Aside from qualified engineers most people may not be familiar with ‘strain wave gearing’, a type of speed reducer for precise positioning applications. It was invented in 1955 in the US and at first nobody was sure how to put it into use. There were attempts to utilise it for driving helicopter rotors. Then in 1971 it found its way into the electrically-driven wheels of the lunar rover as part of NASA’s Apollo 15 mission.
Speed reducers now play a critical role in robotics applications, which are increasingly deployed in a wide array of settings including semiconductor manufacturing, surgical operations, car making, spaceflights and solar energy production. It is estimated that they make up roughly 36% of the cost of an industrial robot. With China’s growing ambitions in smart manufacturing, at least 3.6 million units of speed reducers will be needed between 2020 and 2023, estimates the Gaogong Industry Institute, a Shenzhen-based consultancy.
Till now 70% of the supply has been sourced from foreign players such as Nabtesco and Harmonic Drive Systems, which are both based in Japan. But Chinese rivals are catching up fast by offering competitive prices.
One such player is Leader Harmonious Drive Systems, also known as Leaderdrive.
Established in Suzhou in 2013, its gears have gone into 60% of China’s locally-branded robots since 2017, according to EqualOcean, a tech consultancy. Leaderdrive counts domestic robot makers Efort Intelligent Equipment and UBTech, as well as Denmark’s Universal Robots, among its customers. Despite the disruption from the coronavirus outbreak, the company grew its net profit by 160% to Rmb34 million in the first half on revenues of Rmb88 million ($12.8 million).
Leaderdrive recently listed on Shanghai’s STAR Market. Strong investor interest helped it raise Rmb1.1 billion from the IPO, almost double the original target. Its share price closed 68% higher on its debut on August 28, lifting the company’s market value to Rmb7.1 billion, or 110 times its trailing earnings.
The investment community’s bullish view is partly guided by the company’s bold plan to scale up its production capacity by five times. Costing Rmb631 million, Leaderdrive’s new facility will be completed within four years.
“Young people of future generations will inevitably break away from jobs involving high-intensity manual labour. That implies a huge market potential for automation in the manufacturing industry,” Zuo Yuyu, founder and chairman, told Shanghai Securities News.
Since 2016, the Chinese government has been promoting the robotics industry by handing out substantial financial aid to the point where subsidies account for a fifth of the industry’s net profits, according to Sinolink Securities. Another driver is the increasing need to help manufacturers counter mounting labour costs and to maintain the country’s status as the world’s workshop.
In 2018 China installed 154,000 robots, versus Japan’s 55,200 and America’s 40,400, the International Federation of Robotics reckoned. In terms of robot density, the country paled in comparison with only 140 robots per 10,000 employees – in contrast, Singapore had 831, South Korea 774, Germany 338, and the US 217. To capitalise on rapidly growing demand for factory automation a lot of domestic robot makers are looking to improve both their capacity and capabilities, especially given that they command just 28% of their home market (see WiC467).
With the US government now trying to stop its producers in advanced tech and those of its allies (such as Japan) from working with Chinese companies, there are more reasons for local robot makers to increase their purchases from domestic partners to ensure supply chain security.
Leaderdrive’s future is not entirely rosy though. In 2019 its revenue slipped 15% as a result of a downturn in the consumer electronics and auto markets, which slowed new robot investments. With Leaderdrive’s business so synchronised with the manufacturing sector, China’s souring relations with many of its chief export markets may cloud the firm’s near-term outlook.
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