It’s been a riot a few years, but China’s manufacturing industry is now recovering. Once an industry characterized by low-cost, labor-intensive manufacturing, it has transformed into a cutting-edge manufacturing center aided by technology.
Automation and robotics have the potential to modernize China’s manufacturing, improving work efficiency and alleviating labor shortages. Predictably, companies and investors want to capitalize on this trend.
Robotics has been a hot industry for a while, but its popularity has skyrocketed in the last couple of years. The sector recorded investments and financing of US$ 6 billion in 2021, according to statistics from market research companies, and is expected to double in size in five years.
However, it is unknown when these investments will provide an adequate return. Robotics is experiencing the biggest bubble in China’s venture capital industry and is rife with speculation and overvalued companies. Compared to similar investment bubbles over the last 10 years, this one is larger in scale, longer in duration, and could be more devastating than any before.
The price/earnings ratio is no longer applicable for many listed companies, and the market/sales ratio also went out the window. He Huang
However, the “bust” is entirely preventable. Investors and companies need to get back to business basics and resist the industry’s typical impatience for exits on both sides of the negotiating table.
Understanding the market
With the influx of capital investment, we are seeing partial and cyclical market overheating in China. Many investors caught up in this investment tide are replicating the software investment model, because many institutions that have invested in internet startups are also aggressively entering this field.
So what’s behind this outbreak? Everything from China’s government policy to the launch of the Science and Technology Innovation Council, which opened a convenient outlet channel. Compounding the increase is the push to upgrade China’s industrial structure.
It is crucial, however, that investors do not apply software investment rules to investments in industrial technology. On the one hand, the investment to exit the period is different. Investment in robotics and other industrial technologies is relatively long-term compared to internet companies. Internet companies can go public in three to five years after investing, but industrial technology companies will likely take twice as long or longer to go public.