In the heart of China’s rapidly evolving tech landscape, Roula Khalaf, Editor of the Financial Times, highlights remarkable stories in her weekly newsletter. One such story centers around Unitree, a pioneering robot manufacturer based in Hangzhou, which is making strides in the development of humanoid robots.

Visitors to Unitree's headquarters find themselves face-to-face with the G1, a striking silver humanoid standing 1.3 meters tall. The company encourages visitors to physically engage with the G1 by pushing and kicking it to test its balance. This hands-on demonstration is not just a quirky attraction; it symbolizes Unitree's commitment to showcasing the endurance and capability of their humanoid robots.

Unitree is at the forefront of a burgeoning sector in China, leading a group of innovative start-ups such as AgiBot, Engine AI, Fourier, and UBTech. These companies have gained increased attention recently, especially through dynamic video demonstrations that are perfect for social media consumption. Notably, during the spectacular spring festival gala in China, a remarkable performance featured 16 of Unitree's H1 robots executing a synchronized folk dance, captivating an audience of millions.

This event illustrated China's burgeoning prowess in developing humanoid robots, a sector that is expected to play a significant role in the ongoing technological rivalry with the United States. Analysts from investment banks are predicting that this industry could soon yield the next game-changing technology, akin to the smartphone and electric vehicle revolutions. Wang Xingxing, Unitree's CEO and founder, envisions a breakthrough moment akin to the “iPhone moment” for humanoid robots within the next five years.

According to Goldman Sachs, the global market for humanoid robots is projected to reach a staggering $205 billion by 2035. Bernstein research further estimates that by the year 2050, annual robot sales could soar to 50 million units. Citibank predicts there will be 648 million humanoid robots by 2040, while Bank of America foresees an even more ambitious figure of 3 billion by 2060.

In the United States, competition is fierce, with major players like Tesla, Google, and Meta entering the fray alongside robotics start-ups such as Boston Dynamics and Agility Robotics. However, the existing industrial robot manufacturers from Japan and Europe have primarily focused on collaborative robots designed to work alongside humans, rather than creating fully humanoid robots.

Experts believe that China’s extensive electronics and electric vehicle supply chains give it a competitive edge, as many components essential for humanoid robots, such as actuators and batteries, are already produced within the country. While the U.S. maintains a technological lead in advanced moving parts and AI processors, the affordability of Chinese components is significant. Bank of America analysts estimate that if the second-generation Optimus robot from Tesla utilized Chinese parts, the cost would be reduced by about one-third compared to using parts from non-Chinese suppliers.

This cost advantage is enabling a new level of experimentation in humanoid robotics, an area that was previously dominated by select labs and start-ups like Boston Dynamics. Bruno Adorno, a robotics researcher at the University of Manchester, emphasizes that there is now a burgeoning interest in humanoid research that was not feasible before the emergence of companies like Unitree.

Bernstein analysts compare China’s rapid progress in humanoid robotics to its swift rise in the electric vehicle market. They note that while U.S. enterprises often pursue a singular 'Holy Grail' solution, China employs a 'natural selection' strategy, producing a wide variety of models to meet diverse market needs.

During a recent parliamentary meeting, the Chinese government identified humanoid robotics as a strategic industry and has begun investing heavily in start-ups within this field. Notably, the founder of Unitree, Wang Xingxing, recently had an audience with President Xi Jinping, underscoring the government's support for this emerging industry. Despite the military applications of such technology, which have seen the start-up's robotic dogs used in security drills, Unitree has clarified that it does not sell its products for military use.

Support from prominent investors has also flowed into Unitree, with backing from renowned entities like Sequoia Capital’s HongShan, as well as government funds from the China Internet Investment Fund and various state-backed initiatives. Shen Zhengchang, a delegate to China’s legislature, highlighted that AI-powered robots could represent a crucial future direction for both China and the global landscape, emphasizing the nation's ambition to lead in this sector.

China's well-honed industrial policy is another vital component aiding the growth of the humanoid robotics sector. The Ministry of Industry and Information Technology has mapped out an ambitious strategy aimed at overcoming technological obstacles, complemented by a state-led venture capital fund of 1 trillion RMB (approximately $137 billion) to fuel further innovation.

Local governments are competing to attract companies by providing generous subsidies, with places like Hangzhou investing heavily in the robotics sector. In Shenzhen, officials are drafting policies to incentivize development, and Shanghai has even established a state-supported training facility for humanoid robots, where these machines can practice tasks to gather data for future improvements. The aim is for humanoids to eventually match the efficiency of industrial robots, which are currently optimized for repetitive tasks, thereby creating viable business models for humanoid machines.

While Chen Guishun, robotics head at Shenzhen’s Inovance, acknowledges the potential of humanlike robots, he points out that the popular two-legged designs often showcased in viral videos may not be the most efficient solution. Alternatives such as wheeled or tracked structures may achieve similar mobility more effectively.

In practice, some local police units have begun to deploy robodogs and humanoids for neighborhood patrols, while retail stores are utilizing humanoids for their entertainment factor. Factories are also beginning to experiment with humanoid robots on production lines.

Currently, the majority of Unitree’s robots are being sent to universities and research institutions. The company has made significant strides in reducing the cost of its humanoid robots, bringing the price of its H1 model down from up to $1 million to approximately $100,000. They have also made the code for controlling motors and sensors freely available, allowing researchers and developers to innovate on top of their platform.

Adorno noted that by leveraging Unitree’s application programming interface, researchers are developing new techniques that enhance robot behavior and unlock new functionalities. Markus Fischer, a robotics expert from Exxeta, remarked that while programming humanoids can be intensive—taking about ten days to teach a G1 robot to navigate an office autonomously—there is a clear interest in leveraging these robots for entertainment and customer engagement in retail environments.

Looking ahead, Fischer believes that functionalities such as inventory management in supermarkets may soon become a reality, though he acknowledges that challenges remain in teaching robots nuanced tasks like handling fragile objects. He noted that what humans instinctively do—like adjusting grip strength—requires extensive programming for robots to replicate.

Despite the excitement surrounding humanoid technology, some experts remain skeptical about its commercial viability. Chinese venture capitalist Allen Zhu recently indicated his firm would withdraw from humanoid investments, citing a lack of diverse customer engagement beyond state-owned enterprises using robots for display purposes. “That’s not the kind of customer we’re looking for,” he stated, reflecting a common concern about the practical applications and market potential of humanoid robots.

This intricate landscape of innovation, competition, and investment underscores both the potential and the challenges facing the humanoid robotics sector as it navigates the complexities of technological advancement and market readiness.

Contributors to this comprehensive report include Gloria Li, Nian Liu, and Wenjie Ding.