RISE OF THE ROBOTS
Experts say that the automation revolution is inevitable and companies need to start introducing robots to their manufacturing processes and start thinking long-term if they are to remain competitive
Rising labor costs as well as a rapidly aging population in major cities like Shanghai have inherently accelerated the replacement of human workers with industrial robots.
According to a report jointly released by Deloitte and ChinaInfo100, a non-governmental organization started by Chinese scholars, China’s labor costs have soared five times in the past decade, driving some multinational corporations to relocate their plants to lower cost regions or back to their home markets.
In the meantime, China’s working population, defined by those aged between 15 and 64, has encountered negative growth for the first time in the past two decades. The report projected that the country’s young population, or people aged between 15 and 39, will decrease from 38 percent of the population in 2013 to 28 percent by 2030.
The problems caused by an aging population looks to be even more severe in Shanghai — a blue paper published by the Shanghai Academy of Social Sciences last month said the city’s demographic dividend, which is the economic growth potential resulting from a working-age population surplus, will disappear come 2020.
As such, Shanghai will face a series of challenges posed by an aging population during the 13th Five Year Plan period (2016-2020).
More than 6.4 million people in Shanghai, or 45 percent of the total permanent residents in the city, are expected to be aged 60 and above by 2045.
Manufacturers have said that the replacement of humans with robotics is bound to happen, though the present economic slowdown has made some of them think twice before doing so.
Hefei Meiling Group, a major home appliances manufacturer based in Hefei city, capital of East China’s Anhui province, has since years ago been planning to install more industrial robots in its refrigerator plants located in the Hefei Economic & Technological Development Area (HETDA).
“Though we believe the replacement of human workers will be inevitable in the manufacturing sector, we are contemplating if we should do it now when growth of the home appliances sector has been slowing down in recent years,” said Huang Danian, assistant general manager of Meiling.
“We worry that the investment recovery period might be too long,” said Huang.
In contrast, Giti Tire (Anhui) Co Ltd has already been benefiting from automation. Yu Nenggao, assistant general manager of the company, said that Giti Tire has even been increasing its investments in robots since a year ago.
The company is expected to invest more than 100 million yuan ($14.98 million) this year into further automation upgrades.
He added that the robots have also made it more efficient and safe when transporting the big and heavy tire which has witnessed overcapacity problems in recent years,” said Yu.
China has since 2013 been the world’s largest industrial robot market. In 2015, sales of robots in China reached 68,459 units, up 18 percent year-on-year, said Song Xiaogang, executive president and general secretary of China Robot Industry Alliance (CRIA).
Latest data from the International Federation of Robotics (IFR) indicated that China’s robot density has also increased from 11 to 36 in the past five years. Robot density refers to the number of multipurpose industrial robots per 10,000 persons employed in the manufacturing, automotive or general industries, according to IFR.
Andreas Bauer, chairman of the robot suppliers group of IFR, believes that there is great potential for future growth in the industry as China’s robot density is currently about half of the global average.
However, the company with the world’s leading robot density of 569 is actually Shanghai Highly (Group) Co Ltd, a company that manufactures air conditioning compressors.
Over the past nine years, the company has replaced nearly 1,000 workers with 480 robots.
“We discovered that an average of 33 percent of our workers quit during the months of February and March, during our peak production periods, and this has greatly affected our product quality and manufacturing safety,” Zheng Min, deputy general manager of Highly, was quoted as saying by ThePaper, a Shanghai media outlet.
In 2007, Highly introduced their first robot at an annual cost of 73,000 yuan — almost double that of a human worker (37,000 yuan) — at that time.
However, labor costs have been increasing at an annual rate of 10 percent while the costs of robots are dropping 5 percent year-onyear, resulting in the latter becoming cheaper than the former by 2011.
By 2014, the annual cost of a robot was just 56,000 yuan, in contrast to 92,000 yuan for a human worker.
The central government in April unveiled a development plan for the robotics industry, detailing objectives that need to be achieved
Christopher A Pissarides, the 2010 Nobel Prize winner in economics, has warned that popularization of robotics will result in numerous mid-level workers, especially those from the manufacturing sectors, losing their jobs and China has to be prepared for it.
He added that post-2025 China, which will be home to a small but dynamic manufacturing sector that will drive productivity growth and exports, will need to respond to this problem by having a much larger service sector that can provide jobs.
Authorities have already vowed to promote service-oriented manufacturing and manufacturing-related service industries.
“The strategy needs to be accompanied by other supporting policies that will generate employment. About 90 percent of the country’s employment will have to be in service sectors which cannot be automated,” said Pissarides, who believes that the service sectors will have to take on broader scopes.
He suggested that China will also need to reform its economy in order to encourage more private sector development, especially in the services industry.
“The main sectors that will benefit are healthcare, education, personal services, household services, real estate management and the hospitality industry,” said Pissarides, adding that these particular sectors in China are not doing very well.
Xin Changxing, vice minister of human resources and social security, said at a State Council briefing that although the number of employed people will gradually decrease in manufacturing industries, this technological revolution will actually create more job vacancies for workers in the long run.
Pissarides believes that embracing robotics does not necessarily mean there will be problems with overcapacity.
“Though it is growing, China’s industrial productivity is still very low. The ‘Made in China 2025’ strategy, which emphasizes on automation, will help to increase the productivity substantially,” said Pissarides during a speech in the Hefei-based University of Science and Technology of China in April.
The “Made in China 2025” strategy, which is focused on the manufacturing sector, was unveiled by the State Council in May 2015 and it is the first 10-year action plan designed to upgrade China’s capabilities so that it can become a world manufacturing power by 2025.
Fu Haibin, an official tasked with attracting investments for HETDA, said many of the new manufacturers in the zone already use robots for some of their processes, while the older companies in HETDA are beginning to acknowledge the need for such technology.
“There is no better time to embrace robotics than the present, since the process is inevitable. The earlier they start the campaign, the better development chances they will have in the future,” said Pissarides during the speech in April.
The Harbin Institute of Technology Robots Group (HRG), a leading robotics developer in China, agrees with Pissarides’ sentiment.
The institute announced earlier this month that it will build a large robotics hub in the zone, with total investments in the project possibly amounting to more than 2 billion yuan in five years.
Yang Wei, head of HETDA, estimated that this project would add 10 billion yuan a year to the value of production by Hefei’s manufacturing sector.
The project will include HRG’s eastern China headquarters, a robot manufacturing plant and a research and development center for robotic technologies, said Han Jiecai, vice-president of the institute.
“The industrial robotics business will account for one-third of our Hefei project. We believe that the economic slowdown will actually be an opportunity for HRG, as the country is now seeking new growth drivers,” said Han.
Contact the writers at zhulixin@ chinadaily.com.cn and wang_ firstname.lastname@example.org
Companies have often turned to robots to perform tasks in environments which are too uncomfortable for humans to work in.
Companies that have used robots say they help boost product quality, which in turn helps the organization become more competitive.
Hefei Meiling Group, a major home appliances manufacturer based in Hefei, Anhui province, has been planning to install more industrial robots in its refrigerator plants but worries the investment recovery period might be too long.