Warehouse automation set for steady growth in China, report says

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by Emily Atkins

The Chinese warehouse automation market has fared well over the past five years, maintaining a market growth rate of around 16 percent, with steady expansion expected over the next five years.

Behind the US, China is the largest single market for warehouse automation. China has more warehouses than the US, Canada, and Mexico combined, and its labour costs are increasing as China’s workforce is becoming more skilled.

Despite the impact of the pandemic on the Chinese economy, warehouse automation experienced significant growth in sectors such as general merchandise, durable manufacturing and parcel. Overall, the mobile warehouse automation market has grown at a faster pace in China than fixed warehouse automation.

In 2022, the Chinese warehouse automation industry was worth US$4.72m, compared with $2.59m in 2018. The parcel, durable manufacturing and general merchandise sectors have been largely responsible for driving this growth, registering compound annual growth rates (CAGRs) of 22.1 percent, 22.5 percent and 18.4 percent respectively.

Between 2023 and 2027, the outlook for the market is still rosy as companies continue to look for ways to optimize efficiency on the factory floor, with a CAGR of 13.5 percent predicted by market intelligence specialist Interact Analysis.

International suppliers have played a significant role in China’s warehouse automation industry. However, we are now beginning to see a gradual decline in the share of business taken by international suppliers, as domestic suppliers gain a competitive advantage.

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 solutions 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. 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,” said Irene Zhang, senior analyst at Interact Analysis.

“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.”

Labour costs continue to rise in China, which has led many companies to re-evaluate their strategy and implement warehouse automation solutions in order to reduce costs. Finally, the localization of warehouse automation equipment has driven down the price of components such as sensors and PLC’s, further increasing Chinese vendors’ competitive advantage.

However, where there are drivers for market entry there are also barriers. 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 workforce is plentiful in China compared with other countries, such as the US. This means there is an abundant supply of blue-collar workers and less of an incentive to invest in automation.”