China's robot revolution has foreign firms on edge (III)

Published on 2017-08-25

China's ministry of industry and information technology announced this month local production of robots had jumped more than 52 per cent in the first half of 2017 to just under 60,000 units.

"In China labour costs are going up rapidly, while the cost of robots is going down as the availability of locally made robots improves," says Eloot.

"Humans are more expensive, robots are cheaper and Chinese manufacturers are becoming more sophisticated."

Eloot says when the industry first started to upgrade, firms would go to suppliers in search of a solution but this was often too expensive because the suppliers were incentivised to sell their industrial robots. Now, company engineers are more comfortable seeking "fit-for-China" solutions.

"This can be semi-automation," says Eloot. "Not automating everything but being a bit more selective. Looking at where a company needs flexibility. This is opening up a new phase of automation."

This is evident at both Ruiming and Juyi's factories. While robots speed up the production process by making certain tasks more efficient, workers are still integral to the assembly line.

Despite the strong momentum, China still lags other countries. It is aiming to lift the number of robots per 10,000 factory workers from 49 to 150 by 2020. That compares with 531 in South Korea, 301 in Germany and 176 in the US.

Juyi says its upgrade started well before the government launched its 10-year industrial upgrade plan in 2015.

"We bought a Taiwan-listed company in 1995 and we realised they had much better machines than us and were more productive," says Pan. "We started buying better machines for our factories."

For Ruiming, an increase in R&D spending has boosted their factories' automation. The local government offers tax breaks as one of Beijing's chief aims is to lift R&D spending as a percentage of revenue across the industry.

Mr Wu said Ruiming invests between 8 per cent and 10 per cent of its revenue on R&D.

"We had targeted spending of 210 million yuan between 2016 and 2018 but we have already spent 200 million yuan," he says.

So far, there has not been a big wave of lay-offs or salary declines as a result of the industrial upgrade, according to Eloot.

"The high staff turnover rates mean that companies just recruit less to reduce staff numbers as they automate and that solves the problem.

"This is a gradual process," he says. "Not everyone is automating everything at the same time but it is definitely going to take some pressure off salaries in the long run."