At the very least, it's an excuse for factories in China's bustling Guangdong Province to experiment with the use of robots on the assembly line. In fact, the region aims to automate 80 percent of its manufacturing production by 2020.
Accounting for an estimated 12 percent of China's total output, Guangdong is the nation’s most populous province, exceeding 110 million people when migrant workers are factored in. Clearly, there's no lack of bodies to fill the province's 60,000 factories.
The price of that labor, however, is going up, as China struggles to create a middle class that can afford the goods that it produces at home, and were previously marked solely for export. In some instances, the wage disparity between Chinese factories and those in Mexico has been virtually erased. Now add in the extra cost of shipping product across the Pacific to American consumers, and China's stature as a source of cheap labor very quickly erodes.
Recently it was reported that Changying Precision Technology Co. had shifted a plant in Dongguan City to an all-robot operation. Out of a former labor force of 650, only 60 human workers remain at the site, to oversee the computers and equipment. And that number will eventually be reduced to just 20.
The impact on productivity has been, predictably, dramatic. The operation can run round the clock, without the need for multiple shifts or the payment of overtime, vacation pay or sick leave. Production capacity has soared from 8,000 pieces per person per month to 21,000 pieces (per the human equivalent). At the same time, the defect rate has plummeted from 25 percent to 5 percent.
Changying might be among the first companies in Guangdong to kick people out of a plant, but it’s hardly the last. The official reason is a significant shortage of labor in the Pearl River Delta, estimated at between 600,000 and 800,000 people, according to John Santagate, research manager with IDC Manufacturing Insights. The driving forces behind the trend are an aging population – nearly 200 million Chinese are above the age of 60 – coupled with a younger generation that rejects manual labor.
In response, the Guangdong government is funding the application of robotics to local factories. Plans call for an investment of approximately $150bn to replace people with robots of the sort that are now “manning” the Changying assembly line. The effort involves between 1,000 and 1,500 human-replacement programs by 2016 in Dongguan alone, Santagate says.
It’s all part of a larger national program called Made in China 2025, a 10-year plan to upgrade manufacturing technology and capacity, and make China competitive with the industrialized West. “Unmanned” production facilities are a key element of the plan, which focuses on 10 industry sectors. It can be viewed in part as a response to Germany’s Industry 4.0 effort, which aims to boost automation and internet technology in the years ahead.
A key element in China’s push for factory automation is the quality issue. Like Japan in the 1960s, China today is working to dispel its image as a producer of cheap items such as toys, apparel and low-end consumer electronics. In the process, it’s likely to shed both workers and manufacturers that can’t compete with high-end goods from the West.
All well and good, but Santagate wonders about the long-term impact of manufacturing automation on China’s economy. “What happens to regional spend in the area, and the population that’s remaining?” he asks.
To be sure, technological advances in manufacturing often result in higher wages to the human workers who remain. But how many of those will there be? And what about the low-skilled workers who lose their jobs? Only a fraction can be trained to handle more sophisticated tasks. Having achieved dominance as a global manufacturing power in the relatively recent past, is China already on the downslide? Is it destined to follow the U.S. and become a nation of service workers? Or, like Japan, struggle to find its new identity while suffering from severe economic turmoil?
In the past, China’s factories in major industrial zones have been populated by workers migrating from rural areas. But the government has imposed strict controls on that flow, including, for many years, a ban on families joining their parents due to lack of living space. While some of those strictures have been relaxed, China is keen to discourage more people from cramming into a region that is already severely overcrowded.
Without a doubt, automation boosts efficiency and improves quality. But it also threatens to create vast pockets of unemployment, increasing the cost of social programs while seriously eroding the nation’s tax base. We’ve seen a relatively mild version of that phenomenon in the U.S., but it could prove far more severe if China succeeds in creating thousands of factories where there are few if any people around.
The ultimate impact of the trend remains uncertain. For now, Santagate sees China as a kind of social laboratory for assessing the pros and cons of automation. All eyes will be on the country, as it plots its ascension to the position of world’s biggest economy.
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