October 15, 2012      

In 2011, China spent $1.27 billion on industrial robots. It bought 22,600 units of robots last year, a nearly 50 percent increase from the previous year, according to the China Machinery Industry Federation (CMIF). Zhang Xiaoyu, Vice President of the CMIF, says the rapid demand for industrial robots will continue to grow by 50 percent this year.

One widely publicized cause of China’s investment in robotics has been the labor shortage and wages crisis that has spread across the country. A recent census indicates that in the next 10 years, the number of workers between the ages of 20 and 40 may decrease by as much as 100 million.

According to China Daily, even when its economy was growing by leaps and bounds before the global financial crisis in 2008, the Chinese government was urging domestic manufacturers to alter their business models, warning that the existing model of growth could not be sustained.

With China now clearly on the robot bandwagon, the world’s major robot makers are looking to quickly capitalize on the nation’s automation boom.

ABB

Gu Chunyuan, senior vice-president of ABB North Asia and China, who heads its regional Discrete Automation and Motion Control Division, says industrial robots in China are not only used in the traditional automotive industry, but more and more in other industries.

“With huge investments in the automotive industry, China is the second-largest car market in the world, almost as big as the U.S. and by far the largest production site for cars,” he says.

ABB currently holds more than 20 percent of the global market share and has provided more than 10,000 robots to the China market (one out of three robots it the company sells goes to customers in Asia). The company relocated its global robotics business headquarters to Shanghai from Detroit, Michigan, in 2006, becoming the first multinational company to manufacture industrial robots in China.

ABB offers local manufactured products to global customers. In China, ABB’s robot products are widely being used in almost all major car manufacturers and other food and beverage companies, and electronics companies.

“Salary inflation is the driving force behind robot demand in China,” Michel Demare, the ABB chief financial officer, said in February.

KUKA

KUKA, AG, ABB’s German rival and another leading robot maker, is also prepared for the China boom. KUKA laid the cornerstone for a new plant in Shanghai on Friday.

The production facility, which will be only factory outside KUKA’s home country of Germany, is dedicated to meeting the soaring demand for automation solutions in this region, CEO Till Reuter said at the groundbreaking ceremony.

When the 20,000-square-meter plant is operational, which is expected to be by the end of next year, the company will mass-produce the KR Quantec robot series and the KR C4 universal controllers, which were launched last year and widely applied in the automotive industry.The annual production capacity will be 3,000 units in the first year and is expected to grow to 5,000 units by the end of 2015.

Originally designed to serve all Asian markets, production from the new factory will barely be enough to feed the soaring demands for robotics in China.

KUKA’s Shanghai-based China operation has been in the country 12 years, and has four distribution and service centers. Last year, sales in China doubled to 18,000 units, making the country its largest market.

While the demand from China so far has been driven by automobile production, KUKA is seeking more business with other industries. Manufacturers of semiconductors, electronic devices, food products and beverages are among the largest buyers of industrial robots, according data from the International Federation of Robotics, an industry group based in Frankfurt.

Staubli

Swiss robot manufacturer Staubli Holding AG is also planning to increase sales of robots from 300 units in 2011 to 500 units this year.

The company is investing $31.8 million this year to expand its manufacturing facility in Hangzhou for its three divisions: textile machinery, connectors and robotics. It also plans to build a production line to assemble industrial robots.

Zhang Zhenhui, division manager of robotics at Staubli (Hangzhou) Mechatronic Co Ltd, say seven though the Chinese government does not levy taxes on imported robot units, the management still thinks it is necessary to build a new assembly line for robots in Hangzhou because localization is the key factor for the company to explore the China market.

“To avoid intense competition with others, we are offering the robots that have been designed to suit the needs in dangerous environments, some of which are waterproof robots, which can be used in semiconductor, medicine and food processing industries,” Zhang says.

“We will not only focus on developing the robotics business in the Yangtze River Delta region; we also want to expand our foothold in China’s second-tier cities such as Wuhan, Chongqing, Chengdu and Changsha over the next three years,” Zhang says.

Foxconn and more…

Foxconn Technology Group, one of the largest electronics contract manufacturers in the world making products for Apple, Sony and HP, among others, is the best example in the increasing use of industrial robots. The company has been plagued by scandals in the past over the treatment of employees. It suffered a string of suicides by young workers at its massive Chinese plants which some blame on working pressure.

Terry Gou, chairman of Foxconn, said last year that his company plans to replace human employees with 1 million robots in the next three years and the robots will be used to carry out simple and routine work such as spraying, welding and assembling which are conducted by workers.

The company, which had 10,000 robots in 2011, is hoping to have 300,000 robots working in its factories this year. It also wants to meet its chairman’s ultimate plan by 2014, which is to create a robot research center in Jincheng, Shanxi province.

The robots produced there are called Foxbots and its intelligent quotient is similar to a 7-year-old child. It is priced from $22,000 to $26,000 with various sizes and functions, according to Xinhua News Agency.

The company plans to invest more than $1.43 billion in Shanxi, with a total output volume of more than $7.9 billion by 2016.

“Foxconn is still on the way of improving manufacturing automation, but we may need a longer time to reach the goal of 1 million robots,” says Liu Kun, Foxconn’s spokesman.

Japanese rivals are also preparing for the boom. Fanuc, which sold about 18,000 units in 2010, increased production capacity last year to 60,000. Yaskawa Electric said it was building plants in Japan and China to meet rising demand.

Still, all the swift expansion in China has one possible major drawback. Developed nations today, many of which are mired in deep economic recession, may reduce buying Chinese goods or investing in China’s coastal regions, as the advantage of a cheap labor market gradually disappears and there is no distinct price gap between the products made by industrial robots and manufacturing outsourcing.

It could actually be more economical for US and European companies to bring jobs back to their own countries to save on logistics and transportation costs. They could also decide to move factories to other emerging markets such as Bangladesh, Vietnam, Brazil or Ethiopia, where labor costs are still quite low.