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Trade war

World's robot builders hit by China's capital spending slowdown

Fanuc, Mitsubishi Electric and Kuka forced to downgrade earnings forecasts

Chinese orders for Fanuc industrial robots have plunged.

TOKYO -- The Sino-American trade war has dampened appetites for capital spending among Chinese companies, taking a toll on earnings at manufacturers of industrial robots and machinery across the globe.

Three of the world's top four robot builders -- Japan's Yaskawa Electric and Fanuc and Germany's Kuka -- have now downgraded their full-year earnings forecasts.

Fanuc on Monday predicted a consolidated net profit of 142.3 billion yen ($1.26 billion) for the year ending March 2019, down 2.9 billion yen from the previous projection.

"We don't see orders recovering anytime soon" in China, President Kenji Yamaguchi said at the company's earnings conference. Orders from China fell by roughly half on the year for the three months ended September. Capital spending tied to smartphone production has slowed as predicted, but investments for factory automation, such as those for numerical control devices, appear to have also lost steam.

Kuka on Monday downgraded its 2018 sales revenue guidance to 3.3 billion euros ($3.75 billion) from 3.5 billion euros.

"Uncertainties exist primarily on account of the current developments in the global economy and in particular the trade dispute between the USA and China," it said in its earnings release. "This also affects the world's largest robotics markets, such as the automotive and electronics industries, where we shall continue to keep a close eye on developments."

The two companies follow Yaskawa, which downgraded its forecast earlier this month. Corporate Executive Vice President Shuji Murakami said that "Chinese companies are taking a wait-and-see approach to capital expenditure due to U.S.-China trade tensions as well as their deteriorated cash positions."

With Washington imposing punitive tariffs on Beijing since July, Chinese enterprises have hesitated to invest in plants and equipment in the face of the new barriers to exports to the U.S. The repercussions have spilled over to machinery suppliers doing business in China, especially those hailing from Japan.

Mitsubishi Electric trimmed its full-year guidance on Monday by 5 billion yen to 240 billion yen. "We hoped for a recovery in factory automation for smartphones, but it looks difficult to expect such orders this fiscal year," said Tadashi Kawagoishi, executive officer in charge of accounting and finance.

The company said it is considering increasing production outside China to blunt the impact of the trade war. Air conditioner compressors, now made in Guangzhou, could be produced in Japan and Thailand, for example.

Machine tool manufacturer Okuma reports that orders to China have fallen roughly 30%. President Yoshimaro Hanaki said that "the impact of the U.S.-China trade tensions could last longer than we initially anticipated."

Judging by the downward revisions, Chinese corporations across a wide range of sectors are reluctant to invest. The auto industry is no exception: Japanese autoparts supplier NSK has lowered its earnings outlook over the effects of Chinese production cuts.

Nagoya-based NGK Spark Plug had projected a record full-year operating profit. But as of Monday, it forecast a profit decline due to the sluggish Chinese auto market.

Parts orders "dropped at a faster pace than we anticipated," Executive Vice President Teppei Okawa said.

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