The End Of Cheap Labor? Why China Is Going All-In On Robots

In the heart of eastern China’s Yangtze River Delta, an eerie transformation is underway.

Walk into a textile factory, and the difference is striking—gone are the chaotic sounds of human labor, replaced by the synchronized hum of robotic arms working with mechanical perfection.

With labor costs rising and the working-age population shrinking, China’s six million manufacturers are racing to future-proof their operations. The once labor-intensive textile sector is just one of many industries swapping human hands for advanced automation.

These companies have embraced what they call the “robot revolution”, with robots taking on dull, dirty, and potentially dangerous jobs that are difficult to recruit for.

China has become—partly thanks to government support over the past decade—the world’s largest market for industrial robots, according to the International Federation of Robotics.

According to the IFR's latest World Robotics report, China now has 1,755,132 industrial robots in operation—a 17 per cent jump in just one year.

In 2023 alone, Chinese factories installed 276,288 new robots, accounting for more than half of global deployments. While slightly below 2022 record of 290,144 units, the numbers leave no doubt—China is the undisputed leader in robotics adoption.

Rustlings of Demographic Decline

From electronics and automobiles to food processing and chemicals, factories across the country are embracing automation at an unprecedented pace.

In 2023 alone, China recorded 470 industrial robots per 10,000 employees, a sharp leap from 402 the previous year. This milestone has pushed China ahead of Germany (429) and Japan (419), placing it as the world’s third most robot-dense nation, trailing only South Korea and Singapore.

In terms of robot density, an important indicator for international comparisons of the automation of the manufacturing industry, South Korea is the world leader with 1,012 robots per 10,000 employees, up 5 per cent since 2018, said the IFR.

Indeed, when it comes to robot adoption, China appears to be in a class of its own, raising the question: what’s truly driving this relentless pursuit of automation?

The reality is clear: China’s future prosperity hinges on its ability to replace human labor with machines. As birth rates plunge and the workforce contracts, automation is no longer an option—it’s an economic imperative.

China’s working-age population—those between 16 and 59—fell from 896.4 million in 2019 to 875.6 million in 2022, while those aged 65 and above surged from 176 million to 209.78 million in the same period. These figures paint a stark picture of what lies ahead: a rapidly graying nation with fewer hands to sustain its industrial might.

However, this looming crisis may actually be a blessing in disguise. Could China be the first aging industrial power to transform a demographic decline into a "robot dividend"?

Government-backed automation is accelerating industrial transformation, pushing China higher up the value chain insulating its economy from geopolitical pressures, and coping with the demographic changes that are all but inevitable.

"Ageing is just one of the factors," said Luo Jun, secretary general of the Asian Manufacturing Forum, a government think tank that advises authorities on smart manufacturing.

"More importantly, it is the ever-expanding need for industrial transformation and upgrading which will lead to the growth rate of China’s industrial robots being first in the world and remaining so."

Luo said putting robots in a leading role will allow China to maintain its robust industrial system as it competes with emerging markets seeking to challenge China’s status as the world’s factory.

Grand Bet

Beijing has identified 11 key sectors—spanning healthcare, education, energy, and beyond—where it seeks to ignite a robotics boom. The ambition? A tenfold expansion in robot deployment by 2025. And China isn’t merely hoping for this future—it’s building it with unparalleled financial firepower.

But what truly sets China apart is the scale of its financial commitment. National and provincial governments have opened the floodgates of capital to bankroll this robotic revolution—though some of the reported figures border on the fantastical.

Consider Guangdong province, which in 2018 unveiled a jaw-dropping 943 billion yuan ($135 billion) investment to help firms carry out “machine substitution."

Not to be outdone, Anhui province pledged 600 billion yuan ($86 billion) to modernize its manufacturing sector. To put this in perspective, if the United States were to match this investment relative to GDP, it would amount to a staggering $4 trillion.

Regardless of the exact sums, the reality is undeniable: China is outspending every other nation in robotics adoption—both in absolute terms and per unit deployed. Beyond subsidies, the government also offers tax incentives for equipment investment.

The fact that the Chinese automobile industry is now the largest in the world is also a boon to Chinese robotic adoption, as the auto industry is a major purchaser of industrial robots.

In short, a potent mix of policy ambition and state-backed financial muscle has cemented China’s status as the world’s leading market for industrial robots—an eight-year streak that shows no signs of slowing down.

Lucky for China it’s not starting from scratch; the last two Five-Year Plans (the 13th from 2016-2020 and the 14th from 2021–2025, plus buying every robot in sight since 2013, plus Made in China 2025, have built the base that it will need to secure the robot dividend.

Robot Rulers

Industrial robots—powered primarily by robotic arms—have long been the backbone of factory automation. First emerging in the late 1950s, these machines evolved alongside the rise of manufacturing in the West. China, a late entrant to the game, dabbled in industrial robotics in the 1980s, but it wasn’t until the 2000s that mass commercialization truly took flight.

Yet, for years, China’s factories remained heavily dependent on foreign robotic technology. Industry giants like Kuka AG, ABB Ltd., Fanuc, and Yaskawa Electric Corp. held an iron grip on the market, with foreign firms controlling over 60 per cent of industrial robot sales in China.

Even as recently as 2022, 12 of the top 20 industrial robot suppliers in China were international players, with Japan’s Fanuc reigning supreme. Among domestic challengers, only Estun Robotics and Inovance Tech managed to crack the Top 10, ranking fifth and seventh, respectively.

Now, that landscape is shifting. In line with President Xi Jinping’s push for self-sufficiency, factories across China are now increasingly favoring homegrown robots, not just as a patriotic pivot, but because these machines offer a compelling value proposition.

While Chinese robots may not yet match the surgical precision of their Western counterparts, they come at a fraction of the cost, are designed to meet local industry needs and deliver faster return on investment—a deal too good for manufacturers to ignore.

Even more striking, four firms—Estun (Nanjing), Inovance (Shenzhen), Efort, and Step—secured top positions, signaling that China’s robotic revolution is no longer just a vision, but a rapidly unfolding reality.

Masterplan

Beijing first set a goal for homegrown robot makers to take more than half of the domestic market in its Made in China 2025 plan, the ambitious industrial policy it unveiled a decade ago. The central and local governments have since been pumping money in to support Chinese manufacturers.

The result? An automation boom that has transformed China into the beating heart of global robotics production. Today, some of the world’s most advanced robot factories don’t stand in Tokyo or Munich—but in Shanghai.

Japan’s Fanuc and Switzerland’s ABB have built the world’s largest robotic manufacturing plants in China, boasting facilities that outmatch even Fanuc’s operations back home. Meanwhile, Japan’s Yaskawa Electric has established three factories, collectively producing 18,000 robots annually.

To meet growing demand, Efort, a specialist in paint-spraying robots, announced plans in August to invest 1.9 billion renminbi ($261 million) in a new factory at its Wuhu, Anhui province headquarters. The facility will focus on high-end, specialized robots and aims to increase annual production tenfold to 100,000 units by 2029.

But Beijing’s playbook doesn’t stop at merely attracting foreign investment. It has mastered the art of knowledge absorption—using foreign capital to capture industrial expertise and force technology transfer to Chinese robot makers to shrink the innovation gap.

Despite stringent intellectual property safeguards, the spillover effect is inevitable. With foreign firms setting up advanced production lines in China, local manufacturers have gained crucial insights—accelerating their push toward self-sufficiency.

The numbers tell the story. Since 2017, over 3,400 robotics start-ups have emerged in China, spanning everything from industrial robots to autonomous mobile robots (AMRs). Standouts like Unitree, Mech-Mind, Rokae, JAKA Robotics, and SEER are rapidly climbing the global ranks.

To further boost the industry, the Beijing government established a 10 billion yuan ($1.38 billion) fund in January in collaboration with a subsidiary of Shougang Group, a state-owned steel enterprise. Siasun, one of China’s leading robotics manufacturers, has received 588 million yuan ($80.9 million) in subsidies over the past three years, according to its annual report.

While there has been no official mandate requiring state-owned enterprises to replace foreign robots—unlike in sectors such as semiconductors and software—analysts note that many have already shifted to local suppliers.

The final piece of the puzzle? Cost competitiveness. HSBC Qianhai Securities estimates that Chinese robots are now 10 to 15 percent cheaper than their foreign counterparts, thanks to localized supply chains and scaled-up production.

Progress Paradox

China’s rise in robotics is nothing short of extraordinary, yet beneath the glossy surface of rapid adoption lies a stark reality—it remains the world’s largest importer of industrial robots, highlighting its continued dependence on foreign technology.

However, the country’s Achilles’ heel remains its reliance on foreign-made critical components. The robot gear reducers, controllers, and servo systems—which form the backbone of industrial robots—are still largely controlled by foreign manufacturers.

These three core components account for nearly 70 percent of a robot’s total production cost, and as of 2020, they were still primarily manufactured by global giants such as Japan’s Nabtesco, Germany’s Siemens, and Switzerland’s ABB.

As a result, Chinese industrial robot firms largely function as system integrators, assembling machines rather than leading in high-value innovation—a gap Beijing is racing to close.

A Chinese analyst bluntly summed it up: "Even in robots exported by China, the value of imported parts remains very high."

The Gap

If hardware is the body, then software is the soul—and this is where China lags the most. Today, software accounts for nearly 80 percent of a robot’s value, dictating everything from efficiency to adaptability. However, China continues to lag in industrial software capabilities, limiting its competitiveness in the robotics sector.

“We see a lot of copycat hardware, but most of what differentiates vehicle warehouse robots, especially in terms of throughput capacity, is driven by the software capabilities, and China is behind there”, noted a report from the Information Technology and Innovation Foundation (ITIF), a U.S.-based think tank.

The real battle for robotic supremacy is no longer just about manufacturing more robots—it’s about integrating AI, machine learning, and advanced industrial automation software. And here, Western companies still hold a clear edge.

Another area where China is falling behind? Robotics as a Service (RaaS).

While Western firms are pioneering subscription-based robotic solutions—allowing businesses to access automation without hefty upfront investments—Chinese manufacturers have been slower to adopt this model.

RaaS isn’t just about selling robots—it’s about creating a seamless, AI-driven service ecosystem that enhances efficiency and maximizes uptime. Without mastering this shift, China risks being left behind in the next evolution of robotics.

China’s rapid progress has also been accompanied by allegations of imitation rather than true innovation.

One expert reported that Japanese robotics manufacturer Fanuc discovered its foundry cast mark on a Chinese competitor’s robot. Similarly, after Boston Dynamics unveiled its dog-like walking robot, Chinese firms developed near-identical versions just a few years later.

While imitation can be a shortcut to market entry, true dominance requires originality—and that’s where China still faces its greatest challenge.

The Strategy: Capture the Low-End, Conquer the High-End

China’s industrial robots may not yet match the precision, durability, and cutting-edge technology of their Western counterparts, but they have one undeniable advantage—price. For many businesses, particularly in emerging economies, this trade-off between cost and quality is simply too tempting to ignore.

According to Dr. Anwar Majeed, associate professor at the School of Robotics at XJTLU Entrepreneur College, Chinese robots are, on average, 30 percent cheaper than their European and Japanese equivalents. This cost advantage makes them highly attractive to manufacturers looking to automate without breaking the bank.

Take, for instance, Humanoid, a Chinese robotics company offering advanced robots for just $90,000—a staggering five times less than their Western competitors.

While their performance may hover around 80 percent of the top-tier foreign models, the price difference makes them a compelling alternative, especially for industries where ultra-high precision isn’t a necessity.

China’s robotic industry has embraced a "scale first, refine later" approach. By aggressively capturing market share in the low- and mid-range segments, domestic manufacturers aim to establish dominance before reinvesting in higher-end technology—often with generous government backing.

Despite global giants like Fanuc, ABB, and Yaskawa still controlling the premium market, China is making strategic inroads. Companies like Geek+ and HAI are leading the way in materials handling, while Leader Drive has secured a strong foothold in robotics components.

Fast-rising startup Unitree is closing the gap with its affordable alternatives to high-end robotic systems. While its BD series may not yet rival the best in the industry, its budget-friendly price point has made it a favorite among universities and research institutions, which don’t require top-tier models.

Beyond domestic innovation, Chinese companies have strategically acquired established foreign firms to gain access to critical technologies.

In 2019, Estun, a leading Chinese robotics manufacturer, purchased Germany’s Carl Cloos Welding Technology for $216 million. Two years earlier, it had also taken stakes in Barrett, a pioneering U.S. company specializing in robotic arms.

Inovance, a rising leader in SCARA robots—known for their human arm-like motion—acquired French software company Irai in July last year.

Perhaps the most well-known example of this expansion strategy is Chinese electronics giant Midea’s $5 billion acquisition of Germany’s Kuka in 2016. Despite political resistance in Europe, the deal went through, giving China control of one of the world’s top four robotics firms, alongside Switzerland’s ABB and Japan’s Fanuc and Yaskawa.

The Road Ahead: Price Wars or Technological Leap?

Robotics firms in China benefit from the ecosystem that evolved here during the last 10 to 15 years. They can make product iterations much faster and at considerably lower costs than firms in Japan, not to speak of Europe.

However, challenges remain. In the long run, Chinese players will have to find a way to differentiate their products or they risk getting dragged deeper into a price war as competition intensifies, says Walter Zhu, head of robotics at MIR Databank.

“This is not an industry where you can keep gaining market share just by cutting prices.”

The once-dreaded "job-stealing robots" industrial robot may ironically be China’s best hope for sustaining its manufacturing supremacy well into the future.