China's automation opportunity

Automation is transforming China's manufacturing sector, propelling the economy, and creating huge long-term investment opportunities.

07 Dec 2018

When Foxconn, the world's largest electronics manufacturer, cut 60,000 staff in China during 2016, people thought it was going through hard times. Instead, the company was investing in its future by replacing workers with automated production lines.

Geoffrey Wong, UBS-AM Head of Emerging Markets and Asia-Pacific Equities, says this is a gathering trend because "with China's aging demographics, the number of young workers is getting fewer and fewer. China is responding with a heavy emphasis on automation."

China is taking the lead in automation

And China is taking the lead in automation, installing 110,000 of 380,000 robot systems built globally in 2017, taking China's total to 451,000, or c.20% globally (1).

As Geoffrey points out "China installs more robots than any other country […] each year, and this proportion is only growing"

"If you go to a factory in China today and compare it to twenty years ago, it's totally different: the factories look very similar to ones in Germany, Japan, Korea, with fewer workers and many more robots. This is the future of manufacturing in China."

And potential growth for automation in China is huge. Robot penetration in China is low, with 97 robots per 10,000 workers, compared with 658 in Singapore and 710 in South Korea, according to the International Federation of Robotics (1).

What does this mean for investors?

Three thoughts for investors

  • This is the opportunity to uncover value in companies that aggressively automate and boost efficiency.
  • Innovative robotics companies can sell into China's manufacturing base, which is the world's largest (2) and still relatively underpenetrated.
  • Automation raises productivity and China's long-term economic growth potential. If, as is likely, China continues on its automation path, it will boost GDP by 20% between 2018 and 2037 (3).

So, there are many ways that China's automation process creates opportunities for investors and selecting the right ones is crucial.


UBS Asset Management in the United States

The website contains general information about UBS Asset Management (Americas), Inc., UBS Hedge Fund Solutions LLC, and UBS O'Connor LLC, collectively known as "UBS Asset Management". The information contained on this website does not constitute investment advice or a recommendation to purchase or sell any securities or other financial instrument or any particular strategy or fund. Market commentary, product information and related performance data available on this website has been compiled from sources believed to be reliable and is provided in good faith for informational purposes only. UBS Asset Management does not guarantee the accuracy, suitability or completeness of information contained on this website, and all such information, including but not limited to performance data and related metrics, is subject to change without notice. Certain content on this website is intended for institutional investors and their financial representatives only, and should not be relied upon by retail investors or members of the general public.

Market commentary and similar statements contained herein are based on current expectations and may be considered “forward-looking statements.” Actual future results, however, may prove to be different from expectations. The opinions expressed are a reflection of UBS Asset Management’s best judgment at the time of posting, and any obligation to update or alter any forward-looking statement as a result of new information, future events, or otherwise is disclaimed.

Investments involve risks, are not guaranteed and may not return the original principal amount invested. Past performance is no guarantee of future results. Investors should read all available product information carefully before making an investment decision, including information about applicable risks, fees and expenses. This website does not address the investment objectives, risk tolerance or financial needs of any particular investor. In addition, any statements regarding investment performance expectations, risk and/or return targets do not constitute a representation or warranty that such expectations or targets will be achieved.

This website is not intended for persons located in any jurisdiction where the availability of this website is prohibited or contrary to local law or regulation or would subject any UBS entity to any registration or licensing requirement in any such jurisdiction.

Please confirm you are a US resident to proceed.

Please select at least 1 checkbox