The global smart manufacturing market is expected to welcome a golden period of growth across five years, starting with annual revenue of US305 billion in 2021 and surpassing US450 billion in annual revenue in 2025 at a 10.5% CAGR, according to TrendForce’s latest investigations. This growth can be attributed to several factors, including the accelerating digital transformation efforts from enterprises, the increased demand from industrial automation and WFH applications, and the emergence of 5G, advanced AI technologies, and other value-added services.
Looking ahead to 2022, TrendForce believes that the outlook of smart manufacturing has evolved from such conservative strategies as improving the resilience of the manufacturing industry itself, to increasing the industry’s production capacity as well as efficiency while reducing both energy expenditure and carbon emissions. These advantages are expected to serve as the main drivers propelling the growth of the smart manufacturing market next year.
Smart manufacturing development will revolve around 5G, edge computing, and carbon footprint reduction going forward
The core feature of smart manufacturing lies in its ability to deliver instant feedback through the integration of virtual data and real, physical equipment. Hence, low latency, high security, and fast computing power have become increasingly important for smart manufacturing development, which will revolve around edge computing and 5G applications, including AR/VR, machine vision, digital twins, and predictive maintenance, all of which will experience considerable upgrades in functionality thanks to smart manufacturing.
Furthermore, as the issue of global warming gains more and more media coverage, 137 countries have now committed to achieving carbon neutrality. This pursuit of environmentally friendly outcomes is also reflected in the current state of industry 4.0 development. For instance, companies including Henkel, Johnson & Johnson, Siemens, and Tata Steel all operate manufacturing facilities that qualify them for membership in WEF’s Global Lighthouse Network. The aforementioned companies have ensured their facilities operate with optimized energy consumption, highly effective manufacturing processes, and reduced carbon emissions through the adoption of computer simulation/modeling and smart management. TrendForce expects the future design of smart manufacturing equipment and factories to center on the use of environmentally friendly IoT technologies.
Taiwanese manufacturers are likely to seize shares in the niche market in light of the rise of domestic micro-factories
It should be pointed out that the Taiwanese manufacturing industry possesses certain competitive advantages in the global market, including a highly consolidated supply chain, a relatively comprehensive smart manufacturing value chain, and the ability to deliver highly customized solutions. In particular, various Taiwanese manufacturers specialize in full-service, integrated smart solutions that feature equipment health monitoring and machine vision functionalities, thereby significantly lowering the barrier for adoption. Assuming that the domestic industry is able to continue leveraging their existing competitive advantages and furthering their current developments, TrendForce expects micro-factories to become the key factor through which Taiwanese companies can find commercial success in the global smart manufacturing industry.
Although the smart manufacturing value chain has historically had its various verticals spread throughout the world, recent trends such as a return of domestic manufacturing and tectonic shifts in the manufacturing industry have resulted in the rise of shortened supply chains as well as localized operations. These developments have led to the recent surge of micro-factories. TrendForce’s investigations indicate that, in addition to their high degree of automation and analytical accuracy, micro-factories deliver improved manufacturing outcomes while minimizing resource consumption and yielding such benefits as a flexible supply chain, lean human resources, and low initial cost. Micro-factories have already seen widespread usage in the global automotive and electronics industries in light of these benefits. Likewise, TrendForce believes that Taiwanese manufacturers of bicycle chains, steel nuts/bolts/screws, and suitcases will likely succeed in their respective niche markets by upgrading their manufacturing operation with micro-factories.
The onset of the COVID-19 pandemic in 2020 compelled the manufacturing industry to move towards a future of digitization and automation that attempts to reduce labor associated with production and operation. In light of this shift, the use of industrial robots quickly expanded from its earlier applications in the automotive industry to other industries, particularly pharmaceutical production and healthcare, which have grown rapidly in demand in the post-pandemic era.
The Chinese market, more specifically, has seen remarkable growths in industrial robot production, from just under 30,000 units in October 2020 to 45,000 units subsequently, according to TrendForce’s latest investigations. As of March 2021, about 30,000 industrial units were produced each month. In addition, annual sale of industrial robots in 2020 reached about 170,000 units, a 15% YoY increase. Non-automotive industries, namely, the electronics industry and the metal fabrication industry (which spans robotic machining, freight manufacturing, and rail manufacturing), accounted for about 70% of industrial robot sales in China.
While labor costs in China gradually increased, the corresponding cost advantages associated with domestic production underwent a corresponding decline. As such, industrial robots, the production of which began approaching economies of scale, became one of the key drivers of the Chinese manufacturing industry’s shift towards high-end, advanced manufacturing. Companies such as Estun, STEP, GSK, and Inovance have been either increasing their R&D funding or acquiring other companies in order to raise their technological competencies, and their efforts have been accelerating China’s goal of “domestically manufactured substitutes”.
Articulated robots and home appliances are, in order, the two most prevalent applications of industrial robots
In the industrial robot market, articulated robots comprise the most widely adopted option. Articulated robots are primarily used across three industries, namely, automotive, metal fabrication, and home appliances segments. SCARA robots, on the other hand, represent the other mainstream type of industrial robot and are mainly used for electronics, li-ion, and PV panel manufacturing. Aside from the two aforementioned options, collaborative robots are also used for manufacturing metal products, ICT products, and consumer electronics.
In the Chinese market, for instance, articulated robots from major foreign suppliers have a significant advantage in the automotive, metal fabrication, and home appliances industries. These suppliers had a 73% share in the heavy payload (>20kg) segment and a 51% share in the light payload (≤20kg) segment in the articulated robot market last year, with ABB, FANUC, KUKA, and Yaskawa possessing most of these market shares.
Relatively, Estun, STEP, Siasun, GSK, and other Chinese industrial robot suppliers were instead focused on cultivating their presence among SMEs in tier 2 and tier 3 cities. These companies’ products are now used across a wide variety of applications in the automotive manufacturing (including automotive components and NEVs), metal fabrication, home appliances, and food/beverages sectors.
In particular, industrial robot-based production lines for whole vehicles have already been deployed for automotive manufacturing industries in these cities. Unlike their foreign competitors, major Chinese suppliers had a 20% market share in the heavy payload (>20kg) segment and 22% market share in the light payload (≤20kg) segment last year. Notably, Chinese suppliers possessed a slight advantage in the latter segment because metal fabrication and home appliances manufacturing, compared to automotive manufacturing, has relatively less stringent requirements regarding product compactness and stability.
As the pace of electrification accelerates in the global automotive market, and various governments worldwide implement subsidy policies that encourage consumer EV purchases, sales of new energy vehicles（NEV, which includes BEV/PHEV/FCV）are continuing to rise as well. NEV sales for 2021 are projected to reach 4.35 million units, a 49% increase YoY.
Due to the vast scale of the Chinese market, as well as domestic policies favorable for the growth of BEV/PHEV/FCV, various NEV brands have quickly emerged in China in recent years, such as BYD Auto, Aion（formerly GAC NE）, and BAIC BJEV. At the market’s peak, NEV manufacturers in China once numbered in the hundreds, although that number has since dwindled somewhat, as the intense competition resulted in declining sales and market shares for many automakers, including BAIC and JAC.
Four rising stars among emerging NEV manufacturers in China include NIO, XPeng, Lixian（or Li Auto）, and Weltmeister, all of which have been shipping tens of thousands of mass production vehicles each year. In particular, while NIO, XPeng, and Lixiang registered significant growths in the past few years, Weltmeister also ranked number two in terms of sales in 2019, though it fell to fourth place in 2020 as it delivered fewer vehicles compared to the top three competitors last year.
In light of the aforementioned four automakers’ current expansions, TrendForce has summarized several key aspects of their growths, including the following:
1. Autonomous Driving Technologies: Autonomous driving is not only part and parcel of these automakers’ core competencies but also a reflection of what consumers and investors expect of the automotive industry. In pursuing advanced autonomous driving technologies, the four automakers have been adopting increasingly powerful processors and computing platforms, with Nvidia being the most common partner among emerging NEV manufacturers. Remarkably, XPeng stands out as the only player making a noticeable effort to develop in-house chips.
2. LiDAR: LiDAR is integrated into an increasing number of vehicles in response to the growing demand for advanced self-driving functionalities. Although LiDAR remains out of reach for vehicles in certain price segments, autonomous driving sensors including LiDAR are no longer limited to flagship models since new NEV models’ E/E architectures are expected to be compatible with OTA updates.
LiDAR sensor demand from NEV manufacturers has significantly increased because only by pre-installing hardware ahead of time in their vehicles can automakers enable autonomous driving functionalities as a paid subscription service through OTA updates later on.
3. Battery-swapping: Battery-swapping are relatively attractive for the Chinese NEV industry for several reasons: First, battery-swappable vehicles are excluded from China’s NEV subsidy limits*; second, automakers can now afford to lower the retail price of vehicles by turning batteries into a subscription service; finally, it’s much convenience for driver because battery swapping is faster than battery charging.
For instance, NIO’s entire NEV lineup is compatible with both battery charging and battery swapping. NIO has been pushing its BaaS（battery as a service）and second-gen battery swap stations since 2020. On the other hand, Weltmeister and XPeng are also making their respective battery-swapping strategies.
4. Capacity Expansion and Overseas Strategies: The aforementioned four automakers all place a heavy emphasis on both expanding their production capacities and growing their overseas market shares. Their capacity expansion efforts include building in-house production lines, acquiring other facilities, or jointly funding automotive production with OEMs/ODMs. Regarding overseas expansion, their primary destination is the European market, which is relatively favorable to NEVs.
For instance, NIO and XPeng choose Norway as their first target market in Europe. However, while the European automotive market is conducive to the growth of NEVs in terms of both policies and cultures, competition among automakers is also correspondingly intense. In addition, most European countries prefer either domestic brands or other European brands. Therefore, Chinese automakers must prioritize gaining consumer trust via establishing a trustworthy brand image.
*China’s subsidies for NEV purchases are restricted to NEVs with a retail price of CN¥300,000 and under. However, NEVs with swappable batteries do not fall under this restriction.
As the pace of electrification accelerates in the global automotive market, and various governments worldwide implement subsidy policies that encourage consumer EV purchases, sales of new energy vehicles (NEV, which includes both BEV and PHEV) are continuing to rise as well, according to TrendForce’s latest investigations. NEV sales for 2021 are projected to reach 4.35 million units, a 49% increase YoY.
TrendForce indicates that electrification, smartization, and automation are the three key determinants of the ongoing transformation taking place in the automotive industry. Guided by these three determinants, not only are the strategies, business models, and competitions of automakers transforming, but the automotive supply chain is also changing and expanding. Upstream component suppliers and downstream manufacturers alike are now operating in accordance with new paradigms.
High potential for NEV growth entices emerging competitors to enter the market
Now that the competition between traditional and emerging automakers in the NEV market is gradually intensifying, traditional automakers have begun releasing BEVs that are based on purely electric platforms rather than preexisting ICE vehicles. However, for the vast majority of mainstream automakers, NEV sales account for less than 10% of their total car sales. These automakers are therefore placing a top priority on expanding the lineup and sales volume of their NEV models. Emerging automakers, on the other hand, are instead focusing on expanding their production capacities, and Tesla as well as Chinese brands (including NIO and XPeng) have made their respective capacity expansion plans.
NEV sales currently account for only 5% of total automotive sales. As such, not only does the NEV market still have high potential for growth, but this potential has also attracted new players, which are mostly consumer electronics and IoT vendors such as Xiaomi and OPPO, to enter the market. Given their lack of competencies in developing and manufacturing whole vehicles, these companies are instead acquiring existing automakers or utilizing ODM services. Therefore, automotive ODM services are likely to ramp up going forward, while automakers and ODMs will continue building factories via joint ventures, sharing their technologies, and jointly developing NEV models.
As software and hardware technologies improve in the automotive industry, cars now have an increasing number of smart features in response to the demand for user friendliness; for instance, the Car2Home ecosystem was created as a natural extension of V2X (vehicle-to-everything) technology. Advances in automotive systems and technologies, however, do little to assuage prospective car buyers’ fears of instant depreciation and maintenance fees, which are both justified and frequently parroted by existing owners.
Recent years, however, have seen the emergence of a new technology known as OTA (over-the-air) that can at least address car buyers’ maintenance-related worries. Automakers can fix software issues in the car with OTA updates, thus saving the driver the time and effort it takes to perform a factory maintenance. Simply put, OTA is a cloud-based service that allows automakers to perform a host of actions, including software/firmware updates, OS upgrade, issue fixing, and security patches, through a cloud-network-car connection.
As such, OTA technologies are highly dependent on data encryption, decryption, and transmission, meaning OTA services involve not only software and cloud services vendors, but also cybersecurity companies as well. According to TrendForce’s investigations, about 72% of new cars sold in 2025 will be OTA-enabled vehicles thanks to advancements in V2X, automotive electronic/electrical architectures, and intra-vehicle communications.
OTA pioneer Tesla kicked off its OTA strategies in 2012
Tesla is perhaps the impetus responsible for the surge in OTA viability in the automotive industry. Elon Musk believes that cars should be appreciated, as opposed to depreciating, assets for the consumer. As part of that belief, all Tesla models are capable of OTA updates of software and firmware, reflected in Tesla’s revenues from “service and other”, which saw yearly growths from 2016 to 2020 (Tesla’s 2020 earnings from “service and other” alone surpassed US$2.4 billion). Therefore, Tesla’s sales volume will remain the key to the market size and penetration rate of OTA technology.
Other automakers, such as BMW, Mercedes-Benz, GM, Ford, Toyota, and Volkswagen, also began rolling out OTA updates in their models from 2015 to 2020, although it wasn’t until the year 2020 did most of these companies perform OTA updates on any appreciable scale. Furthermore, most OTA updates were software updates as opposed to firmware updates (for ADAS and powertrain functionalities), since issuing firmware OTA updates still remains a major issue for automakers at the moment.
TrendForce also indicates that, should automakers wish to improve automotive functionalities with OTA updates, they would need to completely overhaul their cars’ electronic and electrical architectures. In this light, one of the prerequisites of performing functional OTA updates is the availability of compatible hardware in cars.
For instance, in order to activate LiDAR functionality, automakers must first equip a car with LiDAR hardware. Once self-driving technology matures to the point when it is deemed appropriate to be enabled on a given car, then automakers can activate the necessary LiDAR functionality with OTA updates.
Of course, all of this hinges on whether automakers are willing to bear the cost of preemptively equipping their cars with the necessary hardware, as well as whether they have any faith in the success of new services/functions to be activated by OTA in the future. Most importantly, however, if consumers were uninterested in these services and functions, then automakers would have no way of recouping their preemptive investments in the aforementioned hardware.
On the whole, despite most automakers’ planned to roll out the capability of OTA updates to their vehicles, they still face bottlenecks in performing OTA updates safely and providing useful upgrades for users. Only by overcoming these hurdles will automakers effectively improve the driving experience and convince car owners as well as prospective buyers that OTA is a worthy investment.