August 23, 2018 / 7:39 AM / a month ago

Trade tensions may power down China's robot industry

BEIJING (Reuters) - At a trade show in southern Beijing, children and parents crowd around a group of pink and blue dancing robots that resemble toddler-sized Power Rangers.

The robots – wired with wide LED smiles and cutesy personalities – are the brainchild of Chinese-American company AvatarMind, built to be futuristic retail workers, teacher’s assistants and household helpers.

But even as the company polishes off production of 2,000 units, AvatarMind and companies like it are rethinking plans for international expansion in the face of widening tariffs.

“We want to sell them for the price that is affordable for families, not just institutions. And Trump’s tariffs may affect that,” AvatarMind chief executive Dr John Ostrem said at the World Robot Conference, which ends Sunday.

The main competitor to AvatarMind’s iPal humanoid robot is a similar but much pricier bot called Pepper, which is made by Japan’s SoftBank Group Corp (9984.T).

Annualized growth rates for robot production in China dropped from 35.1 percent in May to just 6.3 percent in July, according to the country’s bureau of statistics

China’s National Development and Reform Commission (NDRC) says the slowdown is not related to trade.

But analysts say there is an obvious link to direct tariffs on industrial machinery and robot parts, as well as domestic manufacturers’ putting off production during trade talks.

Slideshow (5 Images)

“How could it not be related?” said Iris Pang, economist for Greater China at ING Wholesale Banking in Hong Kong. “The trade war may have already deferred some decisions of export-related manufacturers.”

U.S. tariffs on $16 billion worth of Chinese goods came into effect at midnight on Wednesday, alongside retaliatory Chinese tariffs on an equal amount of U.S. goods.

Although robots aren’t directly named, the U.S. list includes electronics, auto parts and other items that require automated manufacturing and robots. An earlier round of $34 billion tariffs on Chinese goods lists industrial robots.

The situation could worsen for Chinese robotics manufacturers, analysts say, if the U.S. imposes a further $200 billion in tariffs on a range of consumer goods that create manufacturing demand for robots in China.

China has included robotics as one of 10 industries to get state support under the country’s Made in China 2025 industrial plan, which aims to make it a world leader in key technologies within the next decade.

Some Chinese companies hope the country’s cornerstone One Belt One Road foreign policy initiative will provide a boost even if trade with the United States evaporates.

Others said the low cost of Chinese manufacturing would - for now - compensate for tariffs in the U.S., where competing products like Pepper are still more expensive.

Li Shuai, a manager at Chinese medical robot firm Remebot, said her company is seeking FDA approval for its robots.

“There is a similar product abroad in France,” Li said. “Its domestic price is probably in the tens of millions, and the price of our equipment is controlled at about five or six million. Therefore, there is still a great advantage for us.”

Reporting by Cate Cadell, additional reporting by Cong Sun and Irene Wang in Beijing; Editing by Gerry Doyle

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