By Robbie Whelan in Stockholm and Esther Fung in Suzhou, China
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.
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.
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 EUR2,500 ($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 EUR20,000, 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
at esther.fung@wsj.com
(END) Dow Jones Newswires
August 16, 2016 05:44 ET (09:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.