The rise of the robots
With a majority of Chinese enterprises struggling to cope with low production levels, rising labor costs, outdated management methods and changing demographics, more and more companies are buying industrial robots.
Rising labor costs, innovation drive prompt companies to use more machines in manufacturing
While the rural workforce shrinks, the robotics revolution has almost reached China. With a majority of Chinese enterprises struggling to cope with low production levels, rising labor costs, outdated management methods and changing demographics, more and more companies are buying industrial robots, in effect transforming themselves from dependents on manpower production to stewards of what they call "intelligent manufacturing".
These companies are pushing hard toward putting robots to work because the steely employees are seen as, well, more reliable. In recent years, millions of migrant workers have returned to their homes on the countryside, but more often than not, they are not going back to find work in urban areas.
That in turn has driven up labor costs and wages. The average labor cost in China has nearly doubled in the past five years, going to more than 40,000 yuan ($6,400, 4,900 euros) a year in 2011 from less than 25,000 yuan a year in the beginning of 2007, according to global consulting firm Ernst & Young.
But according to a report this year by the International Federation of Robotics, there were 74,300 operational robots in China at the end of 2011, up 42 percent from 2010.
In the 50-year history of industrial robots, the federation says, there is no other country that can match this transformation to robots in such a short period of time.
In 2011, China spent 8 billion yuan on industrial robots. It bought 22,600 units of robots last year, a nearly 50-percent increase from the previous year, according to the China Machinery Industry Federation.
The timing of the buying spree could not be more right. In recent years, a growing labor shortage has spread from the southeast coastal areas to across the country. A recent census indicates that the working-age population will begin to decrease between 2013 and 2015 and in the next 10 years the number of workers between the ages of 20 and 40 may decrease by as much as 100 million.
Economists have long warned that China may soon be reaching the so-called Lewis Turning Point, where the rural surplus workforce dries up and wages begin to soar.
Zhang Xiaoyu, vice-president of the China Machinery Industry Federation, says robots can help reduce production costs, are able to work 24 hours a day, offer more output for repetitive work and work more efficiently and accurately.
Zhang says the rapid demand for industrial robots will continue to grow by 50 percent this year.
Even when China's economy grew by leaps and bounds before the global financial crisis in 2008, the Chinese government was urging domestic manufacturers to alter their business models, warning that the existing model of growth could not be sustained.
"Industrial robots can help Chinese enterprises save costs on company management, food, accommodation, insurance and social benefits for employees. It can also strengthen their competitiveness in technology innovation and product design," Zhang says.
With China on the robot bandwagon, the world's major robot-makers are looking to quickly capitalize on the nation's automation boom.
Gu Chunyuan, senior vice-president of ABB North Asia and China, who heads its regional Discrete Automation and Montion Control Division, says industrial robots in China are not only used in the traditional automotive industry, but more and more in other industries.
"With huge investments in the automotive industry, China is the second-largest car market in the world, almost as big as the US and by far the largest production site for cars," he says.
ABB currently holds more than 20 percent of the global market share and has provided more than 10,000 robots to the China market. The company relocated its global robotics business headquarters to Shanghai from Detroit, Michigan, in 2006, becoming the first multinational company to manufacture industrial robots in China.
ABB offers local manufactured products to global customers. In China, ABB's robot products are widely being used in almost all major car manufacturers and other food and beverage companies, and electronics companies.
Kuka AG, ABB's German rival and another leading major robot maker, is also prepared for the China boom. Kuka is planning to increase assembly capacity of robots to 5,000 in China this year. In 2010, it built less than 1,000.
The German company received a major order in July to construct manufacturing lines for new car body and parts assembly systems in China.
"The (order) comprises a total of nine lines, which will be used to build car body subassemblies such as front and rear doors, fenders, engine hoods and tailgates. Also included in the order are an assembly and finishing line," says Wang Tao, CEO of Kuka Systems (China).
Swiss robot manufacturer Staubli Holding AG is also planning to increase sales of robots from 300 units in 2011 to 500 units this year.
The company is investing 200 million yuan this year to expand its manufacturing facility in Hangzhou for its three divisions: textile machinery, connectors and robotics. It also plans to build a production line to assemble industrial robots.
Zhang Zhenhui, division manager of robotics at Staubli (Hangzhou) Mechatronic Co Ltd, says even though the Chinese government does not levy taxes on imported robot units, the management still thinks it is necessary to build a new assembly line for robots in Hangzhou because localization is the key factor for the company to explore the China market.
"To avoid intense competition with others, we are offering the robots that have been designed to suit the needs in dangerous environments, some of which are waterproof robots, which can be used in semiconductor, medicine and food processing industries," Zhang says.
"We will not only focus on developing the robotics business in the Yangtze River Delta region; we also want to expand our foothold in China's second-tier cities such as Wuhan, Chongqing, Chengdu and Changsha over the next three years," Zhang says.
But the move to automation has one possible major drawback. Developed nations today, many of which are mired in deep economic recession, may reduce buying Chinese goods or investing in China's coastal regions, as the advantage of a cheap labor market gradually disappears and there is no distinct price gap between the products made by industrial robots and manufacturing outsourcing.
It could actually be more economical for US and European companies to bring jobs back to their own countries to save on logistics and transportation costs. They could also decide to move factories to other emerging markets such as Bangladesh, Vietnam, Brazil or Ethiopia, where labor costs are still quite low.
Foxconn Technology Group, one of the largest electronics contract manufacturers in the world making products for Apple, Sony and HP, among others, is the best example in the increasing use of industrial robots. The company has been plagued by scandals in the past over the treatment of employees. It suffered a string of suicides by young workers at its massive Chinese plants which some blame on working pressure.
Terry Gou, chairman of Foxconn, said last year that his company plans to replace human employees with 1 million robots in the next three years and the robots will be used to carry out simple and routine work such as spraying, welding and assembling which are conducted by workers.
The company, which had 10,000 robots in 2011, is hoping to have 300,000 robots working in its factories this year. It also wants to meet its chairman's ultimate plan by 2014, which is to create a robot research center in Jincheng, Shanxi province,.
The robots produced there are called Foxbots and its intelligent quotient is similar to a 7-year-old child. It is priced from 140,000 to 160,000 yuan with various sizes and functions, according to Xinhua News Agency.
The company plans to invest more than 9 billion yuan in Shanxi, with a total output volume of more than 50 billion yuan by 2016.
"Foxconn is still on the way of improving manufacturing automation, but we may need a longer time to reach the goal of 1 million robots," says Liu Kun, Foxconn's spokesman.
While the rural workforce shrinks, the robotics revolution has almost reached China. With a majority of Chinese enterprises struggling to cope with low production levels, rising labor costs, outdated management methods and changing demographics, more and more companies are buying industrial robots, in effect transforming themselves from dependents on manpower production to stewards of what they call "intelligent manufacturing".
These companies are pushing hard toward putting robots to work because the steely employees are seen as, well, more reliable. In recent years, millions of migrant workers have returned to their homes on the countryside, but more often than not, they are not going back to find work in urban areas.
That in turn has driven up labor costs and wages. The average labor cost in China has nearly doubled in the past five years, going to more than 40,000 yuan ($6,400, 4,900 euros) a year in 2011 from less than 25,000 yuan a year in the beginning of 2007, according to global consulting firm Ernst & Young.
But according to a report this year by the International Federation of Robotics, there were 74,300 operational robots in China at the end of 2011, up 42 percent from 2010.
In the 50-year history of industrial robots, the federation says, there is no other country that can match this transformation to robots in such a short period of time.
In 2011, China spent 8 billion yuan on industrial robots. It bought 22,600 units of robots last year, a nearly 50-percent increase from the previous year, according to the China Machinery Industry Federation.
The timing of the buying spree could not be more right. In recent years, a growing labor shortage has spread from the southeast coastal areas to across the country. A recent census indicates that the working-age population will begin to decrease between 2013 and 2015 and in the next 10 years the number of workers between the ages of 20 and 40 may decrease by as much as 100 million.
Economists have long warned that China may soon be reaching the so-called Lewis Turning Point, where the rural surplus workforce dries up and wages begin to soar.
Zhang Xiaoyu, vice-president of the China Machinery Industry Federation, says robots can help reduce production costs, are able to work 24 hours a day, offer more output for repetitive work and work more efficiently and accurately.
Zhang says the rapid demand for industrial robots will continue to grow by 50 percent this year.
Even when China's economy grew by leaps and bounds before the global financial crisis in 2008, the Chinese government was urging domestic manufacturers to alter their business models, warning that the existing model of growth could not be sustained.
"Industrial robots can help Chinese enterprises save costs on company management, food, accommodation, insurance and social benefits for employees. It can also strengthen their competitiveness in technology innovation and product design," Zhang says.
With China on the robot bandwagon, the world's major robot-makers are looking to quickly capitalize on the nation's automation boom.
Gu Chunyuan, senior vice-president of ABB North Asia and China, who heads its regional Discrete Automation and Montion Control Division, says industrial robots in China are not only used in the traditional automotive industry, but more and more in other industries.
"With huge investments in the automotive industry, China is the second-largest car market in the world, almost as big as the US and by far the largest production site for cars," he says.
ABB currently holds more than 20 percent of the global market share and has provided more than 10,000 robots to the China market. The company relocated its global robotics business headquarters to Shanghai from Detroit, Michigan, in 2006, becoming the first multinational company to manufacture industrial robots in China.
ABB offers local manufactured products to global customers. In China, ABB's robot products are widely being used in almost all major car manufacturers and other food and beverage companies, and electronics companies.
Kuka AG, ABB's German rival and another leading major robot maker, is also prepared for the China boom. Kuka is planning to increase assembly capacity of robots to 5,000 in China this year. In 2010, it built less than 1,000.
The German company received a major order in July to construct manufacturing lines for new car body and parts assembly systems in China.
"The (order) comprises a total of nine lines, which will be used to build car body subassemblies such as front and rear doors, fenders, engine hoods and tailgates. Also included in the order are an assembly and finishing line," says Wang Tao, CEO of Kuka Systems (China).
Swiss robot manufacturer Staubli Holding AG is also planning to increase sales of robots from 300 units in 2011 to 500 units this year.
The company is investing 200 million yuan this year to expand its manufacturing facility in Hangzhou for its three divisions: textile machinery, connectors and robotics. It also plans to build a production line to assemble industrial robots.
Zhang Zhenhui, division manager of robotics at Staubli (Hangzhou) Mechatronic Co Ltd, says even though the Chinese government does not levy taxes on imported robot units, the management still thinks it is necessary to build a new assembly line for robots in Hangzhou because localization is the key factor for the company to explore the China market.
"To avoid intense competition with others, we are offering the robots that have been designed to suit the needs in dangerous environments, some of which are waterproof robots, which can be used in semiconductor, medicine and food processing industries," Zhang says.
"We will not only focus on developing the robotics business in the Yangtze River Delta region; we also want to expand our foothold in China's second-tier cities such as Wuhan, Chongqing, Chengdu and Changsha over the next three years," Zhang says.
But the move to automation has one possible major drawback. Developed nations today, many of which are mired in deep economic recession, may reduce buying Chinese goods or investing in China's coastal regions, as the advantage of a cheap labor market gradually disappears and there is no distinct price gap between the products made by industrial robots and manufacturing outsourcing.
It could actually be more economical for US and European companies to bring jobs back to their own countries to save on logistics and transportation costs. They could also decide to move factories to other emerging markets such as Bangladesh, Vietnam, Brazil or Ethiopia, where labor costs are still quite low.
Foxconn Technology Group, one of the largest electronics contract manufacturers in the world making products for Apple, Sony and HP, among others, is the best example in the increasing use of industrial robots. The company has been plagued by scandals in the past over the treatment of employees. It suffered a string of suicides by young workers at its massive Chinese plants which some blame on working pressure.
Terry Gou, chairman of Foxconn, said last year that his company plans to replace human employees with 1 million robots in the next three years and the robots will be used to carry out simple and routine work such as spraying, welding and assembling which are conducted by workers.
The company, which had 10,000 robots in 2011, is hoping to have 300,000 robots working in its factories this year. It also wants to meet its chairman's ultimate plan by 2014, which is to create a robot research center in Jincheng, Shanxi province,.
The robots produced there are called Foxbots and its intelligent quotient is similar to a 7-year-old child. It is priced from 140,000 to 160,000 yuan with various sizes and functions, according to Xinhua News Agency.
The company plans to invest more than 9 billion yuan in Shanxi, with a total output volume of more than 50 billion yuan by 2016.
"Foxconn is still on the way of improving manufacturing automation, but we may need a longer time to reach the goal of 1 million robots," says Liu Kun, Foxconn's spokesman.
