China Using Industrial Robots At 12X Us Rate

The United States had 274 robots per 10,000 workers, while China had 322. (See figure 1.)

But the decision to install and run a robot is usually based on the cost savings that can be achieved when a robot can perform a task instead of a human worker-and those cost savings are directly related to the compensation levels of manufacturing workers. It should therefore come as no surprise that high-wage Germany has a higher penetration rate of robots than low-wage India.

But the interesting question is how national economies perform in robot adoption when controlling for wage levels, given that the payback time for a robot gets shorter as manufacturing labor costs increase. For a full description of the International Technology and Innovation Foundation's methodology on this question, see the 2018 report“Which Nations Really Lead in Industrial Robot Adoption?”

Comparing the ranking of expected robot adoption rates to actual rates, several patterns emerge. The first is that, on a wage-adjusted basis, Southeast Asian nations lead the world in robot adoption. (See figure 2.) China leads the world with an astounding 8 times more robots adopted than expected, up from 1.6 times more in 2017. Korea has 4.8 times more robots than expected. Taiwan has 3.2 times more and Singapore 2.8 times more.

The United States has just 70% of expected robots.

When it comes to robot adoption, China appears to be in a class of its own, with its national and provincial governments committing massive amounts of money to subsidize the adoption of robots and other automation technology.

This is one reason why according to IFR , China has been the world's largest market for industrial robots for eight consecutive years. Some – but probably not most – of this may be an overstatement due to company fraud in order to get subsidies from governments for installing robots.

China's Robotics Industry Development Plan (2016–2020) set a goal of expanding robot use tenfold by 2025. As a result, many provincial governments are providing genersubsidies for firms to buy robots – although the accuracy of reported figures is perhaps dubious, as their size defies comprehension.

For example, in 2018 Guangdong province planned to invest 943 billion yuan (approximately $135 billion) to help firms carry out“machine substitution.”

Likewise, the provincial government of Anhui stated
it would be investing 600 billion yuan
(approximately $86 billion) to subsidize industrial upgrading of manufacturers in its province, including through robotics. To put this in perspective, it is the equivalent on a per-GDP basis of the United States investing $4 trillion.

These numbers may be inflated – the Boston Consulting Group reported around $6 billion in subsidies. China also provides tax incentives for equipment investment. And it has established its second five-year plan for the robotics industry.

Either way, China appears to provide greater subsidies for robot adoption than any other nation, both in absolute terms and per robot. Compare that to the United States, where there are no subsidies for installing robots. The federal tax code no longer even lets firms write off equipment expenditures in the first year for tax purposes.

The implications of this should be clear. The only way for the United States to compete with dollar-adjusted lower manufacturing wages in China is for manufacturers in America to be more productive – and automation, including robotics, is the key way to do that.

Unfortunately, according to theBureau of Labor Statistics,manufacturing has been in a productivity slump over the last decade. As such, unlessmanufacturing significantly boosts robotic adoption, China will gain even more global manufacturing market share againstcompanies.

To reverse this, Congress should establish a 10% investment tax credit for manufacturers as well as triple the funding for the NIST Manufacturing Extension Service and the National Robotics Engineering Center in Pittsburgh.

This article was originally published by the Information Technology and Innovation Foundation (ITIF). It is republished here with permission.