China Morning Missive
“Begun, the Robot Wars have”
Forced technology transfers and an overreliance on China for intermediate inputs to final production. If there were ever to be an honest to God conversation in Washington over Chinese leverage it begins and ends with these two issues.
The issue of forced technology transfers would be easy to address if difficult to execute. To start, there was never all that much “force” applied. American corporations spent three decades willingly engaging with Chinese contractors and in that process IP was aggressively extracted. So, Chinese steal IP. Ok. To address the technology transfer and theft issues, you just stop making those transfers in the first place. This would, however, require management to accept a degree of impairment to both top and bottom-line results. Like I said, difficult to execute.
Addressing the issue of intermediate goods will take time and a great deal more commitment. In 2023, the latest data available, these inputs represented 47% of China’s total export value. Basically, China exports nearly as much finished goods as they do intermediate goods. China is no longer simply supplying final product to Walmart or Costco. China is now the primary supplier to a countless number of America manufactures. This issue, right here, lays at the core of last year’s rare earths episode.
And yet, for all the talk and posturing, it is very clear that there’s been no change in corporate behavior on either of these two fronts and there is no better example than that of Elon Musk’s Optimus robotics program.
Not that there is much need for confirmation, but reports are now surfacing that the Optimus production process will be reliant on “hundreds” of China suppliers. The rationale behind this decision is borderline delusional. Somehow, there’d be a market segmentation where America would lead in the robotic “brain” (software) and China would lead in the “body” (hardware). After this past year, with DeepSeek, QWEN, Kimi-K2.5 et al, it is beyond naive to even consider that China will be solely relegated to hardware. As for Musk, he simply knows that sourcing from America just isn’t an option, especially given his aggressive timeframe.
Over the past year I’ve been vocal in stating that the die is cast and that what China achieved with EVs will be fully replicated, and at tremendous speed, in the realm of humanoid robotics. It is already playing out when you consider the installation of industrial robotics. In 2024, China had total new installs of 295,000 versus America at 34,200. Worse, in the first nine months of last year, China’s new installs nearly doubled to 595,000 or 470 units per 10,000 workers.
Now that I think on it, the robot wars might already be over.
Interesting Engineering
Chinese parts challenge Optimus humanoid robot production goals in US
Elon Musk is exploring the possibility of manufacturing the Tesla Optimus entirely in the US while facing multiple challenges.
