China is preparing to deploy new units of humanoid robots at the Fangchenggang border crossing in Guangxi, along its frontier with Vietnam. Developed by Shenzhen-based UBTech Robotics, the machines are intended to support patrol, inspection and logistics operations at the busy transit hub, with officials claiming they will assist with crowd guidance, inspections and on-the-ground operational tasks.
The move reflects China’s broader push to integrate “advanced robotics and artificial intelligence into public-facing infrastructure and security environments”. UBTech’s Walker S2, launched in mid-2025, was described as the first humanoid robot capable of autonomously replacing its own battery.
At the core of this development is what is known as physical AI; artificial intelligence systems that operate in and interact with the physical world, rather than existing solely in digital environments. With AI, advanced physical systems can now perceive their surroundings, reason using large language models (LLMs), act accordingly and learn from the outcome of those actions.
China currently ranks first globally in physical AI patent competitiveness. Five of the top ten companies and organizations in this category are Chinese; the United States ranks second.
This landscape places Europe at a pivotal moment.
Europe’s industrial crossroads
Advances in AI are expanding the capabilities of robotics across sectors. From industry and services to healthcare, agriculture and manufacturing – which stands out as a sector where robotics can deliver significant impact. Beyond robotics alone, however, AI can enhance automation, optimisation and customisation across production processes.
However, there are several structural pressures that are intensifying the situation. An ageing workforce, rising global competition, and mounting environmental and security challenges are placing European manufacturing competitiveness under strain.
“Recent analyses […] have highlighted the importance of targeted industrial initiatives to help close Europe’s productivity gap. The rapidly evolving field of robotics offers a unique opportunity to propel the industry forward, with millions of jobs depending on its successful transformation,” the European Commission stated.
To seize this opportunity, the Commission has said that working alongside Europe’s dynamic and innovative private sector will deepen the integration between research excellence and industrial deployment, with a strong focus on end-users and small and medium-sized enterprises (SMEs).
Competitive pressure is already tangible. In November 2025, Ford’s chief executive Jim Farley visited a series of factories in China and said he was astonished by the technological sophistication of Chinese vehicles – describing it as one of the “most humbling things I’ve ever seen”. The impact is not limited to American companies, however; Germany’s automotive industry, long considered dominant, faces increasing disruption.
For decades, Germany led industrial automation. But in the past ten years, China has scaled at extraordinary speed. The Asian superpower went from 189,000 industrial robots in 2014 to over 2 million today – a tenfold increase.
Executives even report visiting Chinese “dark factories” so automated that lights are unnecessary.
China’s current edge stems largely from traditional industrial automation; technology that has existed for decades, but has now been deployed at unprecedented scale. Physical AI represents the next phase of that evolution.
The infrastructure battle moves into the physical world
At current trajectories, China is not only expanding its manufacturing automation capacity, but also positioned to control key components of physical AI infrastructure; from foundation models to robot manufacturing and deployment scale. According to Superseed, the situation is perilous for European manufacturers, who are not just losing current battles but are also being shut out of the next generation entirely.
Yet, Europe is not without leverage. The World Economic Forum has argued that in the race to keep pace with rapid AI development, Europe can “win” by focusing on physical AI. An industry-driven AI strategy builds on Europe’s historic strengths as an engineering and manufacturing hub, as well as its leadership in sectors such as chemicals, pharmaceuticals and aerospace.
A focus on Physical AI also aligns with the European Union’s regulatory framework, as major AI regulations primarily address consumer and citizen data privacy rather than confidential corporate intellectual property. To compete effectively, the region will need AI-friendly regulation, strengthened AI expertise and greater data sharing.
Structural differences between ecosystems are also relevant. While the U.S. startup environment is optimized for software, Europe’s corporate ecosystem is oriented toward asset-intensive industries: automotive in Germany, France, Italy and Sweden; industrial machinery in Germany, Austria and Italy; logistics and manufacturing in the Netherlands, Belgium, Czechia and Poland; and healthcare and pharmaceuticals in the Nordics, Germany, Switzerland and Italy.
Europe has also demonstrated capacity in AI development. Companies such as Synthesia, ElevenLabs, Wayve, N8N and Lovable illustrate the region’s ability to compete on product quality and execution speed, even against well-funded American rivals.
Physical AI thus presents a comparable opportunity, as it extends beyond pure software. Europe’s engineering heritage has become a strategic asset.
This momentum coincides with significant growth in European venture capital. From 2015 to 2024, European VC investment totalled €426 billion – ten times the €43 billion invested in the entire decade before. Meanwhile, European unicorns grew from 72 in 2015 to 358 today, a fivefold expansion.
And, last year, almost a quarter of new unicorns globally were European firms, as the region’s VC ecosystem grew by 13% CAGR over the past decade – outpacing the U.S.’s 8%, as per Superseed.
Europe’s window of opportunity
Concerns about China’s industrial scale are grounded in observable trends: European manufacturers are competing against highly automated “dark factories”, and the cost gap is widening. Physical AI applications represent one pathway to narrowing that gap.
“The robotics revolution is inevitable. As we stand on the cusp of this technological revolution, it’s crucial that we have leaders who understand both the technical challenges and the broader societal implications,” Artem Sokolov, founder of the London-based company Humanoid, stated.
Humanoid, founded in 2024, develops advanced AI-powered humanoid robots aimed at increasing productivity in retail, logistics and manufacturing. The company focuses on safe, commercially scalable systems designed to perform repetitive tasks.
These developments unfold against a backdrop of labour shortages across developed economies: the U.S. faces a gap of two million workers, with Europe experiencing a comparable shortfall. Sectors such as warehousing, manufacturing, retail and transportation are particularly affected.
Europe has previously led in industrial automation and has produced competitive AI companies. Physical AI applications present an opportunity to build on those foundations.
Featured image: A Chosen Soul via Unsplash+
