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Hello and welcome to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people around the world.
The tech industry in China has had a pretty hectic week. The government is in the process of overthrowing its $ 100 billion private education sector, wiping billions from the market capitalization of the industry’s most lucrative players. Meanwhile, the assault on China’s internet giants continued. Tech stocks fell after Tencent suspended user registration, sparking fears over who will be the next target of Beijing’s wrath.
Cutting-edge observers point out that the new wave of tough regulations against Chinese internet and education companies has long been on Beijing’s agenda, and it’s not surprising. Indeed, the central government did not hesitate to express its desire to stimulate manufacturing and contain the unchecked powers of its service industry, which can include everything from internet platforms, movie studios to after-school centers.
A few weeks ago, I had an informative conversation with a Chinese venture capitalist who has been investing in industrial robots for over a decade. So I’m including it in this issue because it provides useful context for what’s going on in the consumer tech industry. the week.
Automate factories
China is putting robots in factories at an aggressive rate. Northern Light Venture Capital partner Huang He sees three forces driving demand for industrial robots, especially those made in China.
Over the years, Beijing has advocated for “localization” in a wide range of technology sectors, from business software to automation of production lines. We can start to see Chinese robots that can compete with those of Schneider and Panasonic in a few years. CRP, an industrial robot manufacturer backed by NLVC, already sells in Southeast Asia, Russia and Eastern Europe.
In addition to technological localization, it is also well recognized that China is facing a severe demographic crisis. The labor shortage in its manufacturing sector is further compounded by the reluctance of young people to do menial factory jobs. Factory robots could offer a helping hand.
“Nowadays, young people prefer to become food deliverers rather than working in a factory. The work that robots replace is of the low-skilled type, and those that still cannot be occupied by robots pay well and offer great benefits, ”Huang observed.
Large Chinese companies are still turning to imported robots because of the proven stability of the products. The problem is that imported bots are not only expensive, but also selective towards their users.
“Companies must have in-depth technical capabilities to be able to exploit these [Western] robots, but such companies are rare in China, ”said Huang, adding that the overwhelming majority of Chinese companies are small and medium-sized.
With the exception of the automotive and semiconductor industries, which still rely heavily on sophisticated imported robots, China’s affordable and easy-to-use robots can already meet most of the local demand for industrial automation, said Huang.
China currently uses nearly a million six-axis robots a year, but only manufactures 20% of them itself. The gap, coupled with a national location plan, has led to a frenzy of investment in industrial robotics startups.
Rush is not necessarily a good thing, Huang said. “There is this bizarre phenomenon in China, where the most funded and valuable industrial robotics companies generate less than 30 million yuan in annual revenue and which real users in the industry have not really heard of. “
“This is not an industry where giants can be created by spending money. It is not the Internet business.
Small and medium-sized businesses welcome robots in factories. Take welding for example. An average welder costs around 150,000 yuan ($ 23,200) per year. A typical welding robot, sold for 120,000 yuan, can replace up to three workers per year and “does not complain at work,” the investor said. A good robot can run continuously for six to eight years, so the financial incentive to automate is obvious.
Cutting-edge manufacturing doesn’t just help local bosses. This will ultimately increase the dependence of foreign companies on China for its efficiency, making it difficult to cut off Chinese supply chains despite efforts to avoid the geopolitical risks of manufacturing in China.
“In electronics, for example, most of the supply chains are in China, so factories outside of China end up spending more on logistics to move parts. Much of 3C manufacturing is already highly automated, which relies heavily on electricity, but in most emerging economies the power supply is still quite unstable, disrupting production, ”Huang said.
War against the internet titans
The shock of antitrust regulations against Alibaba last year is still being felt, but another wave of scrutiny has already started. Shortly after Didi’s successful New York IPO, the ridesharing giant was asked to stop user registration and work on protecting user information critical to national security.
Tencent’s shares fell the most in a decade on Tuesday after halting user registrations to its WeChat messaging as it “upgrades” its security technology to align with relevant laws and regulations. The gaming and social media giant is just the latest in a growing list of companies hit by Beijing’s tightening grip on the internet industry, which has thrived for two decades under laissez-faire policies. do.
At the root of the crackdown is Beijing’s growing unease with the uncontrolled accumulation of wealth and power in the service industry. China is unequivocally committed to advancing its tech sector, but the kinds of tech Beijing wants aren’t so much the video games that bring myopia to children and the algorithms that bring adults to their screens. China clearly indicates in its five-year plan, a series of social and economic initiatives, that it will go deep into “hard technologies” such as semiconductors, renewables, agritech, biotechnology and automation industrial like factory robotics.
China is also committed to tackling inequalities in education and wealth. In the eyes of the authorities, the expensive and lucrative extracurricular establishments that dot the big cities hamper the educational attainment of children in the poorest areas, which ultimately worsens the wealth gap. The new regulatory measures have restricted the hours, content, profits and funding of private tutoring establishments, racking up inventories of major companies in the industry. Again, there have been clear indications of The writings of President Xi Jinping to bring off-campus tutoring “on the road to education”. All China-focused investors and analysts are now looking at Xi’s thoughts and directives.
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