(When the Labor Market Gets Tough, the Tough Turn to Robots)
by Andrew Sia


In our October issue, we featured the article “The Industrial Revolution to Evolution and What’s Ahead.” The industrial revolution occurred between 1820 and 1840, and began in countries such as Great Britain, France, Germany and Belgium. It took exactly 150 years for this revolution to shift to Asia and now we are starting a new era with the introduction of robots.

Just 30 years ago, industry growth was rapid and cheap labor was abundant. Factories were set up overnight like mushrooms without much concern for efficiency, quality or tooling. If there were any problems, a factory would just move massive amounts of workers around rather than invest in any automation. Not many considered using CAM as manufacturing equipment. For a long period of time, China was labeled as a low-cost-country-model economy.

Consulting firms would assist manufacturers by introducing industry best practices like Six Sigma, Lean Manufacturing, and the Taguchi Method. This would ensure quality, drive up production efficiency, and reduce waste and cost. With fierce competition from within and from neighboring countries, price reduction eroded profitability.

China’s adoption of robots

Factories in the Pearl River Delta (PRD) started to upgrade their manufacturing methods by using robots. A hybrid assembly line, with both robots and workers working side by side, is the global trend today in factory automation. Robots are programmed to work safely with the workers to drive up quality products.

PRD is home to nine mainland cities in the province of Guangdong, notably Shenzhen and Guangzhou, as well as China’s special administration regions of Hong Kong and Macao. The World Bank recently declared the PRD as the world’s most populous megacity, with 66 million residents, equal to the population of France.

Its GDP is $1.2 trillion, which accounts for 10% of China’s GDP and represents a quarter of its exports.

Net inflows of migrant workers fell from 1.1 million in 2008 to 600,000 last year. Rising competition and a shrinking workforce are not only Shenzhen’s problem, but the nation’s as well. PRD pushed toward four powerful trends in order to make the region fit into the future: diversification, integration, automation and innovation.

Wages in PRD are a third higher than the national average, but shifting production out of the region can only bring a cost differential of between 20 to 30%. The entire supply chain is centrally located, so it’s not worth uprooting to a cheaper production site elsewhere within China. The standard wage for workers is RMB 4,000 or U.S. $600 per month. PRD still has the best logistics, manufacturing and supply chain.

Across the manufacturing belt of China’s southern coastline, thousands of factories are turning to automation in a government-backed robot-driven industrial revolution that the world has never seen. Since 2013, China has bought more industrial robots each year than any other country, including high-tech manufacturing giants such as Kuka of Germany by Midea, a Fortune 500 company and one of the world’s biggest white-goods manufacturers, and a joint venture with Yaskawa Japan and South Korea.

By the end of this year, China will overtake Japan as the world’s biggest operator of industrial robots, according to the International Federation of Robotics (IFR), an industry lobby group. The pace of disruption in China is “unique in the history of robots,” says Gudrun Litzenberger, general secretary of the IFR, which is based in Germany, home to some of the world’s leading industrial-robot makers.

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