The hidden growth driver: China’s industrial aftermarket-services sector
With fewer sales prospects on their books but plenty of assets in the field, China’s industrial-equipment makers can ramp up their services businesses.
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The early twenty-first century was a boom time for China’s industrial-equipment manufacturers, as the country’s growth fueled significant demand across most industrial sectors. Annual fixed-asset investment in equipment and instruments increased by an average of 21 percent annually between 2000 and 2015, an extended period of rapidly rising demand that helped many players grow substantially by focusing on new-equipment sales.
The sector is now entering a different phase of its development. While growth in new-equipment sales has slowed significantly, the installed base of industrial products across China has been transformed. For example, over the past 20 years, China’s operational stock of industrial robots has grown from less than 1,000 to almost 650,000, making the country home to an estimated one-quarter of the world’s robots (Exhibit 1). That shift is encouraging China’s industrial equipment makers to look to aftermarket services as an increasingly important driver of growth and profitability. Read more