China – Home of the robots?
When thinking about manufacturing in China a lot of pictures come to mind. Tens of thousands of factory workers sitting on workbenches assembling everything from iPhones to TVs or shoes!
But things are changing in China.
China has far ceased being the low-labour destination it was once famous for. Granted, salaries are still far below those in developed countries.
But China is catching up fast and so are salaries.
The average factory worker wage has more than doubled over the last few years in Shenzhen. And what’s more, the supply of workers diminished leading to a further raise in wages.
Now this is great news for Chinese workers. But for Chinese companies facing international competition; this is a problem!
To offset higher labour prices, Chinese companies are slowly adopting a similar strategy that companies in developed markets applied. Move up-market and use machines.
Foxconn, the Taiwanese company assembling products for Apple, HP, Nintendo, Sony and many more, is leading the trend. More than 20,000 robots have reportedly been installed in their factories. And many more are to come.
At a price of USD 20,000 per robot, three times the average annual worker salary, it’s a long-term investment. But one that probably pays off after just four years.
So what’s the effect on manufacturing in China?
Will human labour disappear from China’s manufacturing halls, similar to as in Europe or the U.S.?
Most likely it won’t. Big companies (such as Foxconn which churn out millions of the same product, e.g. the iPhone), will certainly replace part of the labour with robots.
But for the countless small and medium sized companies that focus on small to medium sized orders robots aren’t the solution.
Programming and setting up robots takes time… loads of time. So it’s only beneficial if you produce huge quantities, otherwise it’s more expensive.
And while there are products produced in the millions that justify this investment such as smartphones and computers, we see more and more products that are produced in small and medium sized production runs.
Think about specialized electronic gadgets, products like phone cases and the like.
Quantities for those products will be in the tens of thousands. Too little to use robots!
So while robots will have a big effect on manufacturing in China, there will still be more than enough demand for traditional blue-collar manufacturing.