Fig. 22), which is one reason for their success in securing a dominant market position.

Moves to establish manufacturing bases on the mainland have gathered pace in recent years; tougher import tariffs are contributing to the drive to look into local

In recent years, moves to establish local manufacturing bases in China have been gathering speed as foreign robot manufacturers look to enhance their price competitiveness. Currently approximately one-third of Japanese robot makers have manufacturing bases on the mainland, but the trend towards tougher import tariffs discussed in “II. 3. Trends in Import Tariff Rates” above is expected to encourage those manufacturers that have yet to go down

53.7% Japan51.6%

31.8% Europe32.1%

1.2% China3.3%

13.3% Others13.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 (CY)

Fanuc16.9%

ABB15.9%

Yaskawa13.2%

KUKA13.1%

OTC7.8%

Panasonic6.3%

Kawasaki3.7%

Nachi3.7%

Comau3.1%

Efort1.7%

GSK1.0% Triowin

0.6% Others13.0%



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manufacturing this route to look into this option. Various other issues need to be taken into consideration before establishing a manufacturing base in China however, including the prospects for increased robot sales in the domestic market, the viability of securing a stable supply of key components, and currency movements, among others.

Fig. 22: Market Position of Japanese Robot Makers in China

Name of company Date of market

entry Manufacturing base location

Start of mass

production Kobelco 上海神钢焊接器材有限公司 1995 - - Yaskawa 安川電機（中国）有限公司 1996 Changzhou 2013 Fanuc 上海发那科机器人有限公司 1997 - - OTC 欧地希机电(上海)有限公司 2002 Changshu 2014 Fuji-Yuso 上海扬航商贸有限公司 2003 - - Yamaha 雅马哈发动机商贸(上海)有限公司 2004 - - Panasonic 唐山松下产业机器有限公司 2005 - - Kawasaki 川崎机器人（天津）有限公司 2006 Suzhou 2015 Hirata 平田机工自动化设备(上海)有限公司 2006 - - Nachi 那智不二越（上海）贸易有限公司 2008 Zhangjiagang 2013 Denso 电装(中国)投资有限公司 2008 - - Mitsubishi 三菱电机自动化(中国)有限公司 2008 - - Epson 爱普生(中国)有限公司 2009 Shenzhen 2013 Janome 车乐美机械设备(上海)有限公司 2011 - - Toshiba 东芝机械（上海）有限公司 2012 - -


Even manufacturers with existing manufacturing bases in China are looking into expanding their product line-ups

Given the potential for future growth in China’s industrial robot market and the diversifying needs of local customers however, even robot makers with established local manufacturing bases will need to look into expanding China-side production processes and upgrading their product line-ups. Precision reduction gear manufacturer, Nabtesco Corporation, announced its intention to establish a production base in China in February this year, which suggests that as Japan’s industrial robot manufacturers ramp up production in China, so moves by Japanese manufacturers of key components such as precision reduction gear and servomotors, and other related parts, to expand into China and/or start manufacturing their products on the mainland are expected to pick up speed.

2．Entry and Competitiveness of Chinese Robot Makers into the Market

The expansion in China’s robotics market has been fuelled by the entry of several hundred local manufacturers

The growth in China’s market for industrial robots has led to numerous Chinese robot makers entering the market and there are currently some 400 local enterprises in the market. Only a handful have achieved mass production and are supplying mainland customers, however, namely, the four leading robot manufacturers: Siasun, Efort, Estun, and GSK, plus a few others (Fig. 23).



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The technological capabilities of Chinese manufacturers lag significantly behind those of their foreign counterparts, but could well catch up with sufficient policy support

Even the four so-called leading mainland players lag significantly behind their Japanese and European counterparts in terms of product performance, durability, life and other quality issues, and after-sales service practices, and this is one reason why their share of the industrial robot market remains small. Given, however, that the Chinese government is expected to beef up its policy support for the development of the nation’s robot industry, those Chinese robot makers that are selected and receive political support could well close in on their foreign competitors in terms of technological capabilities and product quality over the coming years.

Fig. 23: Market Position of Chinese Robot Makers

Name of company Date of market entry

Stage of development

Manufacturing bases

Siasun 渖阳新松机器人自动化股份有限公司 2000 Mass production Shenyang HHRobot 哈尔滨海尔哈工大机器人技术有限公司 2000 Operations testing Harbin Boshi 哈尔滨博实自动化股份有限公司 2002 Mass production Harbin Boxin 珠海市博信自动化设备有限公司 2004 Operations testing Zhuhai Worldful 洛阳沃德福工程技术有限公司 2006 Operations testing Luoyang Pangolin Robot 昆山穿山甲机器人有限公司 2006 Operations testing Kunshan GSK 广州数控设备有限公司 2006 Mass production Guangzhou Efort 安徽埃夫特智能装备有限公司 2007 Mass production Wuhu Naerjie 江阴纳尔捷机器人有限公司 2007 Operations testing Jiangyin Adtech 深圳众为兴技术股份有限公司 2007 - Shenzhen Incman 青岛创想机器人制造有限公司 2009 Operations testing Qingdao Boshi 苏州博实机器人技术有限公司 2009 Operations testing Suzhou Triowin 上海沃迪自动化装备股份有限公司 2009 Mass production Shanghai RDRobot 深圳市荣德机器人科技有限公司 2009 Operations testing Shenzhen Warsonco 深圳市华盛控科技有限公司 2011 Operations testing Shenzhen

Kexinda 佛山市科信达机器人技术与装备有限公

司 2011 Operations testing Foshan

Daju 安徽大巨工业机器人制造有限公司 2012 Operations testing Hefei Estun 南京埃斯顿机器人工程有限公司 2012 Mass production Nanjing Panda 南京熊猫电子装备有限公司 2012 Operations testing Nanjing Black Gold Steel 黑金刚（福建）自动化科技股份公司 2012 Operations testing Quanzhou Vanta 広州万世徳包装機械有限公司 2012 Operations testing Guangzhou Bonmet 深圳市博美德数控设备有限公司 2012 Operations testing Shenzhen

Vali 东莞市瓦力智能科技有限公司 2012 Operations testing Dongguan

Lishui FDRobot 绵阳福德机器人有限公司 2012 Operations testing Mianyang Kinger 青岛科捷自动化设备有限公司 2013 Operations testing Qingdao STEP 上海新时达机器人有限公司 2013 Operations testing Shanghai Hirobot 上海韩陆机器人技术有限公司 2013 Operations testing Shanghai

Lerobot 江乐佰特自动化科技有限公司 2013 Mass production Lishui

Dongguan Source: Compiled by Mizuho Bank Industry Research Division from China Industrial Robot Market Investigation Pandect, FNA

The rapid rise of Chinese robot makers on a low price

Even if Chinese robot manufacturers succeed, with political support, in drawing their technological capabilities and product quality level, the



19

offensive is likely to prove difficult, however

prospects for the type of offensive seen in other industries where manufacturers use low prices to gain market share or securing sufficient output to compete directly with their foreign counterparts are expected to remain distant, at least in the short term. There are two reasons for this: (1) the automotive industry, which is the leading customer of industrial robots, places a premium on the installation track record of its suppliers, and (2) there is limited scope for price reduction given the current cost structure for Chinese industrial robots.

Much emphasis is being placed on ensuring Chinese-made industrial robots achieve stable operation in the auto industry

The automotive industry is the driving force behind China’s industrial robot market and its largest customer, and industrial robots are used for numerous production processes, including conveyance, welding and painting, with a large number of production lines being automated. The stable operation of these production lines, i.e. of the industrial robots that operate them, has a direct impact on the ability of both automobile and automotive component manufacturers to maintain and improve manufacturing competitiveness, and is thus critical. Since both automobile and automotive component manufacturers look first at the supplier’s track record on the stable operation of its robotic systems when purchasing industrial robots, the prospect for substitution with the products of Chinese robot makers that have only recently entered the market and have no proven track record remains remote.

Chinese robot makers are losing out to their foreign counterparts on the volume discounts they offer on core components

As it stands, the current cost structure of Chinese-made robot products leaves little scope for price reduction. The main structural parts of industrial robots comprise precision reduction gears, servomotors/drivers, controllers and the machine body. Fig. 24 compares the cost structures of Japanese and Chinese robots and shows that the percentage accounted for by the cost of servomotor/driver components is considerably larger for the Chinese-made products than for their Japanese counterparts. In the case of precision reduction gears, two Japanese manufacturers – Nabtesco and Harmonic Drive Systems – account for more than 75 percent of the global market, which means that many Chinese robot markers are reliant on these corporations for procurement. Since, however, these Chinese robot makers have only recently entered the market, their output levels are comparatively lower than those of the leading foreign players leaving little scope for volume discounts on procurement prices, which puts them at a comparative disadvantage. The same applies with servomotors, with China’s robot makers being heavily reliant on imports from Japanese and other foreign manufacturers.

Room for further price reductions makes a low price offensive difficult

Since Chinese robot makers have no choice but to procure the key components used in the manufacture of industrial robots at higher prices than their foreign competitors, such components account for a higher percentage of the overall cost structure. In consequence, the only scope for price reduction is with machine bodies and since simple cost cutting has a limited impact on price competitiveness, it remains difficult for China’s robot makers to launch a low-end price offensive, which simultaneously reduces the possibility of a rapid rise in market position (Fig. 24).



20

Fig. 24: A comparison of the cost structures of Chinese- and Japanese-made robots and the scope for

further cuts in the cost of Chinese-made robots Source: Compiled by Mizuho Bank Industry Research Division from China Industrial Robot Market Investigation Pandect, FNA

Conversely, were the number of sectors not looking for a proven track record in robotics to increase and the manufacture of low-cost core components to become viable, Chinese robot makers could come to the forefront

On reflection, however, the emergence and growth in demand for robots from sectors that do not require a proven track record, coupled with the technological competence to manufacture inexpensive core components would enable Chinese robot makers to launch a low-end price offensive and allow for their rapid rise in the industrial robot market. Unlike Japan, China has a market for conveyor systems and robot palletizing for construction materials such as tiles and bricks, where the requirement for precision automation is relatively low, and the potential for rapid demand growth from such sectors is an undeniable possibility. Moreover, the Chinese government recognizes that the technological capabilities of Chinese robot makers for key components lag far behind those of their foreign competitors, which argues for enhanced policy support for research and development in this area by Chinese manufacturers over the coming years.

Whilst the prospects for a rapid rise in the market by Chinese robot makers on a low-end price offensive remain remote, it bears considering that, were there to be demand growth from sectors that do not require a proven track record and Chinese robot makers to acquire the competence needed to manufacture inexpensive key components, they could emerge as a major threat to Japanese and other foreign market players.

Machine body28% 22%

Precision gears12%

31%

Servomotor and driver

26%

26%

Controller and control

system34%

21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Japanese robot makers Chinese robot makers

Japan52%Europe

32%

China3%

Other13%

Japan75%

Other25%China’s robot makers

are reliant on Japanese-made core components

They enjoy less of a volume discount than

their foreign counterparts

Thus limiting the scope for price reductions and making a low-end price

offensive difficult

Share of global precision gear

market

Share of China’s robot market by

country

Cost comparison of identical Chinese- and Japanese-made robots



21

3．Recent Trends Among European Robot Manufacturers in China

Swiss-based ABB is leveraging its position as the first European robot maker to advance into China

This section looks at the robotics businesses of European manufacturers operating in China. Swiss-based robot maker, ABB, was the first European player to advance into China and has been a presence in the Chinese robotics market since 1994. It has a manufacturing base in Shanghai where it has been mass-producing industrial robots since 2009, and has established its position as the leading foreign robot maker in China (Fig. 25).

Fig. 25: Market Position of European Robot Makers in China

Name of company Head office Date of market entry

Manufacturing base location

Start of mass production

ABB 上海 ABB 工程有限公司 Switzerland 1994 Shanghai 2009 KUKA 库卡机器人（上海）有限公司 Germany 1994 Shanghai 2014 Comau 柯马(上海)工程有限公司 Italy 2006 Kunshan 2011 IGM 北京艾捷默机器人系统有限公司 Austria 2006 - - Reis 徕斯机器人（上海）有限公司 Germany 2007 - -

Cloos 卡尔克鲁斯焊接技术（北京）有限

公司 Germany 2009 - -

UR 优傲机器人贸易(上海)有限公司 Denmark 2013 - -


Citing its contribution to the development of robotics in China, ABB has signed an MoU with the Guangdong Development and Reform Commission

In August 2013, ABB signed a memorandum of understanding (MoU) on strategic cooperation with the Guangdong Development and Reform Commission. This MoU is an agreement to cooperate across a wide range of areas, including transportation, energy and industry, in addition to robotics, and cites contributions to enhancing the competitiveness of Guangdong’s robotics industry through the establishment of a center for practical application of industrial robots. Moreover, with this framework as the backdrop, agreement was reached and documents signed in May 2014 on the establishment of what will be the largest industrial robot R&D and manufacturing base in southern China in the Zhuhai High Tech Industrial Development Zone. This project is steadily boosting ABB’s presence in Guangdong.

ABB is also actively engaged in industry-academia partnerships and human resources development, and has set up training and R&D centers at several leading universities, including Tsinghua University, Shanghai Jiao Tong University, and the Harbin Institute of Technology. Likewise, the German company KUKA has set up a joint center for practical training in robot technology with Foshan Vocational and Technical College in the city of Foshan in Guangdong province.

Added to a retention strategy based on increasing its presence in

As this demonstrates, European robot manufacturers would appear to be pursuing regional retention strategies by creating frameworks for cooperation in the form of MoU with regional governments and promoting



22

the region, ABB aims to facilitate its business expansion efforts in China

industry-academia partnerships with leading universities in a bid to boost their presence within the region. Moreover, in citing the contribution to enhancing the competitiveness of Guangdong’s robot industry in its MoU with the local government, ABB is presumably hoping to cultivate an image for itself as a champion of industry development in China as a means of facilitating its business expansion efforts.

VW has worked to establish good relations with the Chinese government and maintains its position as the market leader in China’s auto industry

Whilst the example comes from a different industry, Volkswagen (VW) offers a case in point on contributions to the development of industry in China. As mentioned in “II. Trends in China’s Industrial Robotics Market”, China’s auto market is now the largest in the world. VW is the current market leader, with the top share in production of 17.1 percent (as of 2013). VW has increased its production capacity on the back of this growth in China’s auto market, and in 2013 established its twelfth local production base in Xinjiang Uyghur Autonomous Region. This plant is located far from any port in an area where little progress has been made towards agglomeration in the parts industry, and is unlikely to be one of VW’s more competitive plants. At the same time, it has been welcomed by the Chinese government for its contributions to the development of the region’s economy through job creation and increased tax revenues for the local government. For VW, the establishment of a production plant in Xinjiang Uyghur Autonomous Region is believed to be of enormous significance in forwarding its efforts to forge good relations with the Chinese government by responding to its demands. VW is maintaining its position as the leading foreign player in China’s crucial auto market through initiatives such as this.

Japan’s robot makers must look to the initiatives being deployed by top manufacturers in other industries and find ways of hitting back against the strategies their European rivals

If Japan’s robot manufacturers are to boost their presence in China’s industrial robot market, they will need to look to the initiatives and strategies being deployed by the leading manufacturers in other industries for inspiration. Currently, foreign robot makers dominate China’s industrial robot market, which means that the European manufacturers are Japan’s most powerful competitors. To combat the regional retention strategies being employed by their European rivals, Japan’s robot manufacturers need to gain greater access to customers and deploy similar retention initiatives/strategies.



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V. A Review of the Strategic Directions Open to Japan’s Robot Manufacturers 1．The Business Challenges Japan’s Robot Makers Face in China

China’s industrial robot market is forecast to grow exponentially on the back of government support for its development. This chapter examines the orientation of the business strategies that will need to be deployed by Japan’s robot makers as the market for industrial robots in China continues to expand.

Commercial distribution is handled by agents or through systems integrators; some Japanese suppliers are co-developing systems integrator companies with Chinese manufacturers

The first task is to survey the commercial distribution practices of Japan’s robot manufacturers in China as a means of summarizing the business challenges these manufacturers face. Fig. 26 provides a schematic of the preferred commercial distribution channels of Japan’s robot makers. Sales offices on the mainland import robot stock from manufacturing bases in Japan or purchase from local production bases in China, which is then sold via distributors to systems integrators (companies that work with robot manufacturers and customer companies to build automated production systems). These system integrators build automated production systems that are then delivered to customers. A number of Japan’s robot manufacturers build their own production systems for direct sale to customers. Others are developing joint-venture systems integrators with Chinese companies with the aim of locking in specific customers, industries or areas. The difficulty of achieving capital recovery in China, coupled with China’s distinctive commercial practices and the complexity of the approval and other formalities required of foreign-invested enterprises, mean that alliances with Chinese companies have the merit of facilitating business expansion since the latter can lend their support.

Fig. 26: Commercial Distribution Channels of Japanese Robot Makers


Putting the appropriate production system in place based on trends and conditions in China’s robot

In using commercial distribution to summarize the challenges facing Japan’s robot makers, on the production side, as was discussed in “IV. 1. Japanese Robot Manufacturers in China”, some have manufacturing bases on the

Japan-based factory or local Chinese factory

Chinese sales office

Distributorship

Robot customers Specific customers, industries, areas

Systems integrator

Joint-venture systems integrator (with a Chinese company)

Production-side

Sales-side



24

market also a key production-side challenge

mainland, whilst others that do not have a local production base import their product into China. For those manufacturers that have already established manufacturing bases in China, the challenge for the future will be to expand their China-side production processes and extend their product lineups to meet the demands of an expanding market for industrial robots and diversifying needs. In light of the trend towards tougher import duties, meanwhile, those robot manufacturers without local manufacturing bases will need to begin looking into establishing production bases on the mainland. In this way, the challenge for Japan’s robot makers on the production side will be to build appropriate production systems on the basis of trends and conditions in China’s industrial robot market.

Turning now to sales-side challenges, the key task for Japan’s robot manufacturers will be to find ways of strengthening sales through the systems integrator channel.

China’s systems integrators are scattered throughout the mainland; the task now is to single out the leading candidates

There are, however, currently tens of thousands of Chinese systems integrators in China and these companies are scattered throughout the mainland. The task for Japan’s robot makers is to assess the sales channels, fields of specialism, technological capabilities, know-how and finances of these systems integrators, and secure a leading systems integrator to serve as a sales channel. None of the local systems integrators have national coverage, meaning that Japanese robot makers must secure systems integrators for and build sales channels in each of the areas in which they operate.

Weaknesses in system integration technology are another issue and know-how needs to be supplemented

Added to which, many local systems integrators lack sufficient technological competence and expertise, and the task of filling these gaps will fall to Japan’s robot manufacturers. Specifically, patient training will need to be provided in the form of technical guidance for systems integration engineers and sales support until such time as the systems integrator can function effectively as a sales channel.

On the sales side, overcoming the difficulties posed by systems integrator will pave the way to building dominant sales channels

In this way, Japan’s robot makers must overcome the difficulties posed by China’s inexperienced systems integrators, deal with its unique business practices, and establish dominant sales channels (Fig. 27). It is worth noting that the challenge of establishing dominant sales channels is not unique to Japan’s robot makers, but is shared by its European and Chinese counterparts, and competition to establish the dominant sales channel ahead of rival manufacturers is intensifying.

All robot makers are in the process of building sales channel strategies and this marks a crucial stage

As discussed, all the various industrial robot makers operating in China are in the process of establishing sales channels for the mainland, and this represents a crucial step in the process of establishing a presence in China’s industrial robot market. The next section thus examines strategies for sales channel establishment and for boosting the presence of Japan’s robot makers in China’s industrial robot market.



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Fig. 27: Challenges to Building Sales Channels


2．Collaborations with Leading Chinese Companies and Local Governments

(1) Working with leading systems integrators and customer companies

Basic strategies include enhanced approaches to systems integrators, selection of influential systems integrators, and the utilization of proprietary sales channels

Fig. 28 summarizes the strategic options open to Japan’s robot makers for establishing sales channels through a systems integrator. One option is to adopt a stronger approach to the systems integrators that are scattered across mainland China, a basic strategy that involves selecting a heavy-hitting systems integrator and using it as the primary sales channel to expand sales of and popularize own-brand robots. In order to achieve nationwide coverage, robot makers will also need to secure systems integrators and establish sales channels in each of the areas (provinces and prefecture-level cities) in which they operate. Once such efforts have been implemented effectively, the next step is to form partnerships with leading systems integrators and/or customer companies so as to formulate a hard-hitting sales channel retention strategy (see below).

Tens of thousands of systems integrators competing with each other

Systems integrators lack sufficient technological competence and expertise

China’s unique commercial practices

Assess system integrator competence in individual

areas↓

Select dominant systems integrators (to supply company products)

↓

Train systems integrators

Systems integrators scattered across China

Small-scale systems integration businesses For Japan’s robot makers the challenge is to build dominant

sales channels



26

Fig. 28: Strategic Options for Using Systems Integrators to Establish Sales Channels


One option with influential systems integrators is to use capital ties as a means of locking in customers from rival manufacturers

There are a number of influential local, Chinese systems integrators, including companies that do business with leading industrial robot customers, those with strong connections with the local government and thus are a major force within the region in which they operate, and those with competitive technological capabilities and business know-how. One option for such systems integrators is the formation of a joint-venture systems integrator via capital ties as a means of ensuring your company’s products receive preferential handling and of locking in the channel away from rival robot manufacturers. Such tie-up agreements have merits for the Chinese systems integrators too in that they enable them to leverage the capital of the Japanese robot manufacture to enhance their financial muscle and creditworthiness or to enhance their competitiveness through the provision of technology and/or know-how. As a general rule, measures to address the risk of technology leaks will need to be investigated before entering into an alliance with a Chinese company, and whilst the manufacturing technologies used in the production of high-precision industrial robots and other technologies that need to be protected against leakage can be kept on the production side, a better option for the sales-based alliances discussed here, though, would be to actively provide the technology and know-how needed to customize the various production systems with a view to establishing the optimal production systems for the Chinese market at the earliest opportunity and thus having that competitiveness available fast.

Alliances with leading customers is another option

Moreover, in China, which serves as the world’s factory floor, there are individual companies that boast enormous production capacity and that wield a powerful influence over their industry. Put simply, these are the companies

Robot manufacturers

(2) Form alliances with dominant systems

integrators (including capital ties)

(1) Enhance approach to systems integrators (basic

strategy)

(3) Form alliances with dominant robot customers

(including capital ties)

Systems integrators

Robot customers

Adopt a meticulous approach to systems integrators scattered throughout China

Use these systems integrators to lock-in

customers

Form alliances with robot customers to lock-in orders

O bjectives

i. Use systems integrators to secure dominant robot customers targeting the preferential installation of company products over those of rival manufacturers

i. Aim to lock-in customers that handle the overwhelming volume of business in their industryii. Build automated production systems for new industries with the aim of tapping into new markets

i. Building of sales channels

Form joint-venture systems integrators with local systems integrators

Form joint-venture systems integrators

with robot customers

Hard-hitting retention

strategy



27

with the scope for large-scale industrial robot installation, and the formation of alliances with such companies and the operation of a joint systems integration business based on capital ties is thus another option in that it offers a way of locking in customer orders. Such alliances with leading industrial robot customers not only furnish a supply route to that company but have the added potential of giving the Japanese robot manufacturer access to other factories within that industry by leveraging its influence over and business connection in the industry concerned. There are also industrial robot customers that are looking to gain access to the robot market, and alliances with such companies have potential benefits for both parties.

Working with customers offers an effective means of tapping into new industries

It is worth noting that alliances with industrial robot customers offer an effective means of tapping into robot demand from new industries, a topic that was discussed in “II. 2. Applications of Industrial Robots in China and the Potential for Future Trend Changes”. Since there is either a lack or total absence of performance data on robot installations for such new industries in the world’s leading industrialized nations, the know-how needed in the construction of automated production systems will need to be accumulated. To achieve this, customer requirements need to be ascertained and reflected into production systems, and the formation of alliances with customer companies offers an effective means of grasping the relevant requirements. The establishment of optimal production systems based on alliances with companies in the industries that are currently attracting attention in China as potential industrial robot customers, including home appliances, furniture, bricks, tiles, explosives, food items, pharmaceuticals and cosmetics, offers robot makers the potential to do business with other companies in these industries and to establish promising new markets.

(2) Working with local governments

Japanese robot makers must also utilize their ties with local governments

As stated in “IV. 3. Recent Trends Among European Robot Manufacturers in China”, ABB has signed an MoU on strategic cooperation with the Guangdong Development and Reform Commission and is steadily increasing its presence within the province on the back of this agreement. If Japan’s robot manufacturers are to boost their presence in the Chinese industrial robot market, then they will need to look into forming similar frameworks for cooperation with regional governments.

Local governments are looking to increase their tax revenues from market entry, achieve industry agglomeration, and to raise productivity through the installation of industrial robots

The formation of alliances with local governments and addressing their particular needs has various potential merits for Japanese robot manufacturers in that they can leverage the support of the local government in developing their business interests in China (Fig. 29).

Local governments across China are looking to increase their tax revenues from Japanese and other foreign companies expanding into the region, establish clusters of robot-related companies through the development of the region’s industrial robot industry, and to increase productivity within the



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region through the installation of industrial robots.

The merits for Japanese robot makers include, preferential treatment, support in the approval process, and customer access support

The establishment of a framework for cooperation with regional governments based on an understanding of these needs will give Japan’s robot makers a strong position by allowing them to enjoy the various incentive policies offered by the local government, to promote their business smoothly by receiving support in the approval process, and receive support in the form of introductions to systems integrators and potential industrial robot customers within the region, and to boost their presence within the region in the process.

In fact, a number of regional governments have been sending positive signals, hosting seminars for customers with industrial robot installation needs and demonstrating their intention to offer support by offering incentives to systems integrators on behalf of robot manufacturers, and Japan’s robot manufacturers are advised to fully utilize such support.

Contributing to the development of China’s robotics industry and promulgating that positive image will facilitate the development of business interests throughout China and help establish the presence of Japanese robot makers in China’s market

Added to which, in cooperating with local governments and earning a reputation for contributing to the development of China’s industrial robot industry nationwide, Japan’s robot manufacturers can expect to enjoy a greater market presence not only within the region under that government’s jurisdiction but throughout the nation. The realization of a virtuous circle or positive feedback loop of this nature not only has the potential to pave the way for business expansion in China, but in forming good relations with the Chinese government, Japan’s robot manufacturers can expect to establish a solid position within China’s growing industrial robot market.

Fig. 29: The Merits of Establishing a Framework for Cooperation with Local Governments


Japanese robot manufacturers

Local governments (provincial, municipal, etc.)

1. Application of various incentive policies2. Support through the approval procedure3. Support accessing systems integrators and robot

customers in the region Enter into cooperative

agreements, such as MoU

1. Entry into the region’s market by Japanese robot manufacturers

2. Development of the region’s industrial robot industry3. Increased regional productivity through industrial robot

installations

Merits for Japan’s robot manufacturers

Local government needs

Gain a national reputation for contributing to the development of China’s robot industry to build good relations with the Chinese government

Could expedite the development of business in China and help establish a robust presence in

China’s robot market (nationwide)



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VI. Conclusion

This report has discussed the significance of promoting industrial robot installations in China, market trends and policy support for the industrial robot industry, and has considered potential strategic directions for Japan’s robot manufacturers on the basis of the business operations of robot manufacturers in China.

With China in the process of establishing a domestic market for industrial robots, now is the time for Japanese robot makers to establish a presence in the mainland

It has discussed the fact that with robot manufacturers across China in the process of building sales channels this represents a crucial step towards winning future market share in China’s industrial robot market, and, with the government currently working on industry support policies in progress ahead of the next five-year plan, demand for industrial robots from sectors other than the auto industry forecast to grow exponentially over the coming years, and Chinese robot manufacturers yet to emerge as direct competitors, it seems fair to state that China’s industrial robot industry is in the process of establishing itself and that this is thus a critical moment for robot manufacturers looking to establish a strong market position in the years ahead.

The world-leading technological capabilities of Japan’s robot makers alone are sufficient to create a strong market presence

Establishing a strong market position in China is an extremely difficult task. At the same time, the Japan Revitalization Strategy (2014 Revision) that is currently being promoted by Japan positions Japan’s robot technology as “a symbol of innovation for which Japan has led the world and will be able to create new markets in the future”, and these are world-class technologies and give Japan’s robot manufacturers a powerful competitive edge in China’s market for industrial robots. Accordingly, with China in the process of establishing a domestic industrial robot market, Japan’s robot manufacturers can, by deploying effective strategies, expect to establish a strong position for themselves in China.

On reflection, the Japanese government has convened a Robot Revolution Realization Council toward the realization of a new industrial revolution driven by robots, a goal set in the Japan Revitalization Strategy, and in January this year, the Ministry of Economy, Trade and Industry published a “New Robot Strategy” that will serve as a roadmap for the realization of this robot revolution. Looking ahead, in promoting the globalization of the new fields for robotics envisaged in the New Robot Strategy and deploying these in the Chinese market, Japan’s robot manufacturers have the opportunity to lay the foundations for establishing a strong position in the Chinese industrial robot market.

In conclusion, with China in the process of establishing a domestic robot market, there are likely to be significant changes in the environment in which Japan’s robot manufacturers do business in China over the next few years, but it is hoped that Japanese robot manufacturers will anticipate these changes and be quick to put bold and flexible strategies in place so as to maintain and enhance their presence in this market. Beyond this, the hope is that Japan’s



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robot manufacturers will play an increasingly active role and that Japan’s robot industry will further expand its presence in China, which remains the world’s factory floor, and that this report will be of some service to Japan’s robot manufacturers in the development of their business interests in that nation.

For inquiries related to this article, please contact: Yuki Matsuda [email protected]

Hong Kong Research Team, Industry Research Division

Mizuho Bank, Ltd.

mailto:[email protected]



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Mizuho Industry Focus Vol.169 2015 No.3 March 2015

Edited / issued by Industry Research Division Mizuho Bank, Ltd.

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