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OM in the News: China’s Factories Turn to Robots

Barry Render

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. 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,” writes The Wall Street Journal (Aug.17, 2016). 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 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 of $14.60 in China’s manufacturing heartland has more than doubled as a percentage of U.S. manufacturing wages, from 30% in 2000 to 64% in 2015.

China, in 2013, became the world’s largest market for industrial robots, surpassing all of Western Europe. 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. 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.

Classroom discussion questions:

  1. How does this impact the U.S. drive to regain manufacturing through automation?
  2. How does automation impact the role of OM managers?

 

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