Midea’s move for German robot maker Kuka may be a turning point for Chinese manufacturing
Edward Tse says the takeover bid is emblematic of how Chinese companies are shaking off the copycat label in the march towards ‘Industry 4.0’ and ‘Made in China 2025’
Chinese electrical appliance manufacturer Midea’s move to acquire Kuka, the German robot maker, could be a defining moment in the evolution of China’s manufacturing sector. China’s reliance on low-cost, labour-intensive manufacturing to power its immense economy is no longer attractive, mainly due to the rise in labour and other costs. The world’s second-largest economy needs to seek alternative ways to grow and companies like Midea are showing the way.
Midea was founded in 1968 by He Xiangjian as a small township enterprise. Leading a group of residents in Beijiao, Guangdong province, He raised 5,000 yuan (HK$5,834) to establish a bottle lid production workshop. Midea has since transformed into a global player pushing the technology and innovation frontier.
It currently owns some of China’s top home appliance brands and its total group revenue globally in 2015 was over US$21 billion. Its rise epitomises the thriving Chinese innovational and entrepreneurial spirit that emerged after the economic reforms spearheaded by late paramount leader Deng Xiaoping (鄧小平).
Industry 4.0 refers to the concept of fully automated production facilities that require minimal human involvement
For a long time, China’s manufacturers were branded copycats (shanzhai). Even though there are still plenty of shanzhai companies around, many more established companies like Midea are transforming themselves into market leaders and disruptors through innovation, evolution, experimentation and a closer connection with consumers. Midea’s latest acquisition target marks its foray into Industry 4.0.
So why is a maker of fridges and air conditioners interested in state-of-the-art industrial robotics? The heart of the matter can be found in two key phrases, “Industry 4.0” and “Made in China 2025”.
“Industry 4.0” refers to the concept of fully automated production facilities that require minimal human involvement. This fourth stage of the industrial revolution represents the convergence of the internet of things and the control of cyber-physical systems.
