Manufacturing News

Transformers of industrial landscape

Nearly 180,000 industrial robots were sold worldwide last year and one-fifth of those were installed in China, which is now the biggest market for robotics.

World's second-largest economy now biggest market of robotics
A worker sits making pullovers, while another thread her sewing machine. What is special about this relationship is that one of them doesn't talk, eat, drink or even get paid.

"In the past, robots worked separately from humans, but now they can work together," said Arturo Baroncelli, president of the International Federation of Robotics, as he described the scene at the recent China International Robot Show in Shanghai.

"In future, there will be more interaction, more robots and humans working together."

For 30 years, businesses worldwide have flocked to China, attracted by its cheap labor.

But now, as its human labor force has begun to price itself out of the market, a new brigade of workers is being recruited to entice companies to the country: robots.

Not only will the shift have profound ramifications for the makeup of the workforce, Baroncelli says, but it has already turned the country into the world's biggest robotics market.

"What happens here will shape the future of the world robot industry as a whole," he says.

Nearly 180,000 industrial robots were sold worldwide last year, a 12 percent increase over the previous year.

A fifth of those were installed in China, the federation revealed at its annual meeting during the show.

With sales of about 37,000 industrial robots last year, China surpassed Japan's 26,000 sales for the first time, to become the world's biggest and fastest-growing market.

During the year, most Western robot markets grew by less than 10 percent, but China's total supply of industrial robots has now grown 36 percent annually on average over the past five years, says Li Xiaojia, a researcher at the China Robot Industry Alliance.

The alliance brings together 100 enterprises, manufacturers, universities and research institutes, as well as government-sponsored organizations involved in Chinese robotics research and development, manufacturing and services industries.

Over the next decade, Li expects the Chinese market to grow about 40 percent a year.

While Western countries started developing and using robots in the 1960s, China was a latecomer, but has caught up fast, meaning more overseas firms are anxious to establish a presence in the country.

Comau Group of Italy, for instance, a leader in automatic and flexible manufacturing systems, says it plans to transfer its robot production from Turin to Shanghai this year to be closer to customers.

Kuka AG of Germany, one of the world's leading suppliers of robotics as well as plant and systems engineering, opened its first overseas factory in Shanghai in March, which the company says will be able to produce 5,000 robots a year, a third of its production worldwide.

ABB Group of Switzerland, a major supplier of industrial motors and drives, entered China in 2005 and has already localized its whole robotic industry chain, including research, manufacturing and aftersales.

"China has a huge number of factories that will need robots, but currently the density of robot use is about a third of the world's average, so we see great potential here," says Daisy Qi, product group head at ABB Engineering (Shanghai) Ltd.

Song Xiaogang, executive vice-president of the China Machinery Industry Federation, says the continuous rise in labor costs in recent years has been the main driver for the booming robotics market.

"China's demographic dividend has been diminishing over the past few years. Labor costs have increased 15-20 percent every year," he says. "This has had a massive impact on labor-intensive companies in traditional sectors, whose products are already delivering low profit margins."

Experts suggest the younger generation of Chinese industrial workers born in the 1980s and '90s are also more choosy, not only about the work they do but also about their working conditions.

Many even refuse to work in what could be considered traditional manufacturing industries, regardless of salary.

National Bureau of Statistics figures show an aging population is adding to the industrial tension. In 2012, China's working population was 937 million, 3.45 million less than in 2011, and last year, the number fell further to 920 million, accounting for about 67.6 percent of the entire population.

"The working population will continue to fall, so using robots has become an important tool to help companies maintain or improve their productivity," says Song, adding that robots are also better at doing repetitive, tedious and dangerous work.

The three-day Shanghai robot show last month attracted 216 companies from more than 18 countries and regions, as well as 38,572 visitors, a jump from last year's 27,371, showing the increased use of robots is capturing the public's imagination, too.

Shen Hongwen, deputy general manager of Yuzhou Yilan Copper and Aluminum Industry Co Ltd of Henan province, says his company plans to invest millions in robots this year.

"A worker's wage is about 3,000 yuan ($480) to 4,000 yuan a month, and is increasing.

"A robot that costs about 200,000 yuan is equally capable of doing the work of five workers, and that cost can be recovered in just one or two years."

As industrial China continues to transform and upgrade in search of better margins, the demand for robots is expected to rise, particularly in the country's manufacturing heartlands.

Traditional labor-intensive industries have been encouraged to diversify, or at the least operate in a more sustainable, environmentally friendly way.

"Industrial transformation means higher dependence on automation and precision, and the robot is the perfect tool for that," Song says. "The Chinese manufacturing sector has huge scale and diversity, much of which needs upgrading. That's why the market is growing so quickly."

Foxconn, the major supplier of components to Apple Inc in China, has vowed to use more robots in its manufacturing operations across the country, to replace dangerous, boring and repetitive work.

The company is building a research and manufacturing hub in Guiyang, the capital of Guizhou.

Terry Gou, its chairman, said last month that its operations in the city's new industrial park were expected to generate revenue of 50 billion yuan in 2018.

In 2011, Foxconn revealed it planned to be using a million robots in its factories within three years, and to have its factories fully automated within a decade.

Some top Chinese home appliance brands have also been employing robotic technology on a major scale.

Haier Group, the multinational electronics giant, is reported to have cut 18 percent of its workforce last year and will cut another 10,000 positions this year, due to its increased use of robots.

Midea, the privately held Chinese electrical appliance manufacturer, has also set up robot design and manufacturing teams, and already uses hundreds of robots on its production lines.

Noting the trend, the Chinese authorities have introduced policies to encourage more use of robotics.

In December, the Ministry of Industry and Information Technology issued guidelines for promoting the use of industrial robots.

And in June, at the 17th conference of the Chinese Academy of Sciences, the national institution conducting basic and applied research, President Xi Jinping stressed that "major robot manufacturers and countries are speeding up their market development, so our companies should also improve their robot-related skills".

In Qingdao, Shandong province, an industrial park has been set up dedicated to the robot sector. Opened in May of last year, it has attracted 30 companies and startups. Its target is 50 by 2016, generating output value of about 4 billion yuan.

"The robot industry is a way of promoting the whole city's industrial transformation and upgrade," says Geng Kai, deputy director of the Bureau of Investment Promotion at Qingdao National High-tech Industrial Development Zone.

"Qingdao has a good industrial foundation. Our machinery and equipment sector, which boasts many top appliance and food brands, had output exceeding 250 billion yuan last year. As a coastal city, we also have good natural conditions for developing marine-related robots that can work underwater."

Further south in Zhejiang province, known for exports largely dependent on low-cost labor, 36,000 local companies have stated that they plan to replace workers with machines by 2017, at a total investment expected to be more than 300 billion yuan.

Similar estimates have been published by officials in Guangdong province, the export manufacturing hub in the south of China, and in Jiangsu province, home to many of the world's leading exporters of electronic equipment, chemicals and textiles.

However, overseas-made robots still dominate. Of the 37,000 sold in China last year, only 9,000 were from Chinese suppliers. Local sales were three times higher than in the previous year, while the sales of foreign suppliers rose 20 percent, the China Robot Industry Alliance says.

But Japanese, European and US producers still accounted for the majority of major contracts, with Chinese products being targeted mostly at middle and low-end users.

"Robots made by Chinese suppliers still lag behind those made by international companies, in terms of quality, technical level and performance parameters," Song says.

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