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The Rise of China’s Customer Service Robots

Summary

It’s no more the Great Leap Forward, but instead the “Robotic Leap Forward.” Automation at the industrial level is now expanding to the consumer level in China, and Beijing is looking to use investment in customer service robots as part of its push to market the nation as a global leader in technology and innovation.

Every year, the same question is asked, “When will robots make human employees obsolete?” Yet, the answer may be simpler than you think. The robots are not coming, they are already here. Unfortunately for many, technology and automation have already erased millions of jobs. Within the next three years, over 120 million workers worldwide could be displaced or heavily impacted due to outsourcing to technology. For China, it is estimated that 50 million workers could be displaced or impacted. 

Despite apprehension over the inevitable robot takeover, Beijing continues to invest heavily in the robotics industry as part of its aim to rely more on homegrown industries, particularly the technology sector, to compensate for labor shortages and supply chain concerns. In the context of manufacturing and industrial robotics, China has widely been regarded as the world leader. However, a highly favorable policy environment for robotics innovation, as well as the pandemic’s sudden push for contactless service, has rapidly shifted the focus of industry investment, and a burgeoning customer service robotics sector is emerging.

The Rise of Customer Service Robotics

Why Is China Surging Ahead in Robotics?

For years, “the world’s factory” has been China’s moniker for a host of reasons, including its low production costs, low taxes, and favorable currency practices. As a result, since the 1980s and gaining speed in the 2000s, Chinese manufacturing has blossomed. However, China is not the “cheap” market it used to be, particularly as the average wages for a manufacturing worker has more than doubled since 2011. Alongside rising production costs, the nation has shifted continuously more investment into industrial automation robots to retain its competitive edge.

Annual Installations of Robotics

In 2013, China became the world’s largest market for industrial automation robotics after years of rapid growth; in fact, it now has more robots than the next four countries combined. Yet, China’s robotics industry is relatively young. In 2000, only 380 units were sold to China, or about 0.4% of the world’s total. Two decades later, in 2019, robot sales to China totaled 140,500 units, or about 38.5% of the world’s total. During this period, robotics was upgraded to a strategic industry, and, in 2016, the Robotics Development Industry Program was launched to increase the domestic production of robots and attract foreign investment to China’s robotics industry. The government also announced a goal to triple its annual manufacturing of industrial robots to 100,000 by 2020.

Policy as a Foundation for Customer Service Robots

Now, China is attempting to continue shifting itself up the value chain by positioning itself as a global leader in technology and innovation in both the manufacturing space and beyond. Emboldened by national policies like “Made in China 2025” and the “dual circulation strategy,” China is seeking to strategically reduce foreign reliance in key industries like manufacturing, AI, IoT, semiconductors, and more. 

These initiatives have created a hotbed for technological innovation within China, and Beijing has fully stood behind these initiatives by signing off on a US$1.4 trillion technology investment plan. As the government continues to push for a stronger presence of local tech companies, AI and robot technologies are now finding new uses in the consumer services space. According to the Chinese government’s 2020 Service Robot Industry Research Report, China’s service robot sector is the fastest growing in the world and represents more than 25% of the global service robot market.

The Pandemic’s Impact on Intelligent Service Robotics

While policy and investment formed the foundation, the pandemic accelerated the rollout of customer service robots across various industries. In early 2020, when the first cities in China began to shut down, businesses scrambled to find creative ways to continue operations in a contactless manner. Some even used creative means to carry out pandemic-related efforts. JD.com, for example, released a squadron of autonomous logistics robots on the streets of Wuhan to deliver medical supplies, with each robot filling 40 to 50 orders a day. In the new “normal” of COVID-19, robotics innovation blossomed in a manner which will continue to play out well after the end of the pandemic.

Who Are the Players Driving China’s Service Robotics Market?

Yushanfang Cooking Robot Tech

Yushanfang, founded in 2018, develops service robots capable of independently preparing dishes in fast food restaurants. Every Yushanfang robot has a four-burner stove and can complete a dish from a selection of over 700 dishes in two minutes on average. These intelligent service robots can simultaneously prepare four separate dishes, adjust burner temperatures, and season food. When it comes to cooking, there is not much that these robots cannot do. Equally impressive, Yushanfang’s R&D team is currently leveraging artificial intelligence to predict a customer’s food preferences based on order history, as well as alter seasonings based on a customer’s flavor palate. 

The breakthrough technology has lent itself to considerable success for the brand. In February 2020, the start-up raised several millions dollars of investment from China Prosperity Capital and Seekdource Investment Management in its angel round. In April 2020, Yushanfang established “Yihexian,” a fast food restaurant chain. Each establishment is staffed and operated by cooking robots and two human staff members. So far, about a dozen Yihexian outlets are spread around Guangdong and Shenzhen. Beyond their novelty, robotic chefs like Yushanfang have proven that efficiency in service will bring customers in the door.

Founder Wen Jie is confident that China’s 800 billion yuan fast food industry will provide endless possibilities in the market for service robotics companies. His confidence is not unfounded. Robotic chefs and smart kitchen technology are a rising trend in the Chinese restaurant industry. Yushanfang is just the latest in a line of Chinese smart kitchen and robotic catering companies. Last year, Qianxi Robot Catering Group opened the world’s first robot-operated restaurant. Meanwhile, Xixiang Intelligent Kitchen, another smart kitchen tech company, made headlines when one of its robots made and served food at a Shanghai middle school to decrease COVID-19 risks.

Keenon Robotics

If a restaurant or hotel in China has robotic servers, there is a high chance that they were developed by Keenon. Keenon was founded in 2010, but launched its first service robots in 2016. The company now claims that 85 percent of the serving robots sold in China are Keenon robots, which can be found in over 500 cities in China and 60 countries worldwide. The company specializes in contactless delivery and serving robots, including food delivery robots, disinfection robots in hospitals, and robot maids in hotels. At a cost of US$8,220 per unit, even small businesses can afford one. 

Stringent health and social distancing measures implemented across China opened a new opportunity for Keenon. Company sales tripled to more than 10,000 units during 2020, which, according to the company, was directly related to business’ need for creative ways to interact with customers during the pandemic.

The company already has partnerships with industry giants such as Burger King China and Haidilao Hotpot, the world-renowned hotpot chain. Recently, Keenon partnered with delivery behemoth Meituan Dianping to open a “contactless restaurant,” with Keenon food delivery robots playing an integral part in the service process. Going forward, Keenon has grand ambitions to become the world’s premier smart delivery robotics company by expanding further abroad. Keenon robots are also already present in the United States, and, considering the ongoing labor shortage nationwide, they may become even more commonplace.

CloudMinds

Cloud-based AI technology firm CloudMinds was founded in Silicon Valley in 2015 by Bill Huang, a Chinese-born engineer. Huang himself attended graduate school in the US, and later spent most of his career in Silicon Valley. CloudMinds found its niche in the janitorial and reception markets. Last year, CloudMinds gained notoriety after becoming a partner in the Wuhan Wuchang Smart Field Hospital project. CloudMinds sent 14 robots capable of cleaning and disinfecting hospitals, delivering medicine to patients, and providing temperature and vital sign checks to a makeshift hospital in Wuhan during the height of the pandemic. CloudMinds’ robots completely ran the hospital while doctors and nurses outside received patient information through patients’ bracelets connected to a cloud-based AI information management program. 

While the Smart Field Hospital was a victory for CloudMinds, the rest of 2020 did not go as smoothly. The US Department of Commerce blacklisted CloudMinds as a part of a wide-reaching ban on multiple Chinese companies over national security concerns in 2020. This measure followed the Department of Commerce barring CloudMinds from exporting US technology to China in 2019. As a result, Huang claims CloudMinds lost 75 percent of its business in the US and was forced to cut 80 percent of its US-based staff. CloudMinds also abandoned plans to go public in the US after filing a US$500 million IPO in 2019 and is contemplating a listing on the Shanghai Stock Exchange STAR Market, China’s Nasdaq-styled board. In the meantime, CloudMinds’ US unit has rebranded as “Wright Robotics,” hoping to distance itself from the bad press.

What About The Future Rise of Robotics?

The pandemic expedited the demand for service robots. As Beijing swiftly locked down cities to prevent the virus’ spread, the service industry, a traditionally customer-facing sector, was hit harder than others. Deploying robots that cannot get sick nor transmit the disease was a natural progression. Now, though the pandemic is coming to an end, the automation economy remains steaming ahead at full speed. 

Numerous trends will define the future development of service robotics. China’s 2020 census recently revealed the population has barely grown in the last 10 years. The fertility rate is now 1.3 children per mother, well below the 2.1 rate needed to replace workers aging out of the workforce. As a result, businesses are already feeling the strain of labor shortages and are turning to automation to make up the difference. Moreover, policy trends, such as “Made in China 2025” and the “dual circulation strategy,” will continue to foster broader investment into automation, AI, and IoT, which in turn will attract both public and private investment into the service robotics industry. In just a few years, we may find that waiters respond better to commands in binary than they do English or Mandarin.

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