3D visual “Hundred Regiments Battle”

July 14th, 2021


In 2021, with the increase of capital, the landing speed of some 3D vision manufacturers has accelerated, and new players are running into the market; according to "GG Robot", the number of 3D vision manufacturers in the Chinese market is about 50-60. And this number is still growing.

The situation of 3D visual "Hundred Regiments" is taking shape.

At the same time, problems such as rising raw material prices, chip shortages, and immature supply chains are concurring, which also poses numerous challenges to 3D vision manufacturers.

In this article, "GG Robots" focused on issues such as price wars, profit difficulties, capital entry, and the balance between products and applications, and interviewed many industry professionals to jointly seek solutions to the above problems. They are:

Lu Zhangyuan, Director of GG Industrial Research Institute
Li Miao, CEO of COBOT
Shao Tianlan, CEO of Mech-Mind Robotics
Yu Shufan, Sales Director of SCAPE
Gan Chuan, Director of Strategic Marketing, SEIZET
Fei Zheping, founder of PERCIPIO
Zhou Jiaji, CEO of XYZ Robotics
Ouyang Ming, General manager of szexcels (Cognex agent)

Price war VS Difficult profitability

In recent years, on the one hand, the price of 3D vision has been declining along with the in-depth application of applications. On the other hand, some manufacturers have set off a price war in the market in order to smoothly open the situation, which has also led to a rapid decline in the price of 3D vision. Judging from Li Miao's personal experience, the current price war for 3D vision in the field of grasping, de-stacking and palletizing is relatively fierce, and it is already in the stage of hand-to-hand combat. Because these manufacturers basically outsource their core components and rely on price and service to gain market share, they are very likely to form an internal roll-up situation.

Shao Tianlan believes that the price war is related to the impatient mentality of manufacturers. Some manufacturers are desperate for financing, and can only show their achievements to the capital side by quickly landing at a low price. Therefore, even if the interest rate is negative, the project must be taken down first, and it also creates hidden dangers for product delivery.

Zhou Jiaji said that price wars do exist, especially for KA customers and benchmarking projects. In fact, not only are financing start-ups have price wars, but also leading companies such as Keyence and Cognex are continuing to cut prices. Objectively speaking, the competitive situation of price war has stimulated the rapid development of the 3D vision market to a certain extent, and promoted the promotion and popularization of products.

Fei Zheping is concerned about this situation, PERCIPIO is more detached from price wars because it focuses on products that do not involve integration. From the perspective of the overall market development, 3D vision is still in the early stages of development, despite the price war. Objectively, the market has been cultivated, but it has caused more damage to the market, whether it is market order or user experience at low prices. However, Fei Zheping believes that the immature market, the imperfect supply chain, and the small distributable cakes are also important factors that trigger low-price competition among manufacturers.

According to "GG robot", the main costs of 3D vision include software and hardware, R&D investment and delivery costs. In the case of a small amount of early-stage products, manufacturers cannot share product costs through large-scale means to reduce the price, resulting in prices of 3D vision in eraly stages in the hundreds of thousands. But in the actual promotion process, the price of hundreds of thousands is enough to "persuade" a large part of the potential customer groups in China's manufacturing industry. Therefore, if 3D vision wants to leverage the market, it has to use the leverage of price to cultivate the market through early profit distribution.

However, another problem brought by this approach is that there are very few domestic 3D vision local manufacturers that have achieved positive profits, and most of them are still at a loss.

In contrast, internationally mature machine vision companies, Cognex, Keyence and other manufacturers have maintained high net profit margins all year round. According to official data, from 2018 to 2021 Q1, the gross profit margins of Cognex's vision business were 74.45%, 73.85%, 74.45%, and 77.39%, respectively; the corresponding net profit margins during the same period were 27.19%, 28.1%, 21.72%, and 29.22%. The gross profit margin of Keyence's Q1 vision business from 2018 to 2021 were 83.68%, 76.89%, 87.61%, and 80.4%; the corresponding net profit margins during the same period were 37.45%, 33.75%, 40.98%, and 39.13%.

Judging from the performance of international giants, "machine vision" is indeed a profitable business.

But as Lu Zhangyuan, director of the GG Industrial Research Institute, emphasized, different from the maturity of the 2D vision market, 3D vision is in the early stage of industry development. Survival has not yet been resolved, and profitability is obviously not reached yet.

Based on years of market observation, Ouyang Ming believes that in the 3D vision market, the advantages of foreign brands are technology, mature application experience and rich customer resources, while domestic manufacturers have obvious advantages in cost and delivery. In the future, with the rise of domestic brands, foreign investment is bound to be impacted. At present, the price decline of some international machine vision giants in China is also the result of domestic impact to a certain extent.

Therefore, the current more pressing problem is how manufacturers can pass through the irrational period of price wars and avoid being "out of the box." Li Hui believes that differentiation is the way out, just like the competition in shoe-selling in small cities. When the market position becomes more and more obvious, it is necessary to look for differentiation and find suitable application points to form sales. The process of finding differentiation is extremely dependent on the company’s R&D capabilities. Generally speaking, a manufacturer may have developed 10 products, and one product will eventually open the market; the second is to tap resources, develop leading companies in the sub-industry, and make Benchmarking, thus forming a clustering effect.

The process of creating differentiation is actually a process in which manufacturers form industry barriers, technical barriers, and resource barriers. The barriers have been established, so why worry about revenue and profit.

Zhou Jiaji believes that 3D vision services are mainly B-end customers, and price wars are not the key factor for winning. The final competition is product strength and service quality. For the automotive and 3C industries with the best industrial automation foundation, customers in this field are more concerned about product use physical examination and long-term service capabilities. The price war only gives manufacturers a lower business cost and a faster service cycle to develop. Early market demand is not enough to penetrate the market and occupy a leading market share.

Li Miao believes that it is possible to take the lead in making breakthroughs in high value-added scenarios, such as aerospace, military industry, medical care, and automobiles. In these fields, price is not the main issue, technology and product strength beyond stability are the key; low additional value application scenarios often need to pay for the industry’s cognition.

Has capital created a bubble?

According to statistics from "GG Robot", there were 14 financing incidents in the 3D vision field in the first half of 2021, of which 6 were over 100 million financing. This is a signal: a large amount of capital is rushing into the 3D vision market, especially the first-line dollar funds. At present, not only 3D vision is favored by capital, but also robots in many fields such as mobile robots, collaborative robots, medical robots, service robots, etc. are still hot, and manufacturers are getting financing more frequently and with larger amounts.

According to public data, there will be 242 investment and financing incidents in the robot track in 2020, and the total amount of investment and financing involved is 26.77 billion RMB. The estimated total investment amount this year is roughly the same. In the first quarter of this year alone, 5 billion RMB was invested in the field of robotics.
In fact, the capital trends in the 3D vision market are inseparable from the changes in the macro environment of the global capital market.

Due to the COVID-19 in 2020, the global economy has fallen into weakness. In order to stimulate economic growth, Trump introduced three rounds of economic stimulus bills during his tenure, with a capital scale of US$3.6 trillion. After Biden took office, he introduced two rounds of economic stimulus bills. Following the 1.9 trillion stimulus policy, Biden recently announced another 2.3 trillion infrastructure plan. Calculated, the US investment in the market to stimulate the economy will reach 7.8 trillion U.S. dollars.

The substantial release of the US dollar has on the one hand led to the continuous rise of international commodity prices; on the other hand, it has led to more hot money in the market, and money has become worthless. Only by saving core assets can money be made worth. Therefore, most of the hot money is pouring into the primary market.

Gan Chuan said that the current valuations of most visual companies are indeed on the high side. On the one hand, there is too much market money, and on the other hand, there are few excellent targets.

So, has 3D vision been partially and cyclically overheated due to the influx of capital, and has spawned a bubble?

Zhou Jiaji emphasized that whether there is a bubble should be measured by objective data, that is, whether the market valuation deviates from the normal PE (price-earnings ratio), PS (market-to-sales ratio) ratio, and whether there is value inversion in the primary and secondary markets phenomenon. "From this perspective, we don’t think that the 3D vision market has formed a bubble. From the standpoint of subjective evaluation, everyone has a different perspective. The company's product value has full confidence, and naturally it will not think that there is a bubble."

Regarding the entry of a large number of first-line dollar funds, take XYZ Robotics as an example. From the turn of the angels to the upcoming round B, it has always cooperated with first-line dollar funds, which is helpful to the company's strategic layout and industry resource utilization. Zhou Jiaji believes that dollar funds have a longer exit period and more patience. The B track often requires investors to give them full patience to accompany their growth.

Yu Shufan said that the bubble corresponds to the company's sales landing and valuation that is not commensurate. In the primary market, what is currently poor is not money but good targets, which will naturally result in excessively high valuations of some companies. At present, 3D vision has not formed a capital bubble. On the contrary, the frequent entry of capital can bring a higher degree of attention to the industry, thereby promoting technological innovation, project development and implementation.

To a certain extent, the 3D vision market is still in the "pioneering" stage, and capital can provide enterprises with opportunities and costs for trial and error in technical routes. For manufacturers, it is important to note that as more and more capital enters, how companies should balance capital and corporate strategy issues.

The influx of capital must have two sides. If an industry and a direction never get the attention of capital, it will be difficult to develop. For Li Hui, the use of capital in the short term can quickly help companies attract high-quality talents and expand their businesses. The opposite of the coin is that when companies introduce more and more capital, it means that more and more people participate in decision-making, which will inevitably affect the company's decision-making efficiency. If the company can effectively sort out the complicated organizational structure, product research and development, talent management and other issues with the intervention of capital, then the manufacturer can use the capital space in exchange for the time to rise.

As an industry observer, "GG Robot" has always focused on the smart manufacturing track that focuses on the upstream and downstream of the robotics industry. This is the future of China's manufacturing industry. As an important part of intelligent enabling robot, 3D vision is bound to attract the attention of capital; especially under the stimulus of the epidemic, the upgrading and conversion of manufacturing to automation and intelligence has accelerated, and the value of 3D vision has become increasingly prominent. A moderate capital bubble is both a booster and a touchstone, trying to figure out who can stand as the bridgehead after the capital boom.

Product VS Application

Due to the early development of the industry, 3D vision has not formed a perfect and mature division of labor in the supply chain system, after the visual manufacturers make products, many integrators are still a little understanding, not to mention a lack of know-how on how to effectively integrate 3D vision into the equipment at the technical level and project construction level.

Therefore, most local manufacturers have to do both products and integration, which not only increases investment for visual manufacturers, but also challenges them. Some people have become tired between switching between the two, and they also want to be a pure product company, similar to Cognex.

Product or Application, to be or not to be?

China’s manufacturing industry is not only broad and deep, there are too many long-tail markets, and the demand for products with thousands of people, which makes it difficult to break away from integrated applications and maintain its purity in most of the time when making products. This makes people wonder whether the "Cognex model" is feasible in China? How do 3D vision manufacturers balance products and applications?

In Shao Tianlan's view, it is obviously not feasible. There is a lack of mature integrators in the market. Mech-Mind Robotics’s business model is product + service, not just selling products, and at the same time fully supporting partners in delivery, training, pre-sales and after-sales support, and market development.

Gan Chuan said that Cognex does products, but it does not mean that they do not do integration projects. Therefore, Cognex cannot be simply regarded as a product company. On the contrary, Cognex has a very wide range of businesses. There are actually three battlefields in 3D vision: solutions, software and hardware integration (similar to Cognex's route) and partial software. Manufacturers can just "make a bet" based on their respective expertise.

PERCIPIO has always adhered to the business model of upstream core components and products, and provided the ultimate cost-effective products and quality services to midstream ontology or integrator partners. Fei Zheping said: “At present, it can be clearly seen that most of the 3D vision startup companies have moved towards an integrated business model, and PERCIPIO is still insisting on becoming a leading manufacturer of upstream core components. With the company’s products Continuous breakthroughs in shipments have been fully verified in terms of product capabilities and business models, and the core component supplier model is feasible and full of vitality."

Zhou Jiaji believes that products or applications are actually related to each company's own positioning, and both have corresponding development paths. If manufacturers like Cognex and Keyence are positioned as 3D vision manufacturers, the simpler the application and the purer the visual application scene for them, the more suitable they are to develop into their main market, such as simple visual positioning, testing, etc.; and the more scenarios that require trajectory planning, force control and other capabilities, such as deep-frame unordered loading and unloading, assembly, polishing and other scenarios, the more their product strength is limited and the lack of competitiveness.

How to balance products and applications is a "dilemma" for 3D vision manufacturers. The more obsessed with the output of products, the more restricted the early market promotion; the more products are output in the form of applications and integration, the less conducive to productization. For XYZ Robotics, Zhou Jiaji believes that XYZ Robotics' products are themselves scene-oriented and customer-experience-oriented robot workstations, so the balance between products and applications is not a major contradiction.

Yu Shufan believes that 3D vision should gradually approach the direction of productization in the later stage. In fact, this can be compared to the development process of industrial robots. When industrial robots first entered China in the 1990s, no one in the market knew about robots, and robot manufacturers could only cooperate with applications in order to promote robots. Later, with the development of the market, robot products gradually became standardized and market application awareness became mature. At this time, the division of labor in the industrial chain has become increasingly clear. This is a process from scratch to professional, and the same is true for 3D vision. At the same time, as the market scales up, more and more manufacturers will join in, and everyone will work hard in their areas of expertise.

For an emerging market, it is normal to have too many puzzles and mysteries. To take root in the "unprecedented" market, there is not much experience to learn from or copy. The large-scale business scenarios of 3D vision are immature, product customization is high, and the market is fragmented and fragmented. In such a survival environment, manufacturers need to explore and develop in each segmented scenario, find application points, and form differentiation. From the accumulation of quantitative changes to qualitative changes, the troubled price wars, profitability difficulties, product and application balance and other issues will also be solved.


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