Roborock (石头科技, 688169.SZ), one of China’s largest cleaning robot developers, has begun production at its new smart factory in southern China’s Guangdong Province, with a maximum monthly output of 300,000 units.
The factory, located in Huizhou, an industrial city 70 km east of Shenzhen, cost 460 million yuan (US$63 million) to build and became operational recently.
Opened for the first time to members of the media on September 14, the smart plant represents Roborock’s latest bid to achieve lean production.
Quan Gang, president of Roborock, told China Business News, a financial and business newspaper, that the penetration of robot vacuums in households could be less than 5% at home and less than 10% abroad.
As a robot vacuum war heats ups in China and growth of the category slows, the focus of the industry has shifted from technical improvement to lean operation and cost reduction.
According to Roborock, while it remains fixated on upping its technological game, the Beijing-based firm will manufacture the high-end models itself from its own factory, convinced that refined assembling and testing techniques will help it maintain a competitive edge.
Meanwhile, it looks to outsource the manufacturing of some of its lower-end models to OEM suppliers.
Roborock said this mixed mode of production will give it a cost advantage.
Narrowing the gap
In the first half of this year, Roborock reaped revenue of 3.37 billion yuan, up 15.41% year on year, while net profit attributable to shareholders jumped 19.93% over a year earlier to 739 million yuan.
Data tracked by AVC, a market intelligence provider, the market share of Roborock gained 2.7 percentage points to 20.2% from the same period last year in the first eight months of 2023.
Roborock’s Q7 Max+ sweeping robot
It ranks second, but is closing in on industry leader Ecovacs (科沃斯, 603486.SH), which currently dominates the segment with a share of 31.8%.
Over the past few years, Roborock management has held internal discussions on whether to build its own factory or hold onto its asset-light model, Quan, the president, was quoted as saying in an interview with China Business News.
With the advent of new technologies, robotic cleaners increasingly come to contain innovations such as those employed in autonomous driving.
In particular, in manufacturing procedures where optical parts are involved, the requirement on precision has become ever higher, Quan stated.
Giving full play to self-owned plant
Roborock believes it could stay ahead of the curve on the back of high-precision products as well as enhanced assembling and testing processes.
These combine to raise the bar for potential competition, Quan claimed, adding that its own factory can bring costs down if running at full capacity.
By contrast, it risks becoming a “liability” should production efficiency wane.
Overall, Roborock will continue to work with two contract manufacturers, but unlike in the past, it may cut contract manufacturing orders by half from “100,000 units” to “50,000 units,” to prevent its own plant functioning below capacity and draining the company’s finances.
As of today’s trading, Roborock shares closed 0.84% lower to 287.04 yuan apiece, with a market cap of 38 billion yuan.