By Jon Quick, CEO, Launchpad
We’ve just had our first look at China’s next Five Year Plan. While the details aren’t fully clear, it’s no surprise that self-reliance in technology is the major theme. At first glance, this might seem like yet another example of China’s growing ability to outcompete the West, but the picture is far more complex.
China plays the long game. When they decide that technologies are strategic they marshall the resources to make them happen. We’ve seen this happen in EVs, solar, steel, rare earth minerals… etc. It’s looking like the global manufacturing industry is next – robotics in particular.
China has more robots than any other country. The latest statistics from the International Federation of Robotics show China at 54% of robot deployments, far outpacing everyone else globally. They installed 295,000 robots last year, almost 7x the number second-place Japan installed (44,500).
The data tells a story of China owning the industry… a clear leader and growing, while traditional powers like the US retreat (US installations fell 9% last year… in the UK the fall was 35%.) With China increasing both financial and political support to its manufacturing industry, it’s no wonder that some commentators are suggesting that it may come out of the trade war unscathed, or even stronger.
To think of the situation this way, however, is missing the full picture, like I did with my burst appendix in Guangzhou.
In my role at Launchpad, I have the privilege of speaking with leading manufacturers of all sizes across multiple geographies. In the next two weeks alone I will have met with multinationals and SMEs in the US, UK and Mexico, all of whom are building exciting and robot-ready products. Our client base across the US and Europe is full of similar stories.
These companies all have the same goal. They are looking to harness AI to make their operations more efficient, flexible and cost effective. They all want robots, but they have to make sense. Nobody is ready to meaningfully increase costs to install robots, and they aren’t looking to bet their companies and careers on the operational risks of moving to full automation. They all share the fundamental understanding that, today, robots cannot fully replace humans, and shouldn’t try to. The win is in sorting out the tasks that they do well, making it so humans don’t have to. The companies that are successful with that will be the ones that reverse the downward trend in Western manufacturing that we’re seeing in the statistics.
China undoubtedly has industrial strength, and the second largest economy in the world (whose robustness seems to be up for constant debate). The one thing China doesn’t have is the world’s largest consumer market. And in a world with tariff and trade uncertainty it is looking to diversify its customer base, particularly in Southeast Asia.
But this does not mean it is immune from wider global issues – even with its enormous robot workforce.
Many Southeast Asian countries are reportedly considering imposing tariffs on Chinese imports. This region has, indeed, long been hesitant about allowing too many Chinese goods to flow in and suffocate local industries. China’s exports to ASEAN nations rose 14.7% between January and August this year as more and more Chinese firms shifted their focus away from the US to safeguard against the trade war.
But with this trend set to continue, Indonesia has, for example, just moved to impose its own three year tariffs on certain Chinese imports. It wouldn’t be a surprise to see other countries follow suit. Indeed, many ASEAN nations already have various measures in place. While robots will help China, they will also help every other industrialized nation. Robots done right will democratize manufacturing, providing each country with high-end capabilities and globally competitive cost structures.
So the picture is far more complicated than might at first seem. China’s dominance in robot installations – while undoubtedly impressive – won’t be enough alone to solve its export challenges or improve its domestic consumption levels. Seen from another perspective, in fact, this picture offers huge potential opportunities to manufacturers in other parts of the world.
Even without the vast amounts of money that will be directed towards Chinese industry, it is possible to reimagine manufacturing and take advantage of the increasingly complex global trade situation. At Launchpad, we believe that the future belongs to systems that can flex, learn and evolve. Those companies that recognize this and act now will be in prime position regardless of trade wars, tariffs or geopolitical tensions.
China’s new Five Year Plan has clearly signaled their intent. It’s up for everyone else to see this as the wake-up call it is. As Sherlock Holmes would say, “the game is afoot.”
