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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: KARLJOSEF HILDENBRAND/DPA/ZUMA PRESS
By
ROBBIE WHELAN in Stockholm and
ESTHER FUNG in Suzhou, China
Aug. 16, 2016 5:30 a.m. ET
104 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.
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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.
Write to Robbie Whelan at robbie.whelan@wsj.com and Esther Fung atesther.fung@wsj.com
QUESTIONS:
1. Why are Chinese factories using small robots to replace workers?
2. How is the culture changing in China? What is the impact on leadership decision-making in the manufacturing
sector?
3. How are workforce issues impacting the shift to robots in Chinese manufacturing companies? What are the longterm solutions for leaders of Chinese manufacturing companies?
…
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