http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805
China’s Factories Count on Robots as Workforce Shrinks
Rising wages, cultural changes push automation drive; demand for 150,000 robots projected for 2018
ENLARGE
Robots are assembled in the production hall of robot manufacturer Kuka in Augsburg, Germany. PHOTO: KARL-JOSEF HILDENBRAND/DPA/ZUMA PRESS
By
ROBBIE WHELAN in Stockholm and
ESTHER FUNG in Suzhou, China
Aug. 16, 2016 5:30 a.m. ET
98 COMMENTS
A Chinese factory near Shanghai is relying on a new breed of workers to maintain its competitive advantage in assembling electronics devices: small robots designed in Germany.
Suzhou Victory Precision Manufacture Co.’s chairman, Yugen Gao, said the days when the company drew its strength from China’s cheap and hardworking employees are gone.
“We’ve been losing that edge in the past three years,” said Mr. Gao in his office, overlooking rows of buildings where a battalion of robots was cranking out computer keyboards. “It’s one of the effects of
the one-child policy.”
China’s
appetite for European-made industrial robots is rapidly growing, as rising wages, a shrinking workforce and cultural changes drive more Chinese businesses to automation. The types of robots favored by Chinese manufacturers are also changing, as automation spreads from heavy industries such as auto manufacturing to those that require more precise, flexible robots capable of handling and assembling smaller products, including consumer electronics and apparel.
At stake is whether China can retain its dominance in manufacturing.
“China is saying, ‘we have to roboticize our industry in order to keep it,’” said Stefan Lampa, chairman of the robotics division of
Kuka AG, a German automation firm and a supplier to Suzhou Victory.
ENLARGE
The rush to buy robots comes in part because China’s population of
workers aged 15 to 59 is starting to shrink, forcing manufacturers to turn to automation. The United Nations estimates the number of the country’s workers peaked in 2010 at more than 900 million and will fall below 800 million by 2050.
In addition, the average hourly labor cost—defined as wages plus benefits—of $14.60 in China’s coastal manufacturing heartland has more than doubled as a percentage of U.S. manufacturing wages, from roughly 30% in 2000 to 64% in 2015, according to Boston Consulting Group, making
the country less competitive as a destination for manufacturers.
China, in 2013, became the world’s largest market for industrial robots, surpassing all of Western Europe, according to the International Federation of Robotics. In 2015, Chinese manufacturers bought roughly 67,000 robots, about a quarter of global sales, and demand is
projected to more than double to 150,000 robots annually by 2018.
Chinese firms also are investing in industrial technology, with an eye toward building more of their own robots. Chinese home-appliance maker
Midea Group Co. launched a bid
to buy Kuka for more than $5 billion in May and now owns about 86% of the robots company. Some German politicians criticized the deal, saying Kuka is a strategic asset that should have remained German or European-owned.
At a robotics-research conference in Stockholm in May, companies including Kuka and Switzerland’s
ABB Ltd. displayed lightweight robots with agile arms capable of manipulating items as small as bottle caps.
Last year, ABB, introduced
a two-armed version of its YuMi robot, a lightweight robot that was designed specifically for the Chinese market. It can put together car-dashboard electronics, wristwatches and eyewear.
YuMi, which is manufactured both in Sweden and in a sister factory in Shanghai that opened a decade ago, was designed as a “collaborative” robot, meaning it is small and safe enough that it can share the manufacturing line with humans and doesn’t require a protective cage, as many large industrial robots do.
Over the past five years, China has become ABB’s largest market for robotics customers, according to Steven Wyatt, ABB’s head of marketing and sales.
Mr. Wyatt said China originally started adopting automation en masse in response to concerns over the quality of goods manufactured in the country. Now, however, Chinese factories—including those that make consumer goods—are buying robots to fill positions that would otherwise sit empty because of high job turnover rates.
“Hard as it may be to believe, despite having 1.3 billion inhabitants, China doesn't find enough people to do the work generated in its factories,” Mr. Wyatt said.
Another factor is cost. Robotics technologies that were once prohibitively expensive are now cheap enough that they are feasible for Chinese factories.
Budapest-based OptoForce Ltd. manufactures €2,500 ($2,796) sensors that can be attached to robotic arms and used to polish metal parts that go into car transmissions and other products. Its head of sales, Szabi Fekete, said such sensors have become significantly cheaper to produce in recent years.
“Ten years ago when a force sensor cost €20,000, no one wanted to automate polishing, because it was cheaper to hire 100 workers,” Mr. Fekete said.
Suzhou Victory, which assembles laptops for Dell Inc. and
Lenovo Group Ltd. and smartwatches for
Fitbit Inc., started increasing its investment in robots two years ago, driven by shorter product cycles, rising wages and high worker turnover, especially after the annual vacation around Lunar New Year. This year, the manufacturer signed an agreement to buy 160 jointed-arm robots made by Kuka.
“We have to consider investing in robots so that the company can survive longer,” Mr. Gao said.
