As coronavirus disease (COVID-19) continues to rampage across the world, it brings many adverse effects and uncertainties to the global machinery production and automation equipment market. The Chinese machinery production and automation equipment market cannot be immune to the global pandemic.
Post–COVID-19: Mixed pictures in machinery production
The COVID-19 pandemic has been largely contained in China and industrial activities have gradually resumed since March. However, insufficient overseas demand and supply chain disruptions still prevent the Chinese market from rebounding strongly in 2020. Omdia predicts that China’s domestic market will be important in offsetting the decline in machinery production in 2020.
In a short-term outlook, the Chinese machinery production market will be affected by the insufficient demand from outside of China, as other parts of the world are still struggling to contain or recover from the COVID-19 outbreak. Demand declined in many countries in The Americas and Europe because they have been severely affected by COVID-19 and their industries activities have not yet returned to normal. Increasing trade frictions and geopolitical conflicts will also add the uncertainty to China’s overseas market.
Amid this pandemic-induced downturn around the world, Omdia is expecting a mixed recovery trend across different industry sectors in China. According to Omdia’s Machinery Production Market - Q2 2020, the overall Chinese machinery production market has been estimated to be worth $512 billion in 2019, and it is expected to decline by 10.3% in 2020.
Machine tools is one of the hardest-hit machine types in China. Omdia predicts that the revenue of machine tools will decline by 15.7% in 2020. This sector is closely tied to the performance of the automotive, agricultural manufacturing, and marine markets, these account for more than 50% of demand for machine tools. These sectors are bearish and will not be able to quickly recover in the short term.
China has become the world’s largest market for industrial robotics and the fastest growing market worldwide, but robotics production has a mixed picture in 2020. For industrial robotics, which is more exposed to industries such as automotive, Omdia is expecting a sluggish recovery in 2021, following a sharp decline in 2020, because consumer confidence has been dampened and the automotive sector is struggling to recover. On the other hand, the use of robotics, such as automated guided vehicles (AGV) (categorized as “other material handling” machinery in Omdia’s scope), in the material handling sector is poised for significant growth in China in 2020. This will be driven by the continued investment and development of e-commerce warehousing and intelligent logistics.
Construction machinery will be the first machine type that will rebound in China. Fueled by the government’s stimulus package, it is expected to perform better than the market average throughout the forecast period. The Chinese government announced an infrastructure investment package—for railways, road, airports, new urbanization, and city clusters, which could reach $707 billion (¥ 5 trillion). Omdia predicts that construction machinery will have a revenue growth of 14.6% in 2020, with a CAGR of 9.0% from 2019 to 2023.
Post–COVID-19: Pressure and opportunity coexist in the automation equipment market
Weak growth in machinery production will inevitably affect the demand for automation products used in new equipment. Meanwhile, because the supply chain has become globally integrated, China also faces a shortage of imported key parts and components. Omdia predicts that the sales revenue of China’s automation equipment will decline by 7.1% in 2020.
However, there are still some positive signs in the Chinese market. The third session of the 13th National People’s Congress and the 13th National Committee of the Chinese People’s Political Consultative Conference, which closed on May 27, 2020, announced plans to upgrade the manufacturing industry and the development of emerging industries by expanding effective investments. The focus is on constructing new infrastructure like 5G, ultra-high voltage (UHV), intercity high-speed railway and intercity rail transit, new energy vehicle charging piles, big data centers, artificial intelligence (AI), and industrial internet. These national-level stimulus policies and investments will drive relevant automation equipment growth from late 2020 onwards.
From an end users’ perspective, many manufacturers are realizing the importance of remote intelligence, automation, and smart manufacturing to reduce the reliance on the workforce, driven by the pandemic. This is bound to accelerate the use of the industrial internet of things (IIoT) and other transformative technologies in the manufacturing process. The adoption and promotion of transformative technologies will lead to the growth in demand for related automation equipment, such as industrial sensors, machine safety equipment, and industrial edge networking components to name a few.
Worldwide, it is likely that China will drive the recovery in automation and machinery markets in the long-term, driven by national level policies and the increasing desire of manufacturers to reduce reliance on the workforce. However, despite a large domestic market, the risks of insufficient overseas demand and supply chain disruptions could pose challenges in the short term. Overall, Omdia predicts that China’s automation equipment market will grow steady with a CAGR of 5.5% from 2021 to 2023.
These and other findings will form the subject of the forthcoming Automation and Machinery Production - China - 2020 report. This report covers Chinese economic indices, capital expenditures, machinery production, and the industrial automation equipment sales outlook. The report illustrates overall machinery production and industrial automation product market trends in mainland China and provides a detailed analysis on the key automation equipment market. It provides a five-year revenue forecast and insights to disruptive trends like the industrial Internet of Things (IIoT).