CNBC Disruptor 50

China’s blueprint to crush the US robotics industry

Andrew Zaleski, special to
Industrial robots 'dance' at a booth at the China International Industry Fair at National Exhibition and Convention Center in Shanghai.
VCG | VCG | Getty Images

About four years ago Jeff Burnstein attended his first China International Robotics Show, the annual Shanghai-based expo now in its seventh year. At the time, Burnstein, president of the Robotic Industries Association, a Michigan-based trade group, wasn't impressed. He said he walked around the show and thought many of the robots on display looked like copies of what American companies were already doing.

In today's China a different picture is taking shape, courtesy of a blueprint known as the Made in China 2025 plan. Announced in 2015, the initiative is China's massive government-backed push to be a world leader in a number of high-tech industries, such as medical devices, aerospace equipment and robotics — the key piece of the country's desire to automate sectors of its economy: automotive manufacturing, food production, electronics and more.

Meet the 2017 CNBC Disruptor 50 companies

But to do that, China needs more robots. In addition to the Made in China 2025 plan, the government has also released the Robotics Industry Development Plan, a five-year plan to rapidly expand the country's industrial robotics sector. By 2020, China wants to be able to manufacture at least 100,000 industrial robots annually. The country is racing full steam ahead to a robot-powered future in a push to not only remake its own economy but also to transform into the world's robot capital — overtaking Japan, Germany and the United States in the process.

"The Chinese are the fastest-growing and largest user of robotics in the world by now," said Burnstein. "The 2025 plan will only accelerate it."

According to the International Federation of Robots, China is already home to the biggest share of robots, a global market worth about $30 billion. It is currently ranked the No.1 sales market for industrial robots, with the United States coming in at No. 4. (South Korea and Japan are two and three, respectively.)

Health care, warehouses and logistics ripe for robotics in China: Expert

While the United States is arguably the worldwide leader in automation in vehicle manufacturing, China is quickly making gains to outstrip the U.S. and other global competitors. Over the first half of this decade, China installed 90,000 industrial robots, or one third of the world's total, compared to 80,000 industrial robots installed between 2010 and 2015 elsewhere in Asia, Europe and the United States combined.

A heated race

"I'm sure there are lots of manufacturers in China who are focused on crushing the U.S.," said Matt Beane, a robotics researcher and fellow at the MIT Initiative on the Digital Economy. "But it seems like China's whole goal is to become self-sufficient."

A new International Federation of Robots report shows that China will likely represent 40 percent of the total worldwide sales for robots by 2019, an increase from 27 percent in 2015.

China's steady growth in spending on robotics has even caught the eye of entrepreneur and Dallas Mavericks owner Mark Cuban. In an open letter to President Donald Trump last December, he said the United States should invest $100 billion into the robotics industry in order to compete with China.

"We have to win the robotics race. We are not even close right now," Cuban wrote.

More from CNBC Disruptor 50:
Investors poured $2.8B into reaching outer space. They may not be done
AirPods don't go far enough: Reinventing headphones for 'hearables' era
Stadiums are getting smarter, giving ticket-holders money's worth

But many of these robots are ones produced elsewhere that Chinese companies purchase. The country would now like to flip the script and produce in country more of the industrial robots it needs in a variety of economic sectors. By 2020 the government wants more than 50 percent of the total robotics sales volume to be filled by robots made in China by Chinese companies.

Producing robots in-house, so to speak, is where China is looking to outpace America. Beane noted that China has "never had this character of deliberately going toe-to-toe with another global power." But what they do have is a desire to look toward the future by investing billions of dollars in robotics and complementary technologies, like artificial intelligence, in order to not rely on other nations to outfit their factories.

"China will throw tons of money toward [robotics] that we will not," Beane said. "They're looking to play a long game where, through steady investment, they make it less and less likely that countries that act impulsively can catch up."

Robots and automation are priorities in China, where salaries have increased more than 100 percent over the last 10 years while the national labor force has been shrinking. With industrial robots, Chinese companies hope to keep innovating while cutting costs. Signs of this shift are already present. Foxconn, a leading supplier of Apple iPhones, replaced 60,000 workers with robots in just one of its Chinese factories last year.

"The long-term goal in China is to transform it from a low-cost labor source to being a high-tech labor source," said Frank Tobe, publisher of the Robot Report in California. "That's a major technology transformation, and they're doing it."

As Tobe wrote in a rundown of the Made in 2025 plan, China wants to "overtake Germany, Japan, and the U.S. in terms of manufacturing sophistication by 2049." The Made in China 2025 plan helps out by offering subsidies, low-interest loans and rent-free land to Chinese companies. Consider what Guangdong, just one Chinese province, is doing: offering almost $140 billion in subsidies to about 2,000 local companies, including robotics firms.

The complete history of the CNBC Disruptor 50

"To reduce the threshold of innovative entrepreneurship, the government provides appropriate financial subsidies for rent, broadband access and public software for new businesses," said John Rhee, general manager of the Los Angeles office for UBTECH, a Chinese robotics company headquartered in Shenzhen City that makes humanoid robots for the home.

Fast-forwarding market domination

UBTECH is one such company currently benefiting from the Made in China 2025 plan. In April the company signed a "strategic cooperation agreement," Rhee said, with the municipal government of Kunming City in the southwestern province of Yunnan, which will aid the company in robot building and developing artificial intelligence capabilities in Yunnan province for the purpose of making Kunming and other municipalities A.I.-enabled "smart" cities.

But how quickly China can get itself up to speed in the globally competitive robotics field is still a question, as is the overall effectiveness of the Made in 2025 plan on growing China's robotics industry.

"China can manufacture simple robots but nothing complicated, like the six-axis ones by Japan, Germany and the U.S.," said Zi Yang, a China analyst at the Washington, D.C.-based Jamestown Foundation. "It's hard to close the gap due to several reasons, mainly because of China's lack of innovativeness due to its weak intellectual property laws and government-led projects that focus on quantity over quality."

Indeed, that push for quantity is one of the aggressive goals China has set for itself in its Made in 2025 plan. By the end of next decade, the country wants to be producing 400,000 industrial robots annually. That's a tall order, considering just a little more than 250,000 industrial robots were sold the world over in 2015 alone, according to the IFR.

Some Chinese companies are actively buying the expertise in robotics that has been developed elsewhere. One such company, Midea, closed a $4 billion deal earlier this year to acquire Germany-based Kuka AG, a leading, global robotics supplier for plant and automotive robots with a research and development center in Austin, Texas.

China's Midea recently acquired Germany-based Kuka AG, a global robotics supplier for plant and automotive robots with a research and development center in Austin, Texas.
Source: Kuka Industries

While Yang admits this is a sign of a shift from quantity and toward quality, he also said that Chinese robotics companies "can't buy their way into industry leadership. They must innovate, and that's the most difficult hurdle to overcome, since the constraints are structural."

There are signs that that's beginning to happen. This past July, RIA president Burnstein went back to CIROS in Shanghai. He said he left with a different impression after seeing many new companies and many of the same companies he saw just a few years ago.

"It's a lot more sophisticated. You wouldn't say it's all copies anymore," he said. "Basically, China wants to compete everywhere, and they want to be a major, global robot supplier. And they're actively doing it."

— By Andrew Zaleski, special to