Robot Invasion of Pearl River Delta at Full Tilt

A remarkable and fast-moving change is taking place in China’s province of Guangdong (formerly Canton; see map): human workers are being replaced with robots on a massive scale.

Extraordinary and unprecedented can’t begin to describe the import of such an undertaking. It’s a first in human history, and probably richly deserves – good or bad, success or failure – to be memorialized as a documentary film.

By the looks of official reports coming from China, Guangdong, with a population of 104 million (30 million of whom are migrant workers) and with a land area slightly greater than that of the United Kingdom, is going to replace 80 percent of its human labor force with robots by 2018.

That’s just three short years away!

More to the point, the process is already well underway. The government has put up $154 billion to basically repopulate the province’s 66,000 factories with robot workers.

If Guangdong succeeds, and all indicators point towards it being a very doable project, then it’ll be the first such place on Earth to have pulled off what the rest of the world has been speculating about and fantasizing over – on a seemingly daily basis from TV, radio, online and in print – for the last five years: the robot invasion that sweeps aside human jobs by the millions.

700 robot suppliers

Larger cities in the province like Dongguan, Foshan, and Guangzhou (provincial capital) are handing out between $32 million and $80 million in annual subsidies to robot producers and manufacturers who install robots on assembly lines.

More than 60 percent of Dongguan’s industrial enterprises have reportedly begun replacing humans with robots, while in Foshan the government said the value of the city’s automation and robotics market would reach $320 billion in five years.

“There were about 400 robot companies across the country last year. Now, as of the first quarter [1Q2015], the number has reached more than 700, with most in Guangdong, reported He Huifeng from the South China Morning Post. He Zexian, sales director of Foshan-based LXD Robotics, said. “The market is being driven by government policies and right now it’s too hot.”

“Municipal governments are competing for a piece of the pie. Guangzhou has set the goal of fostering a robot-manufacturing industry with an output value of more than $161 billion, as well as automating more than 80 percent of the city’s manufacturing production by 2020.”

It’s all about people … and money

Driving the transformation is all about people.

On one side is the emerging middle class (139 million; equals the entire population of Japan). According to McKinsey’s Mapping China’s middle class, China’s middle class population earns between $9,000 to $34,000 per year (lower middle class to upper middle class).

Astoundingly, just 4 percent of urban Chinese households were within that range in 2000 – but, twelve years later, by 2012, 68 percent were. “In the decade ahead, the middle class’s continued expansion will be powered by labor-market and policy initiatives that push wages up, financial reforms that stimulate employment and income growth, and the rising role of private enterprise, which should encourage productivity and help more income accrue to households. Should all this play out as expected, urban-household income will at least double by 2022.”

Double! That’s lots of spending power.

China’s massive export trade combined with its burgeoning home market of millions and millions of middle class citizens will put demands on production that can only be met by maximum automation; and that kind of automation is just another way of saying robots.

On the other side, existing human labor and expectations for even more laborers are fading fast.

Basically, as Tech In Asia recently reported: “Chinese manufacturers are bringing in robots because of the problems with the human workforce.”

“There are, according to Huayang Multimedia Electronics company’s VP Luo Mingdeng, three core issues with China’s industrial labor force right now: ‘recruiting workers is hard, paying workers is expensive, worker overflow is excessive.’

“The decrease in young people looking for manufacturing jobs, in concert with the rise of China’s manufacturing sector, is responsible for the first and third issues.”

“Because the workforce isn’t large enough to satisfactorily meet the demands of every factory, recruiting workers is difficult. Companies have to compete to attract them. And even when they do find the right worker, keeping them is often difficult. Finding work at a factory is not difficult, and many workers won’t hesitate to leave if they think they can get a better job somewhere else. The result is that in addition to paying their salaries, Chinese manufacturers also have to put a lot of money into finding and training new employees.

“And while worker salaries in China aren’t high by Western standards, they’ve been rising steadily, and new minimum wage laws in some areas have raised worker salaries considerably. Shanghai’s minimum wage now, for example, is nearly double what it was in 2010.”

One early adopter in the switch to robots over people was Shenzhen-based Rapoo, a maker of electronic peripheral devices. Rapoo CEO Deng Qiuwei told China Business News that between 2011 and 2012 his company cut more than 65 percent of its workforce, about 2,100 people. In place of those 2,100 workers went 75 robots, with the robots now saving the company $13 million annually.

“The goal is to integrate the entire process,” added Deng to the South China Morning Post.

“We use the robots as a platform to realign the entire production line, not just replace two or three workers.”

“Rapoo’s demo plant includes two production lines: a traditional system of 110 humans who produce 4,500 wireless mouse units per day and a new line with robots and 10 workers that make more than 5,000 a day.

“Clients are easily convinced by our showcase plant, especially when they know they can earn back their investment within three years,” Deng said.

Migrants to head west?

Migrants who have flooded to the big cities of Guangdong will be particularly hard hit by the robot invasion; people who up to now were the engine that propelled the province to a GDP of $1 trillion annually, most for any province, (China’s overall GDP is $17 trillion) will be out of work.

Hsiao-Hung Pai, in her Scattered Sand: The Story of China’s Rural Migrants puts the migrant population at three to four million living in Guangzhou, with a total of thirty million living in the UK-size province.

“Every day [they] produce some $300 million worth of goods and account for about 30 percent of China’s exports and one-third of the world’s production of shoes, textiles and toys.”

Much or most of all that output will, according to government authorities, soon come by way of robots.

At night in the Guangzhou Railway Station, Pai mingles with some of these homeless migrants, who sleep the night on the station floor and then are up and out early before the authorities sweep through every morning to roust the squatters.

Some migrants have been in the city for a decade, they tell Pai. They say that they have given their youth to the factories. Going back home to the rural life is impossible: they make more money in a month in Guangzhou then in a year as a farmer. Besides, they need to send money home.

In three years or less, eight out of ten may not even have their job in the city. Robots will have taken them over. For migrants, they will have to travel to places where automation has yet to arrive, where jobs for humans are still available. Undoubtedly, that means heading west, away from the populous coastal cities where automation is underway.

The reality of it all: If you are poor and human and looking for work, better disappear someplace west; if you’re a tireless robot willing to work three shifts a day and can pay for yourself in three years, welcome.

Technical divide still to cross

If robots are indeed going to be the main workforce in Guangdong in the coming three years, tens of thousands of robots are going to be bought and installed in the province’s 66,000 factories.

The question for China is will those robots be manufactured by the country’s indigenous robot developers or by well-known foreign robot makers with established brands that have taken up manufacturing residence in China’s largest cities? Foreign companies like ABB, KUKA, Yaskawa, FANUC, and Comau are presently reaping the lion’s share of industrial robot sales.

In March of 2015, Report Linker’s analysis sums up the situation as dominated by foreign companies in its Global and China Industrial Robot Report, 2014-2017:

“China’s industrial robot industry sprouted in 2003, sped up from 2010, and overtook Japan as the world’s largest consumer market in 2013 for the first time.

“According to China Robot Industry Alliance (CRIA) statistics, industrial robot sales volume in China in 2013 was 36,560 units, or 1/5 of the global total, and is expected to reach 45,000 units in 2014 and around 100,000 units in 2017.

“In spite of this, the Chinese industrial robot market is still dominated by foreign companies, which sold more than 27,000 units of industrial robots in China in 2013, 74 percent of total sales volume, of which ABB, FANUC, Yaskawa and KUKA occupied 65 percent or so, and nearly monopolized high-end fields like industrial robot manufacturing and welding.”

Su Bo, a vice minister at the Ministry of Industry and Information Technology, said Beijing wants local brands to grab 45 percent of the high-end industrial robot market by 2020.

And as He Huifeng reported in the South China Morning Post, with over 700 robot companies, competition from homegrown robots could theoretically impact sales by foreigners.

China’s Xinhua News Agency reports that the country has even put together a “robotics technology road map” that lays out the near future of how Su’s 45 percent plan would unfold.

But to command a 45 percent share of robot sales, Chinese robots need to be able to compete with foreign brands, which most Chinese experts agree are superior to domestic robots.

Guangdong’s deputy governor Xu Shaohua wants to encourage more research institutes to develop intelligent robots, as well as production plants, to drive mass innovation.

He admitted that Chinese robot manufacturing relied heavily on imported materials and technology “China lags behind in robotic technology. With rising demand, we will likely see many Chinese manufacturers looking to speed up their development by acquiring overseas companies and their patents.”

China’s frontline domestic robot producers are in the process of crossing the technical divide that separates them from foreign competitors. The magnitude of the job ahead in retooling all factories means that there’s more than enough in impending robot sales for both domestic and foreign-branded robots to profit well.

China’s leading robot manufacturers:

Ace in the hole: China’s 13th Five-Year Plan (2016-2020)

“The Chinese government has started the long process of drawing up its next development blueprint: the 13th Five-Year Plan (2016-2020). This crucial document will set targets and guidelines spanning a range of social, economic and environmental issues and informing Chinese policymaking for the period from 2016 to 2020.?

In China’s sixty years of Five-Year Plans none ever included mention of robotics until the current 12th Five-Year Plan (2011-2015). That mention has made all the difference. With it, money and influence can flow to domestic industrial robot production like never before.

Although development money is key to growing the competitive technology of China’s domestic robots, more importantly is the clout the government can bring to bear on state-run organizations, including factories, to strongly prefer or mandate the purchase of robots Made In China only.

Logic says that if the 12th Five-Year Plan gave a first-time-ever nod toward robotics, and that provinces like Guangdong will massively retool their factories with robots, then the 13th Five-Year Plan (2016-2020) – due to be announced in March of 2016 – will more than likely contain much more than a nod this time around.

The 13th Five-Year Plan could well be the breakout move for domestic robots: a five year span of billions in government largesse plus direct word from the National People’s Congress to favor domestic robots in all installations.

If the $154 billion in government money that Guangdong is currently spending on its 66,000 factories is any indication as to how much financial support will flow form China’s next Five-Year Plan, then the country’s domestic robotics development program, including the acquisition of foreign technology and intellectual property to complement that program, seem primed for success.

Recently, the Economist wrote about China: In 1820, China was far and away the world’s biggest economy. It accounted for more than 30 percent of global GDP. Thanks to a furious 35 years of market reforms, it is only a matter of time before China reclaims its spot as the biggest economy of all once again.

And it’s with undertaking gargantuan projects like the robots of Guangdong that it seems quite possible that China might well remain the number one economy for a very long time thereafter.