China’s Impending Robot Revolution
Thanks to automation, Chinese manufacturers will only grow stronger and more competitive.
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Our work with Chinese and multinational clients leads us to conclude that, far from being blindsided by these new technologies, China’s private manufacturers have the opportunity, thanks to robots, to emerge stronger and more competitive than ever.
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The vast size of China’s manufacturing industry offers huge potential for economies of scale. President
has declared automation a national priority. And “Made in China 2025,” an industry strategy announced by Beijing last year, provides manufacturers with billions of yuan for technological upgrades, including advanced machinery and robots.
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According to the International Federation of Robotics, China was already the world’s biggest market for industrial robots in 2013. By 2014, Chinese factories accounted for 25% of the world’s industrial robots, a 54% increase over the previous year. Last year, Chinese manufacturers bought 68,000 of the 248,000 industrial robots sold globally. Industry experts expect that share to continue rising.
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China’s leaders are also pushing for China to become not just the world’s largest robot buyer, but a leading robot maker. At the forefront of that effort are firms such as GSK CNC and Shanghai’s
, which are developing a range of robots for use in factories, and SZ DJI Technology Co., now the world’s largest consumer-drone maker by dollar sales.
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Yet despite the breakneck pace of transition, the risk of political instability in China is small. The country is used to rapid change. Job turnover in the manufacturing industry is 2½ times that of the U.S. and has been so for decades.
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As China forges ahead with automation, there are at least three reasons to believe its chances for success are higher than the U.S., Europe or Japan.
First, China has developed a unique manufacturing ecosystem. Its companies, working in partnership with global firms, have created an extraordinarily sophisticated supply chain and built a network of collaboration between people and machines that allows for maximum flexibility at minimal capital investment. There is no parallel to this in any other economy in the world.
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Second, with the possible exception of India, no other nation can match China’s capacity for producing the number of engineers necessary to oversee industrial robots at significant scale. One recent analysis concluded that each year China graduates at least three times as many engineers as the U.S.
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Finally, the rising purchasing power of China’s consumers will provide a solid anchor for China-based manufacturing. Even with a slowing economy, China remains home to the world’s fastest growing middle class. Already there are 116 million middle-class and affluent households in China, with annual disposable incomes of at least $21,000. In 2000, there were just two million such households. With spending power of that magnitude, global companies have ample incentive to keep factories in China.
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We see little cause to expect manufacturing to shift back to developed markets. China will not only remain the world’s factory, but it could increase the size of its manufacturing sector by as much as 22% by 2025. Western leaders would be ill-advised to imagine that these new technologies will play disproportionately to their advantage. Far from being left behind, China is at the forefront of the robot revolution.
Mr. Sneader is the chairman of McKinsey & Company, Asia. Mr. Woetzel is a director of the McKinsey Global Institute.
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