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China expands automation in warehouses
- September 5, 2023
- Steve Rogerson
The Chinese warehouse automation market has fared well over the past five years, maintaining a growth rate of around 16%, with steady growth expected to continue over the next five years, says market intelligence specialist Interact Analysis.
Despite the impact of the pandemic on the Chinese economy, warehouse automation experienced significant growth in sectors such as general merchandise, durable manufacturing and parcels. Overall, the mobile warehouse automation market has grown at a faster pace in China than that of fixed warehouse automation.
In 2022, the Chinese warehouse automation industry was worth $4.72m, compared with $2.59m in 2018. The parcels, durable manufacturing and general merchandise sectors have been largely responsible for driving this growth, registering CAGRs of 22.1%, 22.5% and 18.4%, respectively. Between 2023 and 2027, the outlook for the market is still rosy as companies continue to look for ways to optimise efficiency on the factory floor, with a predicted CAGR of 13.5%.
International suppliers have played a significant role in China’s warehouse automation industry. However, there is starting to be a gradual decline in the share of business taken by international suppliers, as domestic suppliers gain a competitive advantage. International suppliers held a large share of the Chinese fixed warehouse automation market in 2018, but this has been declining over time.
This is largely because local suppliers have a clear price advantage compared with international vendors. Furthermore, Chinese suppliers are often able to offer more flexible options that can be tailored to the needs of the customer and have greater knowledge of the Chinese market and economy, further boosting their competitive advantage. Chinese suppliers have also been successfully expanding into overseas markets.
“There are four main drivers of growth for the Chinese warehouse automation market,” said Irene Zhang, senior analyst at Interact Analysis. “Firstly, China’s economic growth has remained strong over the past few decades, while, secondly, government support and promotion of warehouse automation has boosted the market significantly. Our research provides detailed analysis of government subsidies that warehouse automation suppliers have received, of which make up a substantial amount of their net profits.”
As with countries across the globe, labour costs continue to rise in China, which has led many companies to re-evaluate their strategy and implement warehouse automation to reduce costs, said Zhang. Finally, the localisation of warehouse automation equipment has driven down the price of components such as sensors and PLCs, further increasing Chinese vendors’ competitive advantage.
“However, where there are drivers for market entry there are also barriers,” said Zhang. “Project implementation cycles tend to be longer in China due to a lack of experience and expertise among some local suppliers, which hampers growth of the market. Additionally, although labour costs are high, the labour force is plentiful in China compared with other countries, such as the USA. This means there is an abundant supply of blue-collar workers and less of an incentive to invest in automation.”
Behind the USA, China is the largest single market for warehouse automation. China has more warehouses than the USA, Canada and Mexico combined, and its labour costs are increasing as China’s workforce is becoming more skilled. Understanding China’s complex and nuanced warehouse automation is a strategic imperative for international system integrators, especially for those looking to enter the market.
This report provides a deep-dive analysis on China’s warehouse automation, providing data, commentary and insight on policies, technologies, end-users and domestic automation vendors. It discusses the key end-users and their historic, current and future investments in automation, major policy trends in China relating to warehouse automation, and the performance of domestic automation vendors and system integrators.
More on the report can be found at: interactanalysis.com/research/china-warehouse-automation-2023.