Industrial Automation Part 2

Automation’s Ascent: Riding China’s Capex Boom and Valuation Divide

Good Morning,

This is the second par of the industrial automation overview. The first one can be found here.

Today we are focusing on valuations in the space - what are they telling us? This, like all the automation work and semiconductor work that will follow are behind the paywall. Do join up if you are interest, we’d love to have you.

Similarly if you feel like you may benefit from some Panda Portfolio style insights, we do offer an individual portfolio reviews for your China/Asia exposure. Clearly this won’t be free (or included) as it takes time to prepare for a review in order to do it well, so for the people interested, get in touch and we can try to work something out.

**Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.**

Valuation Landscape of the Chinese & Asian Industrial Automation Sector

The industrial automation sector in China and Asia is undergoing rapid transformation, driven by rising labor costs, supply chain localization, and the accelerated adoption of AI-driven automation technologies. As discussed in our industry overview, China has moved beyond its traditional role as a low-cost manufacturing hub to become a global leader in high-end automation. This shift has been powered by policy support, domestic technological advancements, and the strategic goal of self-sufficiency in critical industries.

As China’s automation capabilities expand, the competitive landscape is being reshaped. Chinese automation firms are aggressively expanding their market share at the expense of long-established Japanese and European incumbents. This competitive shift has led to divergence in valuation multiples, reflecting differences in growth potential, profitability, and strategic positioning. While Japanese firms maintain strong margins and market stability, Chinese players are commanding premium valuations, driven by rapid expansion and strong policy backing.

China’s Made in China 2025 initiative is a central pillar of its industrial automation strategy. The policy is designed to reduce reliance on foreign automation equipment by promoting domestic robotics and AI-driven manufacturing. To accelerate this shift, the Chinese government has provided subsidies, tax incentives, and R&D grants, giving domestic players a significant competitive advantage. Companies like Leader Drive, Estun, and Siasun Robotics are direct beneficiaries of these policies, positioning themselves as leaders in China’s automation revolution.

As a result, these domestic firms are receiving premium valuations, driven by investor expectations that they will dominate China’s industrial ecosystem in the long term. With strong state-backed support, these companies can outcompete foreign rivals in their home market and expand their footprint internationally.

Rising labor costs in China and Southeast Asia have intensified the need for automation-driven efficiency improvements. Manufacturers are increasingly investing in industrial robots, precision automation, and AI-powered factory solutions to reduce dependency on human labor while boosting productivity.

At the same time, geopolitical tensions, including the U.S.-China trade war, have driven companies to rethink their supply chains. With increasing concerns about reliability and security, manufacturers are localizing their automation ecosystems, reducing dependence on foreign suppliers. This trend has benefited domestic automation firms, further justifying their higher valuation multiples.

The next phase of industrial automation is being driven by AI, machine vision, and IoT. These technologies are enhancing efficiency, precision, and real-time decision-making, leading to higher productivity and lower operational costs. As a result, companies specialising in AI-powered automation are seeing significant investor interest and premium valuations.

Notable players in this space include OPT Machine Vision, which focuses on AI-driven vision systems, and Leader Drive, which specializes in precision motion control. Similarly, Siasun Robotics, a key player in the Chinese robotics industry, is integrating AI to create next-generation autonomous robots. These firms are emerging as leaders in the high-tech automation landscape, with investors pricing in long-term growth potential.

The traditional dominance of Japanese automation giants such as FANUC, Yaskawa, and Keyence is now being challenged by fast-growing Chinese firms. While Japanese firms still lead globally in terms of scale and technological expertise, their growth rates have slowed, leading to lower valuation multiples.

In contrast, Chinese firms like Estun, Leader Drive, and Siasun Robotics are rapidly capturing domestic market share while expanding internationally. These companies are benefiting from China’s push for homegrown automation solutions, positioning them as key players in the future of global industrial automation. Their higher P/E and EV/EBITDA multiples reflect investor confidence in their long-term growth trajectory and strategic importance in China’s industrial upgrade.