If you tuned in to the first round of the Democratic primary candidate debates, you know that one of the hottest topics in Miami was China. It came as no surprise. Trump’s tariff wars have put the spotlight on China—a country that is now viewed by many as the biggest external threat to the US today. Not only does China pose economic and military threats to the US, but its aggressive initiative to become the world leader in AI is working.
For investors with their eyes on robotics and AI, that reality is a call to action to look closely at how China’s rise as a technology disruptor is affecting the global supply chain today—and the impact it is likely to have on market leaders in the space for decades to come.
According to the just-released Artificial Intelligence Market Report: Trends, Forecast and Competitive Analysis[1], the global artificial intelligence market is expected to reach an almost shocking $71B by 2024, with a CAGR of 26% from 2019 to 2024. It’s a level of growth that every investor dreams of. How big is China’s slice of this growth? According to PricewaterhouseCoopers, AI deployment is likely to add $15.7T to the global GDP by 2030, and China is poised to take home $7T of that total, more than double the projected $3.7T in gains in North America.[2]
Shenzhen, one of the biggest hotspots for innovation in the world, is a perfect example of how China’s focus on innovation is shifting the landscape of robotics and AI. As recently as the early 2000s, back when US-based companies Qualcomm, Microsoft, Cisco, and Intel dominated Nasdaq, Shenzhen was a sleepy fishing village. Just 10 years later, Shenzhen had earned a reputation as a manufacturing hub for copycat technology. Then came “Made in China 2025”—the 2015 government policy that set the stage for China’s rapid rise in technology manufacturing. China, including the state and the people, is determined to surpass the rest of the world in technological prowess. Today, Shenzhen has become the world’s leading tech hub—complete with some of the world’s top programmers, designers, and engineers, as well as a growing list of AI startups founded by young and ambitious entrepreneurs. Named China’s most economically competitive city in 2018 for the fifth consecutive year[3], Shenzhen is the poster child of China’s potential.
China’s rise as center of technology innovation is nothing new. In my interview with CNBC over a year ago, I pointed out the fact that China had already become a technological powerhouse. It’s one reason the ROBO Global Indices—including the ROBO Global Robotics & Automation Index (ROBO), the ROBO Global Artificial Index (THNQ), and the ROBO Global Healthcare Technology & Innovation Index (HTEC)—include Chinese companies that our research has shown are positioned to support the area’s massive growth potential. Some, including Tencent, Han's Laser, and Shenzhen Inovance, are located in the hotspot of Shenzhen. Beijing, another major technology center, is the home of Hollysys Automation, JD.com, and Baidu. Alibaba and Hangzhou Hikvision are based in Hangzhou, and some regional outliers include Siasun Robot & Automation (Shenyang), IFlytek (Hefei), and Ping An Healthcare and Technology (Shanghai).
As the momentum of “Made in China 2025” continues to build, the number of Chinese cities striving to become technology hubs in their own right is growing as well. Two years ago, President Xi Jinping announced a plan to transform the Xiong’an New Area into a green and innovative city. Analysts have estimated that $580B could be spent on building out the city to plan, including 100% autonomous vehicles, roads that are embedded with smart solar panels, and a computer vision-geared infrastructure.
In an effort to reach its goal of becoming the global technology leader, China has even created a “national team” for artificial intelligence that includes Baidu, Alibaba, Tencent, and iFlytek. The goal is for these innovators to work together to pioneer research, supercharge innovation and, ultimately, to create the next generation of AI technologies faster than the competition.
During last week’s debate, “Mayor Pete” Buttigieg addressed the fact that China’s massive investments in AI are of much greater significance than Trump’s tariffs. “China is investing so that they could soon be able to run circles around us in artificial intelligence, and this president is fixated on the relationship as if all that mattered was the balance on dishwashers,” he said. Whatever your stand may be on the political issues, one thing is clear: China’s focus on technology is driving the future of AI. Investors who hone in on the right opportunities today are bound to reap the rewards—no matter who “wins” the race.
By Bill Studebaker, President & CIO, ROBO Global
[1] ResearchAndMarkets.com, July 2, 2019
[2] “Sizing the Prize: PwC’s Global Artificial Intelligence Study,” 2017
[3] National Academy of Economic Strategy at the Chinese Academy of Social Sciences, June 2019