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Technology

Robot demand points to signs of life in China's capital spending

Industry barometer Yaskawa's order book better for third quarter in a row

Yaskawa Electric's Kitakyushu factory in southwestern Japan: The company is one of the world's biggest markers of factory robots. (Photo courtesy of Yaskawa Electric)

TOKYO -- A closely watched indicator of Chinese demand for industrial robots is showing a slower decline, adding to signs of improvement in factory investment in the world's second-largest economy.

Japan's Yaskawa Electric reported Thursday an 11% year-on-year drop in robot and other orders for the September-November period, compared with the preceding quarter's 13% decline.

Chinese orders fell only 3%, versus a June-August drop of 21%. The company generated roughly a fifth of its roughly 475 billion yen ($4.34 billion) in net sales in China last fiscal year.

The chairman of the Japan Machine Tool Builders' Association also sees a modest recovery ahead for the industry, which has suffered as Chinese smartphone makers have cut production and the Sino-American trade war has discouraged factory investment more broadly.

"We expect to see orders bottom out in the first half of this year, followed by a gradual rebound," Yukio Iimura told reporters Thursday.

Yaskawa's results marked the company's third straight narrowing of the decline in Chinese orders. Two factors are at work: semiconductors and 5G.

Certain areas of the Chinese semiconductor industry, notably memory chips for data centers, have started to increase capital spending again.

Meanwhile, the advent of fifth-generation wireless communications has given a boost to makers of smartphones and network equipment. This appears to have driven up orders for Yaskawa servo motors, which power machine tools used by these manufacturers.

Other data also points to a gradual recovery in Chinese capital spending that had gone cold with the escalation of the trade war with the U.S. Chinese production of robots rose 2% on the year in October, marking the first increase since August 2018, and grew 4% in November, shows data from the National Bureau of Statistics.

Iimura said Thursday that orders are projected to hold steady at 1.2 trillion yen in 2020. This would mark little change from last year's estimated result, which was down more than 30% from 2018.

Chairman Yoshiharu Inaba of factory robot maker Fanuc, a key supplier of tools for smartphone makers, called the forecast "understated."

"Business related to high-speed rail and other infrastructure in China is robust, and with a wave coming in automakers' investment cycle, I think we can hope for an overall recovery," Inaba said.

Others expressed more cautions views.

"There was a sense of overcapacity to begin with, so it's hard to see a boom like the one in 2018's record high coming for a while," an executive said. Machine tool orders peaked at 1.81 trillion yen that year.

The industry is coming off a difficult 2019, which in November saw monthly orders fall below 85 billion yen for the first time in more than six and a half years.

Investors will be watching for further signs of improvement in Japan's manufacturing sector as earnings season arrives later this month. Its April-September net profit plunged 31% on the year, owing to the trade war and other headwinds.

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