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Article06 May 2022

China’s Labour Shortage Brings Machine Vision into Focus

A new report by Citi Research’s Jamie Wang looks at how China’s labour shortage is fuelling the growing use of machine vision by China’s EV battery makers 
As China’s labour shortage grows more acute, machines that can see are stepping up 

A machine vision system is a mechanism for extracting information from a digital image. It has widespread applications, not least in allowing automatic inspection of industrial processes and components 

Based on industry talks, Citi analysts reckon China EV battery makers are becoming more willing to use machine vision systems for inspections in order to better control the quality of their EV battery products. This comes after several incidences of battery explosions.  

Citi analysts forecast that the machine vision market size in China’s EV battery sector is growing rapidly, with forecasts of Rmb2.6bn/4.4bn/6.2bn by  2021E/22E/23E respectively.  And according to market research company Markets and Markets, the global machine vision market size grew from US$6.2bn in 2016 to US$9.6bn in 2020, increasing at a CAGR of ~12%. 

A vision check is performed by software and consists of several steps. First, an image is acquired from the sensor. In some cases, pre-processing may be required to optimize the image and ensure that all the necessary features stand out. Next, the software locates the specific features, runs measurements, and compares these to the specification. Finally, a decision is made, and results communicated. 

As Citi’s previous China Robotics Super Sector Report indicated, analysts see the labour shortage issue getting more serious in China as the labour force population (15-64 years old) accounted for only 69% of total population in 2020, down 6pp from 75% in 2010. Based on China’s declining birth rate, The World Bank forecasts the figure to further decline to 67%/62%/60% in 2030/40/50E. This suggests that the labour shortage issue could get worse in China, prompting China’s manufacturing industries to raise their factory automation levels. 

 

China EV battery capacity and machine vision market size 

 

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. 

Source: Company Reports and Citi Research Estimates 

 

China’s manufacturing GDP per capita (per manufacturing worker) is significantly lower than that of Japan, suggesting that China still has great potential to adopt automation to improve the productivity of its manufacturing industries.  

The fundamental factor that would drive machine vision demand in the longer-term is the limitation of human eye, whose judgements are neither quantifiable nor objective. Hence, for sensitive applications such as guidance, identification, gauging, and inspection applications in the electronics, EV battery, semiconductor, etcCiti analysts think penetration of automation will rise going forward. 

 

Comparison of human vision and machine vision 

 

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. 

Source: Citi Research, Company Reports 

 

Fast-growing EV battery capacity 

The EV battery sector has undoubtedly been one of the industries in China with the strongest growth over the past few years due to the Chinese government’s supportive policies, but also to increasing numbers of Chinese EV manufacturers. According to Citi’s EV battery team, China EV battery capacity will increase by 70%/42% YoY in 2022E/23E 

China’s EV battery sector growth means it accounts for a higher percentage of the total factory automation demand in China.  

Rising adoption of machine vision in the EV battery sector 

The strong demand for machine vision stems from the EV battery sector not just because of the industry’s faster capacity growth, but also due to the increasing machine vision applications in different battery manufacturing processes. Machine vision can be applied at many steps such as inspection for the surface of pole piece, coating surface defects, battery plate lug welding, lug position, battery size, battery cathode and anode, etc., and these processes spread all over the front-end, mid-end, and back-end processes.   

China EV battery capacity and machine vision market size  

 

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. 

Source: Company Reports and Citi Research Estimates 

 

More on Machine Vision Systems  

According to the AIA (Association for Advancing Vision and Imaging), machine vision refers to all industrial and non-industrial applications in which a combination of software and hardware captures and processes images to provide operational guidance. A machine vision system generally consists of image capturing and image processing – the former is carried out by the hardware part while the latter is done by the software based on the information provided from the hardware of the machine vision system. 

A machine vision system usually includes lighting, lighting controller, lens, camera or other imager, vision controller (processor and software), and output devices. The lighting, lighting controller, lens, and camera work together to produce images and the vision controller processes and analyzes the images, displaying the results on the output device 

 

Diagram of a standard machine vision system 

 

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. 

Source: Citi Research, OPT Machine Vision 

 

The primary uses for machine vision are imaging-based automatic guidance, identification, gauging, and inspection for a wide variety of industrial applications. Among the primary uses, inspection has the highest complexity and is the main purpose of industrial applications for the time being. The ultimate goal of implementing machine vision is to replace humans to solve real world problems with efficiency and minimized errors.  

For more information on this subject, please see the full report here 

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here. 

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