Internet & Tech

New labour

The workshop of the world is buying more robots

CHINA/

Service, but no smile

In 1955 an American union boss was being shown around a newly automated production line at a Ford car plant. “How are you going to collect union dues from these guys?” his host teased. “How are you going to get them to buy Fords?” the union man countered.

Martin Wolf from the Financial Times told the story earlier this year to show that the debate about automation isn’t new. And as China prepares for its own future in a world of intelligent machines, similar conversations are taking place.

The International Federation of Robotics (IFR) says that about 162,000 industrial robots were sold worldwide last year. China bought about 25,000, slightly fewer than North America or Japan. But the Chinese will soon start buying more robots every year than anyone else, the IFR says. In part that’s because the policy headwinds are gusting in favour of the robot makers. Until recently, automation was much less of a priority for Beijing than finding employment for millions of low-skilled workers. But businesses are now complaining about labour shortages. The working population has fallen for two consecutive years and salaries are going up. CBN says manufacturing wages increased 14.5% in each of the last two years, for instance, forcing bosses to look again at the case for robots (a term, coined in 1920, which means ‘drudgery’ in Czech).

Of course, it’s not a straightforward decision, especially for smaller firms with unpredictable order books and thin operating margins. We’ve looked at some of the calculations before (see WiC159). National Business Daily gave another example last month at a typical textile factory in Shaoxing in Zhejiang, which thinks it can reduce its workforce by a quarter – or about 200 people – if it automates more of its production. Each worker is paid about Rmb45,000 ($7,203) a year, so total savings would come to Rmb9 million. Against that, the upfront spend on automation would be Rmb30 million, much more than the yearly savings on labour.

If the capital is available, the investment looks sensible over the longer term. There are other benefits, such as improvements in product quality. Labour unrest would also become less of an issue, something highlighted in Guangdong last month (see page 7). Yet some of the gains are offset by other concerns, National Business Daily reports. One is that automated production is much more dependent on power supply, which can be unreliable, especially during periods of extreme weather. “These machines are generally never fully shut down, so we are worried about power rationing measures in the annual summer peak,” a textile boss commented.

Despite the shrinking workforce Beijing will also be worried about too many redundancies if robots are installed in greater numbers. It’s not clear which parts of the workforce would be hit hardest. Wolf’s piece in the FT suggested that artisans lost out to machines more than unskilled workers during the first industrial revolution, for instance, while the rise of computers in the twentieth century hurt middle-income occupations more than others. But this time around Wolf thinks that lower-paid workers are going to be the main casualties. And as the firings start, the adjustment period could be painful.

Because China’s economy is more focused on low-cost labour than its rivals, it also looks more exposed to the dangers of disruption. But it knows that it can’t just stick its head in the sand as technology advances. So it has been encouraging its own manufacturers to be ready for the rise of the machines, in hope of grabbing more of a growing market. Last month CBN reported on the cities establishing themselves as robot research-and-production clusters. One is Luoyang, which is targeting Rmb80 billion in industrial automation revenues by 2016, or 30% of sales to China’s manufacturing sector.

Guangzhou has similar goals, promising Rmb100 billion of robot revenues by the end of the decade. By then more than 80% of the manufacturing firms in the city will be using industrial robots, the local government hopes. To help with the transition, firms that purchase or rent robots can get subsidies of up to Rmb30,000, while there is a one-off incentive of Rmb500,000 for companies that introduce more complete automation.

Keeping track: in WiC235 we looked at how China’s factories are increasingly being filled with robots, to counter rising labour costs and to move up the value curve. The Financial Times released updated data on this trend on Monday, noting that China has, for the first time, surpassed Japan as the world’s biggest buyer of industrial robots. In 2013 it bought around one in five of the robots sold globally. In fact, it purchased 36,560 of them, 60% more than in 2012.

The International Federation of Robots reported that Japan bought 26,015 robots last year and the US was third with 23,679.

However, Japan still has the biggest robot stock, with 310,508 installed, versus China’s 96,924. (Jun 6, 2014)


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