Robots on the move: indoors, outdoors, on-the-ground and in-the-air UBS HK/China consumer team initiates on the Global Robotic Vacuum Cleaner (RVC) sector today (link). By their estimates China is set to become the largest RVC market globally, growing from a USD1.5bn (Rmb9.5bn) industry in 2020 to a USD5.4bn (Rmb35bn) industry in 2025E. The growth in RVC is another example of the rise of mobile robotics in China. Other use cases include warehouse robotics, delivery robotics (see also case study on page 19) and autonomous aerial vehicles (AAV). Rising interest in autonomous driving (AD) – which uses the same general technology and is also a form of mobile robotics – will underpin the materialisation of this theme.

Diverse use cases, common technologies While the end-user applications appear vastly different, the technologies behind mobile robots are almost identical: sensors including LiDAR, radar, depth camera, IMU enable perception, positioning and navigation; sophisticated processing chips support objects detection and route planning; SLAM, ROS, AI and management algorithms improve user experience, enhance safety and allow better customization. New communication networks enable better human-to-machine and machine-to-machine interaction.

LiDAR: upside potential We spoke to domestic LiDAR vendors, mobile robot manufacturers, industry observers, domestic software providers and OEMs. In our view, LiDAR is likely to be equipped in most on-the-ground commercial and passenger use cases. LiDAR vendors with exposure to multiple mobile robot applications could be better placed to secure steady top line growth. International vendors include Velodyne (VLDR.O), Luminar (LAZR.O), Ouster (OUST.N), Innoviz (INVZ.O), Innovusion, Valeo (VLOF.PA) and Aeva (AEVA.N). Domestic vendors include RoboSense, Leishen, Hesai, Huawei and Livox.

Still early in the theme RVCs are still at the early stage of the adoption curve with household penetration in China at 4.7% vs. 14.9% in the US in 2020. By our estimates, the warehouse robot segment in China could hit USD 1.94bn (Rmb13bn) in 2021. UBS China auto analysts forecast 4% of L4 AD penetration in China by 2025. In the short term, we see room for further technology improvements. In the longer run, the price of mobile robotics could fall as penetration ramps. It could take longer for mobile robotics to be commoditized in industrial applications and AD than in the consumer segment, in our view.

Chinese suppliers catching up in tech, gaining global share Chinese vendors are upgrading the technology components in their mobile robots, and in some cases, their products are already more advanced than western peers. This trend of Chinese products shifting from low end to relatively high end is evident across different mobile robot applications. Chinese mobile robotics companies are also going global. Ongoing R&D in critical technologies should improve China's competitiveness further. The 14th FYP targets 7% growth in annual R&D spending. The UBS China economics team expects actual average growth in China's R&D spending to be higher (link), lifting annual R&D spending from Rmb2.4trn in 2020 to Rmb3.8-4trn in 2025.