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Home » Blogs & Opinions » Editor's Comment
AUTOMATION: A TARIFF WARS CASUALTY
Just as changes to the local environment in one part of the earth, can have profound effects many thousands of miles away – the so-called butterfly effect – so it is with business matters.
When President Donald Trump initiated his tariff war with China, it was easy to dismiss it as a spat between the two superpowers which would have little effect on business activities in the rest of the world. But this has turned out to be far from the case, with the tariff dispute having ramifications around the globe in all sectors of commerce and industry, including automation.
China has, for example, become the dominant force in the world's machine-building industry. Its machinery manufacturing sector generated revenues of $3.18 trillion in 2018 – more than 6% higher than the previous year. And the country exported $429bn worth of machinery during 2018 – a 12.1% increase on 2017.
Much of the exported machinery is destined for the US, so any increase in tariffs has severe effects on Chinese machine-builders. And because many machines – especially the more sophisticated ones – rely heavily on automation and control equipment from Western automation manufacturers, these suppliers are suffering too because of the tariff war. Production of some types of machinery has almost come to a halt in China, with severe repercussions for the Western automation suppliers for whom China has become a major – for many, their main – source of revenue.
Moving beyond the machine-building sector, to the wider world of manufacturing, China is now by far the world's biggest user of industrial robots. Last year, it installed more than 130,000 of these machines – more than twice as many as the next-largest user, Japan, which bought an estimated 52,400. So, if higher tariffs lead to Chinese manufacturers cutting back on their capital investments (as seems inevitable), robot-makers will be hit hard.
Although China now has many homegrown robot manufacturers, and most global robot-makers have substantial operations in China, the effects of the cutbacks will be felt on the robot industry around the world.
The latest figures bear this out. After almost 20 years of rapid growth of more than 20% each year, the Chinese robotics industry has witnessed its first contraction in both sales and production, starting about a year ago, according to the analyst IHS Markit.
All types of automation equipment are likely to be affected by the slowdown. Take PLCs (programmable logic controllers), for example. According to a new report from IHS, China overtook the US in 2018 to become the biggest regional market for PLCs, with revenues worth an estimated $1.7bn. But the analyst now expects to growth in the Chinese PLC market to hit a low point this year, blaming the a "dramatic change" in the dynamics of the downstream industries that buy PLCs.
President Trump believes that his tariffs will be good for US industry and consumers alike. I wonder whether US automation suppliers agree.
Tony Sacks, Editor
IS AI DELIVERING REAL BENEFITS?
THE COBOTS ARE COMING
CREATING A GREEN AND PLEASANT LAND
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