Where does China stand on the global humanoid value chain?
And which stocks should be kept under the radar for exposure?
The hype surrounding Deepseek on global news headlines somewhat overshadows China's humanoid robots. However, domestically, humanoid robots continue to make news. Firstly, UniTree, a robot company based in Hangzhou, showcased its humanoid robots dancing at the Spring Festival Gala in January, which was broadcast to the entire country. The show received mixed reviews but still became the most "memorable" program, and the 2025 gala is undoubtedly the most "tech"-focused one so far.
Shortly after, UBTech (9880.HK), a Shenzhen-based humanoid robot manufacturer, announced that it had completed a test to deploy its robots in Zeekr's car factory in Ningbo, taking a step closer to the future where "made-in-China" humanoid robots work in industrial manufacturing ground.
This Thursday, as I write this newsletter, Beijing also released the news that the first global half-marathon race for humanoid robots will be held in Beijing in April. (In fact, I'm quietly looking forward to this somewhat funny game and seeing which robot maker will win.)
The fact that China chose to feature a humanoid robot dance at the Spring Festival gala or to host a marathon for robots is strategic-the priority of the so-called "new quality productive forces" is evident. Most importantly, the development of humanoid robots in China is progressing rapidly.
Although there hasn't been a ChatGPT-like moment for humanoid robots yet, as we don't see many of them fully commercialized and in mass production for consumer or industrial use, the equity market has already responded to this hype. For example, the robot maker UBTech (9880 HK) has gained over 101% year-to-date (as of the close of Mar 6). This is remarkable even compared to the already impressive broader China tech recovery - Hang Seng Tech up 36.8%, and BABA, one of the biggest winners from the DeepSeek and Chinese LLM hype, up 66%. Other companies in the supply chain have also reaped substantial gains year-to-date, such as Sanhua (002050.SZ) up 38.8% and Tuopu (601689.SS) up 33.2%.
In today's newsletter, I aim to provide an overview of China's position in the global humanoid value chain, particularly a quick look at related stocks in the secondary market if you are seeking exposure. (As I know it's somewhat unfeasible to obtain a direct primary market investment for many.) Let's get started.
The ChatGPT moment for humanoid robots is coming
Before OpenAI introduced ChatGPT, discussions around AI were mainly confined to the tech community and a small group of devoted enthusiasts. However, the launch of ChatGPT in late 2022 sparked real interest that eventually spread to the global equity market. It is only when people use the product in their daily lives that they begin to materialize the expectations.
Therefore, the reason why I am discussing humanoid robots at this moment is that many predict that the "ChatGPT moment" for humanoid robots could be approaching in the coming years. Thus, we need to understand the current state of the global industry in advance.
As of now, many humanoid robot manufacturers are still in the prototype stage. However, leading tech companies are expected to start shipping mass-produced commercial robots in 2025. For instance, Tesla has committed to producing thousands of humanoid robots in 2025, with shipments growing 10 times annually in 2026-2027. These robots will be deployed in Tesla's own factory to replace some human labor. Other leading companies have also secured real orders for commercial robots: FigureAI, for example, has obtained contracts from BMW and Amazon totaling approximately 100,000 robots in the next four years (2025-2028), and Agility from Amazon and GXO, Apptronik from Mercedes Benz and GXO. OpenAI-backed Norwegian company 1X also plans to start shipping 1,000 robots for home use and intends to mass-produce its signature home-use robot NEO.
In terms of the economy, Soochow Securities estimates that three humanoid robots could replace one worker, assuming an initial net cost of 500,000 yuan per robot. This translates to a payback period of 0.3 years in the US market and 1.5 years in the Chinese market, based on the average salary of local workers.
Morgan Stanley also estimates that "approximately 75% of occupations and around 40% of employees in the US have some degree of "humanoidability." This amounts to an estimated addressable market of approximately $3 trillion, or approximately 63 million humanoid units in the US alone."
While different research institutions offer varying forecasts for the total addressable market, the key message is that humanoid robots are set to enter the mass production stage soon, rather than remaining as prototypes. This will generate real economic value for the companies that adopt the first batch (currently, mostly car manufacturers, logistics, and warehouses) to cut costs as well as consumer products companies. Humanoid robots have the potential to become the next widely adopted terminal device, following smartphones and cars.
Therefore, at Baiguan, it is a good time to start considering the implications for the secondary market, especially the position of Chinese companies in this value chain.
What does the humanoid robot value chain look like?
According to research by Morgan Stanley, the global humanoid robot value chain can be categorized into three key areas: the "Brain," the "Body," and the "Integrators." The "Brain" encompasses companies specializing in semiconductors, AI models, and software crucial for autonomy and perception. The "Body" comprises firms manufacturing essential industrial components such as sensors, actuators, batteries, and wiring. Finally, "Integrators" are companies that develop and assemble full humanoid robots, frequently leveraging expertise from industries like automotive, consumer electronics, and robotics.
To investigate the value chain, MS's team selected an exhaustive set of publicly traded companies with significant exposure to the humanoid market. The comprehensive list includes firms already actively engaged in humanoid development and those with considerable potential to enter the field. A cursory look reveals that Asian companies are outnumbering in this race.
China vs America
At this stage, North American firms are prevalent in the "brain" development of humanoid robotics, primarily focusing on AI and autonomy enablers, with names like TSLA (manufacturing robots) or NVDA (providing infrastructure and AI services for robot development). This leaves many investors feeling that there aren't enough Western names to add to their portfolios.
In fact, China is emerging as a major force in humanoid robotics. Among all the companies on MS's list confirmed to be involved in humanoids, 56% are from China. While Western companies dominate in "brain" development, Asia, especially China, plays a leading role in "body" and "integrators".
However, this does not imply that China is exclusively focused on manufacturing body parts or assembly (as Morgan Stanley's survey only covers publicly traded companies, not startups that are under the radar). Since 2024, Chinese humanoid robots have entered a phase of rapid development, as indicated by the surge in the number of humanoid robot unveilings by Chinese companies. It won't be long before more humanoid robot makers and companies providing foundational AI services emerge from China, and these startups are poised to benefit from China's established manufacturing supply chain and strong government support.
Apart from the supply chain, Chinese companies are also set to generate more synergies with their already leading EVs or consumer electronics products. These companies are already competing and expanding globally with excellent price-for-value ratios. With China's vast consumer market, the addition of humanoids could create enormous synergy.
For instance, carmaker Xpeng (NYSE: XPEV), for one, is already manufacturing and deploying its own humanoid robot, "Iron", making it the first Chinese EV maker to launch an in-house humanoid. Xpeng's humanoid initiative began as early as 2020, but due to technical difficulties, the company has struggled to push it forward, and some even thought it would abandon the initiative. Although the newly unveiled "Iron" bot still lags behind Tesla's Optimus at this stage, Xpeng is confident that their initiative could help the company become the first Chinese EV maker to fully mass-produce a level 3 autonomous driving vehicle.
Where are Chinese companies on this value chain
Now, I aim to offer a swift overview of some Chinese names in case you are contemplating adding some exposure to your portfolio. I will condense some key companies that belong to different sections of the supply chain, along with broader implications to take into account for China's general stock market.
Before going further, you may have noticed that today's newsletter is full of equity research info from reputable institutions. We provide a digest every trading day in our exclusive discord channel for paying members. For example, on a regular day, you'll get key research for macro updates, specific company research, and a 3-min audio summary to make it easy to understand.
If you want in-depth and timely equity research papers, and to join our paid community to exchange ideas on China's investment and general affairs, consider getting a paid membership today!