Kuka robots invade China as wage gains put machines over workers

By Richard Weiss

Kuka AG (KU2), Europe’s largest maker of industrial robots, is creating a regional hub in China to tap surging sales in the world’s most populous country, where rising wages are lifting demand for automated factory gear.

The German company will boost assembly capacity in China to 5,000 units this year, from less than 1,000 two years ago, chief executive officer Till Reuter said. China will become a center for procurement, production of components and assembly for the entire Asian region, while research, development, and most production will remain in Germany, he said.

“China alone bought 15,000 robots last year, and we expect that number to rise to about 20,000 this year,” Reuter said in an interview. A company target for an operating margin of 10 percent at the robot unit “is within reach,” after standing at 9 percent in the fourth quarter, he said.

Rising wages, a push for quality, and demands for faster production are prompting China’s manufacturing industry to buy more robots, helping European companies including Kuka and ABB Ltd. (ABBN) return lagging businesses into profit centers. Kuka’s robots have become twice as profitable as the company’s larger systems unit, and ABB turned its robot unit around in 2010.

At Kuka, robotics revenue jumped 84 percent between 2009 and 2011, as customers include Volkswagen AG (VOW3) and Daimler AG (DAI) bought equipment for new factories and China became the world’s largest auto market. The company had record order intake, sales, and operating profit last year.

Automobile Demand

While demand from China so far was driven by automobile production, Kuka now seeks more business with customers in other iNike