The 10-Year Growth Path of a Leading Domestic RV Reducer | The "Little Giant" of the Era

Introduction: With the advent of the era of hard technology, a large number of hidden champions, single-item champions, and specialized and sophisticated small giant enterprises are beginning to emerge. These enterprises are the core pillars of domestic substitution and the reservoir for Chinese companies to become global companies.

Based on this, Yingke has launched a new column: The "Small Giants" of the Era. Through in-depth communication with founders and investors, more small giant enterprises can be seen and recorded.

The following is the 4th article in this column.

Author | Wu Ruoyu

Editor | Peng Xiaoqiu

With an annual output of 200,000 CRV reducers, it ranks among the top two in the domestic market share.

This is the answer sheet handed over by Beijing Zhitong Technology after nearly 10 years of entrepreneurship, and behind it is the rise of a domestic RV reducer company.

The reducer is an intermediate device that connects the power source and the actuator of the robot, equivalent to the "joints" of the human body. Under normal circumstances, a humanoid robot usually requires about 20 - 30 precision reducers depending on its design complexity and functional emphasis. Precision reducers include RV reducers and harmonic reducers, which are mainly used in industrial robots, collaborative robots, service robots, and industrial automation and other fields. They have high technical barriers and are the core factors affecting the performance of the robot.

The RV reducer industry in China started relatively late. In this field, Japan is the pioneering enterprise, and the representative enterprise is Nabtesco. Relying on technological accumulation and capital strength, Japan has realized the autonomy of reducers, and the global precision reducer market share is also monopolized by it, accounting for more than 80% of the market share in the early stage.

It is precisely by seeing this gap that Zhitong Technology was founded in 2015, hoping to change this situation. At the beginning of its entrepreneurship, although there were more than 20 domestic enterprises in China, the product maturity was low, the market recognition was not high, and the output and performance had not yet reached the level of domestic substitution.

After continuous market exploration, Zhitong Technology has now entered the top two in China. And it has layouts in various transmission forms such as cycloidal transmission, harmonic, precision planetary, hypoid, and roller screw. In July 2023, it became a national-level specialized and sophisticated "small giant" enterprise, and in the same year, it also completed the cumulative financing of several hundred million yuan in the B round and B+ round.

With the AI explosion, Zhitong Technology has also ushered in a new opportunity - humanoid robots. However, only when the output of humanoid robots exceeds 100,000 units, will there be a fundamental quantitative change in the reducer industry. Therefore, currently, reducers will still be concentrated in the fields of industrial and collaborative robots.

After all, China has become the world's largest industrial robot market. Data from the International Federation of Robotics (IFR) also shows that about 276,000 industrial robots are newly installed in China, accounting for 51% of the global new installations. Of course, the rapid development of domestic industrial robots nowadays is inseparable from the localization of the core components of the robot (reducer).

Then, how will the humanoid industry evolve in the future? What changes will it bring to reducers? How can domestic enterprises continue to break through? Recently, Yingke conducted an interview with Zhang Yueming, the chief scientist of Zhitong Technology, and Liu Zepeng, the general manager of the Strategic Development Department. The following is part of the conversation (edited):

High investment and slow return are inherent contradictions in the industry

Yingke: You used to be engaged in basic research (entered Beijing University of Technology as a postdoctoral fellow after graduating with a Ph.D. from Tsinghua University). Why did you choose to start a business later?

Zhang Yueming: Choosing to establish Zhitong Technology is both accidental and inevitable. In fact, Zhitong Technology mainly produced reducers for construction machinery in the early stage, mainly planetary reducers. They believed that the current products were mature and had limited technical content, and hoped to find new products to achieve growth, so they saw my project. In 2015, RV reducers were basically imported from Japan, and the domestic market had huge development space and broad prospects. So I transferred the accumulated technical achievements to Zhitong Technology and provided it with later technical services. With the in-depth development, the company, investors and I all felt that without my technical follow-up, the overall development would be limited, so I chose to conduct in-depth research in the field of robot transmission.

Yingke: What stage is the domestic precision reducer industry currently in, and what changes have there been compared to ten years ago? What do you think are the driving factors for these changes?

Zhang Yueming: After ten years of development, the domestic market share of domestic reducers has reached 80 - 90%. Among them, the domestic usage rate of RV reducers has reached more than 80%, and the harmonic reducers are even higher. Moreover, the quality and production capacity of domestic RV reducers are constantly improving, and the cost reduction and optimization are obvious.

The rapid development of domestic reducers has two reasons: One is the efforts of technical workers; the other is the support of capital. The intervention of capital has played a huge role in promoting the development of the industry.

Yingke: What are the main areas of early investment in precision reducers, and how much is the investment?

Zhang Yueming: In the early stage, the main investment is in equipment, which is basically about 100 million yuan; the second is R & D investment. Due to technical problems that require market application feedback, adjustments are made according to the stability, cost and performance of the product. This is a gradual process. For investors, the return time is longer, and there are many technical change factors. The early investment risk is still relatively large.

Yingke: Are precision reducer equipment still imported at present?

Zhang Yueming: 90% of the domestic RV reducer manufacturing equipment still needs to be imported. Although the development of domestic equipment has made certain progress in recent years, it is not enough to cover the actual needs of enterprises.

Yingke: The robot investment is booming, driving the industrial development, but there is a contradiction between the capital's pursuit of short-term profits and the industry's need for long-term investment. From your perspective, is the RV reducer market affected by this? How do you think enterprises should find a balance between innovation and revenue?

Zhang Yueming: The impact definitely exists.

Investors hope to shorten the return time, but the RV reducer is an industry with high investment and slow return. This is an objective situation that cannot be compressed, and this will inevitably bring contradictions between enterprises and investors. Generally, investors expect a return within 2 - 3 years, and at most no more than 5 years. But for our type of enterprises, ten years is a development stage, and the time difference problem that exists really requires both sides to try their best to balance.

As an enterprise, we will try our best to shorten the time, and also hope that the capital will be more patient to allow it to have a process of slow return. At the same time, we hope that the country will give us more support from the policy.

Yingke: What stage has Zhitong Technology developed to?

Zhang Yueming: After ten years of accumulation, we have basically reached the break-even point. I believe that the next ten years will be a stage of rapid revenue growth for Zhitong Technology.

Compound growth of production and sales by 247% in three years

Yingke: In the market competition, what capabilities of precision reducer enterprises do customers value more?

Zhang Yueming: The market requirements for products are gradually increasing. Not only does the machine need to operate stably, but also the enterprise needs to be able to understand the operating principle and technical source of the reducer.

Why is this requirement put forward? Mainly because when the reducer encounters problems, we need to be able to quickly solve them from the technical principle and underlying logic level; secondly, the robot products are also constantly iterating and putting forward new demands. Whether the reducer enterprise has a continuous technical hematopoietic ability is what customers care more about. If the enterprise simply imitates without its own core technology, its competitiveness cannot be enhanced.

Yingke: But product research and development cannot blindly pursue "newness". How does Zhitong Technology find a balance between innovation and the market?

Zhang Yueming: First of all, our team is technology-oriented, and I myself am also engaged in basic theoretical research, with a theoretical basis and technical accumulation to adapt to the development of the market. In addition to the RV reducer research, we are also exploring new transmission forms to meet the changing application needs of robots.

Specifically, in September 2020, Zhitong Technology and the Science and Technology Park of Beijing University of Technology jointly established the "Beijing Zhitong Gongda Intelligent Transmission Technology Research Institute", referred to as "Zhitong Gongda Research Institute". The research institute is between universities and enterprises, with a more detailed internal division, and supports the theoretical research of mechanical transmission with the theory of mechanism design, gear meshing theory, and mechanical strength and mechanics theory. It not only makes up for the deficiency that the cutting-edge research of universities is divorced from market applications, but also improves the technical degree of enterprise R & D.

Yingke: What is the customer and market profile of Zhitong Technology?

Liu Zepeng: The customers of Zhitong Technology include some enterprises in the international top four families, Estun, Efute, Inovance, Rockstone and other domestic enterprises, covering the first-line enterprises of Chinese industrial robots. The core customers are mainly listed companies, and most of them are supported by state-owned enterprises or large enterprises.

We focus more on the new product R & D ability of customers and the rapid response ability based on the application market. Although Chinese industrial robots have already achieved more than 50% of the Chinese market share, in key fields (such as automobiles, large aircraft manufacturing, etc.), domestic robots still have a long way to go. How to get rid of the homogeneity and avoid the price war, the innovation ability of customers is the focus of Zhitong Technology.

Yingke: How is the production capacity of Zhitong Technology?

Liu Zepeng: Zhitong Technology currently has an annual production capacity of 200,000 CRV reducers. With the support of the governments of Beijing and Shijiazhuang, it plans to build a research and development and manufacturing base for high-precision joint modules for humanoid robots with an annual output of 30,000 units in Beijing, and a large-scale manufacturing base for high-precision reducers in the High-tech Zone of Shijiazhuang City, Hebei Province within three years. We are currently in a full production state, and the compound growth rate of production and sales has remained 247% for three consecutive years.

Yingke: While in mass production, will it lead to a price war in the reducer industry?

Zhang Yueming: There will be price competition, but it will not be as fierce as in industries such as new energy vehicles. At present, the market pattern is already in a relatively stable state, and the RV reducer has high technical barriers and a high industry entry threshold, so there are few enterprises that can impact the RV reducer track.

Yingke: In the fields where foreign countries have a first-mover advantage, how can domestic start-up companies stand out?

Zhang Yueming: I think the road of hard technology is real. It cannot take shortcuts, and difficulties are its normal state. For hard technology researchers, scientific research must be market-oriented, and products are for the market. At the same time, the relationship between input and output must be handled well. Simply put, the purpose of scientific research is also to provide good products, create profits, and promote sound development.

After mass production, what should we compete for?

Yingke: In the field of precision reducers, Japanese enterprises have a first-mover advantage. In order to break the technical barriers, what do you think are the technical focuses in the next ten years?

Zhang Yueming: In fact, just from the RV reducer, its technical route is basically finalized, and we have basically not taken detours in the early basic theory and design theory. But the later development requires the accumulation of output. Whether we can compete with international manufacturers, the stability of the product process is the key. At present, we mainly focus on domestic machine tool manufacturers and jointly develop with domestic upstream machine tool manufacturing enterprises to meet different process requirements.

Yingke: Mass production is a key indicator to measure a company's competitiveness. What problems did Zhitong Technology encounter in the process of increasing production?

Zhang Yueming: One of the difficulties in increasing production is the stability of the process just mentioned; the other is the collaborative support of the upstream industry with us. The most core upstream industries of the reducer include machine tools, bearings, and metal materials, and there are dozens of upstream suppliers. This requires us to gradually build our own supply system to cope with market changes.

Yingke: The application scenarios of industrial robots are changeable. How does Zhitong Technology improve the scene adaptability of products?

Zhang Yueming: We are guided by basic theory and supported by the Zhitong Gongda Research Institute, and can provide customized services in these aspects according to the specific requirements of customers.

Yingke: The supply chain of robots and the automotive end has a high degree of overlap. Will the price war at the automotive end have an impact on us?

Zhang Yueming: There will be a certain impact, but the supply and demand of RV reducer enterprises is small, and the transmission pressure is not great.

Yingke: How is the overseas market development currently? Can you share the strategic focus of going overseas?

Liu Zepeng: The overseas market is the top priority for the development of Zhitong Technology. We have currently completed in-depth technical exchanges and validations with customers such as KUKA (Germany), ABB, Dürr (Germany), and Kawasaki (Japan), and matched the customized needs of the overseas market to develop new high-precision reducers and joint modules to seize the market. In addition, with the help of overseas suppliers, the existing standard products have been exported. The next step will be to increase investment in the overseas market, deeply cultivate the European, Japanese and South Korean markets, and strive to achieve an overseas market production and sales share of 15% of revenue in the next three years.

Yingke: In 2024, the humanoid robot industry will experience explosive growth. What impact will this