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Friday, September 25, 2015, 10:52

China powers up future work force

By KRISHNA KUMAR VR in Hong Kong
China powers up future work force
An automotive factory i n Wuhan, Central China’s Hubei province. At about 40 percent, the auto industry is the largest customer of industrial robots in China. (AFP)

It seems China may just be completely handing over its factories to robots.

In May, Shenzhen Everwin Precision Technology, an electronics producer based in Dongguan in South China’s Guangdong province, announced plans to replace 90 percent of its 1,800 employees with robots in the near future. And Shenzhen Everwin is not the only factory turning to robots.

China is expected to install more industrial robots than any other country by 2017, according to the International Federation of Robotics (IFR), an association based in Frankfurt, Germany.

In 2014, Chinese factories accounted for about 25 percent of the global share of industrial robots, a 54 percent increase over the previous year, the IFR said.

Midea, a leading manufacturer of home appliances based in Guangdong, plans to replace 6,000 workers in its residential air-conditioning division — about a fifth of the work force — with robots by the end of this year.

Foxconn, a maker of consumer electronics for companies including Apple, plans to automate about 70 percent of factory work within three years. It already has a fully robotic factory in Chengdu, in China’s southwestern Sichuan province.

According to the Dongguan Economy and Information Technology Bureau, more than 500 factories in the industrial city have invested a total of 4.2 billion yuan ($659 million) in robots with the aim of replacing up to 30,000 workers.

By 2016, around 1,500 enterprises in the city are expected to begin replacing humans with robots.

Henrik Christensen, a professor at the Georgia Institute of Technology in the United States and director of the Center for Robotics and Intelligent machines, explained the main reasons for China’s growing appetite for industrial robots.

“China is the largest market in the world for industrial robots, and the two drivers are labor cost and the search for better product quality,” Christensen told China Daily Asia Weekly.

Driven by rapid economic growth, there has been near double-digit growth in the national average annual wage for urban employees since 2004, according to the National Bureau of Statistics of China, with the average yearly wage reaching $9,000 in 2014.

Over the last 10 years, salaries in China have increased remarkably, whereas in Europe and in the US the number is more or less the same, Christensen said.

There are other challenges in terms of the environment and competition from other countries, especially from Southeast Asia, prompting China to use more robots in its factories.

Analysts view automation as a way for the country to keep industries that might otherwise move offshore, or even to lure them back.

Staying competitive

“Low labor cost alone is not adequate to motivate a move of production bases,” said Christensen.

“For that reason, you need to automate to remain competitive, as it makes it simpler to achieve consistent quality.”

In most manufacturing industries in China, the “robot payback period” is dropping below two years, said Michael Osborne, associate professor of machine learning at the Oxford-Man Institute of Quantitative Finance in the United Kingdom.

“With China’s still very low robotic density, demand for industrial robots in the country is expected to continue,” Osborne said.

At present, China has only about 30 industrial robots per 10,000 manufacturing workers, against the global average of 62, according to HSBC.

However, a policy document by China’s Ministry of Industry and Information Technology, titled Guidance on Promotion of Development of the Robot Industry, estimates an increase in robotic density to over 100 robots per 10,000 workers by 2020.

In comparison, South Korea has the world’s highest robot density at 437 robots per 10,000 manufacturing workers, which is about 15 times greater than China’s.

In China, the automotive industry is by far the largest customer of industrial robots at approximately 40 percent.

“The significant demand for new cars means there is a need to deploy more robots. Without use of robots it is very difficult to achieve the required quality,” said Christensen.

“As the Chinese auto market continues to expand, the demand for robots will continue to grow.”

The automotive industry in China has been the largest in the world since 2008, and annual production exceeds that of the European Union, the US and Japan combined.

The number of registered vehicles in China is expected to exceed 200 million by 2020, according to consultancy McKinsey & Company.

The other major customers for robots are electronic and consumer goods manufacturing units.

Worldwide, the rubber and plastics industry has continuously increased the number of robot installations, and robot sales to the pharmaceutical and cosmetics industry surged by 69 percent, according to the IFR.

However, for bigger economies like China, the challenging task is how to prepare the country’s working class in order to keep pace with the changing job environment, said Ameek Kaur, instructor at the engineering design and innovation centre, National University of Singapore.

“Explosive growth of the robotics industry will definitely affect labor-intensive jobs, so it is key that we educate people to be prepared for such a change in work practice,” Kaur said.

Although analysts point out that robots will take over some factory jobs, they add that automation will also lead to the creation of jobs.

“For instance, the introduction of ATMs has not resulted in a reduction in the number of bank tellers,” said Christensen of the Georgia Institute of Technology.

“Introduction of computers for white-collar workers has not reduced the need for administrative assistants,” he added.

However, Osborne of the Oxford-Man Institute warned that as firms replace humans with robots, they need to be sure they are not losing the hands-on skills and factory-floor knowledge needed for problem solving.

“It is still humans who are the source of innovation and creativity,” he said.

Nevertheless, robots have proven their value in manufacturing, said Carlos Antonio Acosta Calderon, senior lecturer at the school of electrical and electronic engineering of Singapore Polytechnic.

“As the technology is getting mature, the price to introduce robots in factories will be cheaper than it used to be,” said Calderon.

As a result of robotic technology getting cheaper and more efficient, the Boston Consulting Group predicts that the industry will balloon from $15 billion in 2010 to $67 billion by 2025.

However, China mainly relies on importing high-end robots in spite of the fact that the sales of domestically made robots reached 16,000 in 2014.

“This is likely to change in the next few years, which will see significant growth of Chinese companies,” said Christensen.

Policy support

Calderon pointed out that the favorable government policies will spur growth in China’s robotics industry.

Recently, China unveiled Made in China 2025, a national plan focused on modernizing its manufacturing processes and shifting labor-intensive work to robots. The country also aims to make the robotics industry development blueprint part of the 13th Five Year Plan (2016 to 2020).

To further develop the robotics sector, the Ministry of Industry and Information Technology has called for the promotion of three to five robot-manufacturing companies of international competitiveness and the development of eight to 10 related industrial fields by 2020.

Guangzhou is planning to create a robot-manufacturing industry worth more than 100 billion yuan by 2020, and aims to automate more than 80 percent of its manufacturing production. In Foshan, the value of the automation and robotics market is expected to reach 300 billion yuan in five years.

Guangdong province is already handing out annual subsidies of between 200 and 500 million yuan to makers of robots and manufacturers installing robots on assembly lines.

The government’s far-sighted policy will encourage the development of a domestic robotics industry and investment in robots, said Alex Malley, CEO of accounting body CPA Australia.

“I expect that some of the Chinese firms will become globally competitive in the not-too-distant future and possibly lead the industry,” Malley said.

“Increasing demand, government support and technological advances should give the industry in China a very bright long-term future.”

krishna@chinadailyapac.com
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