A Chinese robotics push by Siemens started where all corporate foreign excursions start: at a hotel. The Munich conglomerate unveiled its focus on the Chinese market Thursday with an exhibition in the lobby of a luxury hotel in Suzhou.
“Siemens is headquartering its global research network for autonomous robotics in China,” Chief Technology Officer Roland Busch said during the event in the eastern Chinese city. The company will also open a robotics research center at Beijing’s Tsinghua University, he added. The world’s most populous country is already a major innovation hub for Siemens, which maintains 20 research and development locations there and has more than 4,500 researchers and engineers on its payroll.
Mr. Busch emphasized that no development capacities would be shifted to China. Siemens will continue to rely on a broad web of international teams stationed in different locations around the world. The central leadership of those teams, however, will be in China.
The reorganization underscores China’s dominant role in the robotics industry. Since 2013, more robots have been sold in China than anywhere else in the world. Last year, sales increased by 30 percent. And by 2019, the International Federation of Robotics (IFR) expects China to account for 40 percent of the market.
For Siemens, China could soon be a more important market than the company’s native Germany; it now generates around €6.5 billion ($7.7 billion) in sales in China, compared to about €10.7 billion in Germany. “We’re not within striking distance yet, but we’re close,” a company insider told Handelsblatt, referring to the sales volumes in the two countries.
“Despite massive subsidies and quotas for domestic products, the progress of Chinese companies has been modest.”
Two years ago, the government in Beijing presented a key roadmap for the country’s industrial renewal with its “Made in China 2025” strategy paper. The paper identified future-oriented markets such as robotics and process controls as areas where it wants Chinese companies to play an increasingly important role. And the government has made no attempt to conceal its efforts to strengthen Chinese firms, a major source of consternation for many European businesses competing in China. Indeed, that’s one of the biggest obstacles facing Siemens’ business there. The company fears the Chinese could learn from its vast expertise in automation technology and then use that knowledge as a competitive advantage.
Siemens has reason to worry, too. The Germans have been doing business in China for more than 145 years, but they have also watched as Chinese companies have usurped their licenses to operate. For instance, after Siemens produced some of China’s first high-speed trains, the contracts were then given to Chinese companies – firms that are now competing with Siemens around the world.
Despite the potential for disagreement and disadvantage, China is still a lucrative market for foreign robotics suppliers. Of all the robots sold in China, 70 percent are made by international manufacturers. Chinese producers, however, are quickly closing in. The seven largest Chinese robot makers reported growth last year of 36.7 percent. By comparison, the seven largest international manufacturers logged only 26.6 percent.
Luckily for Siemens, it’s uniquely positioned to straddle this gap. The company’s automatic control systems can be used by both Chinese and international producers and Siemens doesn’t even build its own robots – it just provides the tools for the machines to run efficiently. In China, the company already enjoys a favorable starting position. “Siemens can be found along the entire value chain of industrial automation. No Chinese player comes close,” said Georg Stieler, a consultant in Shanghai.
The Chinese government has been trying for years to foster domestic development of automation systems for machine tools and, more recently, for robots. While there are Chinese companies involved in process automation, they still have a ways to go. “Despite massive subsidies and quotas for domestic products, the progress of Chinese companies has been modest,” Mr. Stieler said.