Investigation into the Survival of the Industrial Robotics Industry

Since the introduction of "Made in China 2025", the robotics market has been in a state of "fever." Local governments have doubled down on robotics projects, constructing numerous robotics industrial parks, while significant capital has flowed in. With "high subsidies" and "price wars," robotics companies have sprung up like mushrooms after rain. Even real estate and internet companies have ventured into the sector to get a piece of the pie. Looking back at the robotics industry, from the mergers and acquisitions craze in 2016, through the investment boom in 2017, to the investment momentum in 2018, the nearly 30-fold increase in financing has brought a spring breeze to the industry while also disrupting its ecological system. At the same time, the Chinese robotics industry has shown signs of "high-end industry going low-end" and risks of overinvestment, with robots companies recklessly expanding and low-level repetitive construction becoming apparent.

The Current State of China's Robotics Industry with the Aid of Capital

Capital, a double-edged sword, has fueled the rapid expansion of the robotics industry, but it also created turmoil. Investors seek policy subsidies and capital returns, aiming for quick profits with "quick entry and quick exit," ideally with a company going public within three years. In contrast, industrial robotics is part of the traditional manufacturing industry, with slow company growth requiring long-term technical accumulation. Before capital entered, the robotics industry grew through orderly competition in the market, allowing a few truly technical and capable companies to grow and develop.

Robotics companies with solid strength that secure financing often face unrealistic high expectations and overvaluation from investors due to a lack of industry understanding. When companies don't meet growth expectations, this pressure leads to flawed execution of their strategic and tactical plans, and companies then lack the ability to generate revenue, relying on successive rounds of higher financing valuations to ease pressure from previous investors. The 2018 bankruptcy of Tangbao Robotics and the closure of collaborative robotics pioneer Rethink Robotics were influenced by capital issues. Tangbao was the first robot product in China to receive "China Robotics Certification." However, last year it was reported to be on the brink of collapse due to a funding break, with its founder, Wang Minggao, now heavily in debt and relocated to the United States. Rethink Robotics, despite raising $150 million over several rounds of financing, failed to meet expected sales volumes and had to exit due to financial issues.

Is the "Low-Price" Strategy Feasible for Robotics?

Last year, a price war erupted in the robotics sector, causing domestic companies' profits to drop significantly, which led to a reduction in R&D investment, further impacting product performance and sales. This cycle is a key challenge for many domestic companies' survival.

Using a fierce low-price strategy in the early stages is clearly detrimental to the industry's development. Companies adopting this approach often can't meet investors' returns expectations, simply "burning cash" for publicity. With capital cooling down, these companies will inevitably face severe challenges.

The impact of the domestic robotics market's "low-price strategy" may extend to imported robots, leading to a reduction in quantity and a downward price trend. International giants increasingly shifting their focus toward the Chinese market have already, or are beginning to, prepare for price cuts, with Kawasaki being the most prominent. Only these enterprises have the capital to engage in a price war, seeking to gain market share in China through high-volume sales.

Excess Demand in the Industrial Robotics Sector

A series of data indicates that despite the rising demand for robotic automation, the Chinese robotics market shows signs of overcapacity. According to data from the National Bureau of Statistics, in October 2018, industrial robot production fell by 3.3% year-on-year, marking five consecutive months of decline since June 2018.

How Can Domestic Robotics Companies Break Through?

International giants have reached maturity, holding the majority of the market and technology, with low risk and high return. Domestic robotics companies, however, are transitioning from high-risk, low-return startup phases to high-risk, high-return growth phases. In the face of domestic overcapacity and a stagnant market while facing direct competition from major international brands, how can Chinese industrial robotics companies break through?

Despite the 50% drop in industry-wide financing in 2018, the financing amount was equal to the total of 2016 and 2017, with an increasing focus on companies with strong advantages. The financing scale for individual companies has increased, mainly in emerging segments like machine vision, collaborative robots, and Automated Guided Vehicles (AGVs). The industrial robotics industry has become capital-intensive, with enormous capital demands. In this industry context, top companies must proactively learn about capital, engage with capital, and leverage capital effectively.