Elon Musk wants robots everywhere. China is making that a reality

Over the past few years, China has made robotics a key focus of its technology strategy, announcing plans to build supply chains and mass produce machines.

Chinese President Xi Jinping and the country’s top leaders, known as the Central Committee, met in October to release proposals for the “15th five-year plan,” a document laying out some of Beijing’s key focus areas in the coming years.

The term “Embodied AI” was mentioned in the text, which refers to AI-enabled hardware such as robotics or driverless cars.

For China, humanoid robots represent an opportunity to tackle labor challenges in the world’s second-largest economy as well as advance Beijing’s quest for technology superiority.

“China’s push to develop humanoid robotics stems from a combination of addressing demographic pressures, driving the next horizon of economic growth, and strengthening its role in global competition,” Karel Eloot, senior partner at McKinsey & Company, told CNBC.

UBTech Robotics is another important player in China. It produces humanoid robots for both industrial environments such as factories and commercial applications such as being tour guides. UBTech’s flagship industrial model, Walker S2, can change its battery itself to operate 24 hours a day.

The company is listed on the Hong Kong stock exchange and this month completed a share placement to raise nearly $400 million to fund its expansion. UBTech plans to deliver 500 industrial robots this year and expand humanoid robot production to 5,000 in 2026 and 10,000 in 2027, the South China Morning Post reported in November.

AgiBot is another player that said its 5,000th humanoid robot rolled off the production line this month.

China’s manufacturing prowess and success in ramping up production of other products, such as electric vehicles, could give it an advantage when it comes to robotics, analysts said.

“The depth of China’s supply chain means companies can develop and produce robots at a significant cost advantage over other regions,” Ethan Qi, deputy director of Counterpoint Research, told CNBC.

In fact, UBTech expects production costs to fall by 20% to 30% each year.

Meanwhile, various local governments in China have subsidy programs for companies in the robotics industry.

But Horváth’s Brauchle said the US has “advantages in artificial intelligence, autonomy and advanced algorithmic development.”

According to McKinsey’s Eloot, American firms are “investing in vertical integration” — which means owning and controlling more parts of the supply chain. This includes components such as actuators that power the robot’s movement, as well as artificial intelligence software integrated into the final product.

“We believe that tighter ownership of the entire system will deliver superior performance, stronger security postures and defensible intellectual property,” Eloot said.

China’s humanoid robot market will initially be larger than the US’s, but it won’t stay that way forever.

“In the long term, both countries are expected to converge towards similar large markets, whereby absolute mass market penetration is expected after 2040, driven primarily by high-volume adoption in private households,” Brauchle said. he said.

China’s robotics industry is not immune from challenges. A bottleneck is limited access to certain chips needed for robots.

“I think there’s a very high dependence on U.S. chips, for example Nvidia chips,” Jacqueline Du, head of China industrial technology research at Goldman Sachs, told CNBC’s “China Connection” last month.

Charlie Dai, principal analyst at Forrester, noted a number of other potential hurdles, such as AI limitations in humanoids’ unpredictable operating conditions and regulatory hurdles.

“These challenges slow commercialization over the next two years and require coordinated innovation, security and policy frameworks,” Dai told CNBC.

There are also technological challenges in replicating human movements of limbs such as hands and fingers; This is an incredibly complex task that requires mimicking biological functions. “Most robotic hands fall well short of effective degrees of freedom, sharply limiting their range,” says McKinsey’s Eloot.

Finally, perhaps the biggest challenge is to reduce the cost of these complex machines. Product costs for today’s advanced humanoid prototypes range from $150,000 to $500,000 per unit, Eloot said. To be “competitive with human labor,” these need to come down to between $20,000 and $50,000 per unit.

While robotics is a strategic priority for China, that hasn’t stopped regulators from warning about a potentially overheated market.

In November, the National Development and Reform Commission (NDRC), China’s top economic planning agency, warned that there was a risk of a bubble forming in the humanoid robot market. NDRC said there are more than 150 humanoid robot companies in China, the number is increasing, and most of them produce similar products.

In the past, there have been boom and bust cycles around technologies such as electric vehicles, to which Beijing places strategic importance.

“Many assume that humanoid robots will soon exceed human-level versatility, speed and autonomy. Manufacturers are reinforcing this perception through flashy promotional videos and staged trade show performances that offer capabilities that cannot yet be replicated in real industrial settings,” said Horváth’s Brauchle.

“This gap between perception and reality increases the risk of an investment bubble.”

“A market correction could slow the momentum of innovation and commercialization,” Forrester’s Dai added.