Rob Scott 
“We don’t own any Chinese companies,” says Arthur Ntale, “but if you want to understand how and why the global competitor landscape works the way it does, you have to visit China. These trips always offer insights, nuances and surprises.”
Home to one-third of the world’s population and 160 cities of more than 1 million people, China produces up to 50% of the world’s manufactured goods and has 6 of the world’s top 50 universities. If you’re analysing an industry, a significant issue or a company, it’s crucial to understand how China might influence it.
Over 10 days in 6 cities, Arthur packed in 24 meetings with car and robot manufacturers (robotaxi makers are arguably one and the same), AI modelers and app creators. The striking constant of our trips to China is the breakneck pace of development as it moves rapidly up the value chain to be a world leader in sophisticated finished goods.
The country is now the centre of gravity for the global autos industry and Beijing (“Grim city, incredible talent pool and so many robots,” says Arthur) has become a centre of expertise for robotics and AI, a combination that is just beginning to supercharge automation. Three portfolio holdings set to benefit from this tech shift over the coming years are Amphenol and AMETEK, which produce electrical components and instrumentation and Keyence, whose sensors are used for quality control and automation.
To survive in China’s cutthroat car market, manufacturers must offer compelling features, many of which will require computer chips. Today’s electric vehicles contain up to 3,000 chips. That number is growing and Chinese car companies such as Li Auto and Xiaomi want to design their own custom chips. We are unlikely to invest in a car company, but we do invest in Cadence, which provides software for designing and testing the semiconductors that lie at the heart of all modern tech.
There is a lot more innovation and growth to come. As a Li Auto representative put it: “We’re at the windows phone stage for cars”. Whatever next – flying cars? Well, yes, and China is likely to lead the world in making them. Historian and economist Adam Tooze sums it up well:
“China is more than just an example of modernity; it is essential to grasping the concept of modernity itself…Western perspectives need to move beyond treating China as just a data point…”
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