8/17/16, 5:58 PMChina’s Factories Count on Robots as Workforce Shrinks - WSJPage 1 of 5http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805?mod=djemlogisticsA Chinese factory near Shanghai is relying on a new breed of workersto maintain its competitive advantage in assembling electronicsdevices: 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 cheapand hardworking employees are gone.“We’ve been losing that edge in the past three years,” said Mr. Gao inhis office, overlooking rows of buildings where a battalion of robotswas cranking out computer keyboards. “It’s one of the effects of theone-child policy.”China’s appetite for European-made industrial robots is rapidlygrowing, as rising wages, a shrinking workforce and cultural changesdrive more Chinese businesses to automation. The types of robotsfavored by Chinese manufacturers are also changing, as automationThis copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visithttp://www.djreprints.com.http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805BUSINESS ASIA ASIAN BUSINESS NEWSChina’s Factories Count on Robots asWorkforce ShrinksRising wages, cultural changes push automation drive; demand for 150,000 robots projectedfor 2018| |Robots are assembled in the production hall of robot manufacturer Kuka in Augsburg, Germany.PHOTO: KARL-JOSEF HILDENBRAND/DPA/ZUMA PRESSAug. 16, 2016 5:30 a.m. ETBy ROBBIE WHELAN in Stockholm andESTHER FUNG in Suzhou, China8/17/16, 5:58 PMChina’s Factories Count on Robots as Workforce Shrinks - WSJPage 2 of 5http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805?mod=djemlogisticsspreads from heavy industries such as auto manufacturing to thosethat require more precise, flexible robots capable of handling andassembling smaller products, including consumer electronics andapparel.At stake is whether China can retain its dominance in manufacturing.“China is saying, ‘we have to roboticize our industry in order to keepit,’” said Stefan Lampa, chairman of the robotics division of Kuka AG, aGerman automation firm and a supplier to Suzhou Victory.The rush tobuy robotscomes inpart becauseChina’spopulationof workersaged 15 to 59is starting toshrink,forcingmanufacturers to turn to automation. The United Nations estimatesthe number of the country’s workers peaked in 2010 at more than 900million and will fall below 800 million by 2050.In addition, the average hourly labor cost—defined as wages plusbenefits—of $14.60 in China’s coastal manufacturing heartland hasmore than doubled as a percentage of U.S. manufacturing wages, from8/17/16, 5:58 PMChina’s Factories Count on Robots as Workforce Shrinks - WSJPage 3 of 5http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805?mod=djemlogisticsroughly 30% in 2000 to 64% in 2015, according to Boston ConsultingGroup, making the country less competitive as a destination formanufacturers.China, in 2013, became the world’s largest market for industrialrobots, surpassing all of Western Europe, according to theInternational Federation of Robotics. In 2015, Chinese manufacturersbought roughly 67,000 robots, about a quarter of global sales, anddemand is projected to more than double to 150,000 robots annuallyby 2018.Chinese firms also are investing in industrial technology, with an eyetoward building more of their own robots. Chinese home-appliancemaker Midea Group Co. launched a bid to buy Kuka for more than $5billion in May and now owns about 86% of the robots company. SomeGerman politicians criticized the deal, saying Kuka is a strategic assetthat should have remained German or European-owned.At a robotics-research conference in Stockholm in May, companiesincluding Kuka and Switzerland’s ABB Ltd. displayed lightweightrobots with agile arms capable of manipulating items as small asbottle caps.Last year, ABB, introduced a two-armed version of its YuMi robot, alightweight robot that was designed specifically for the Chinesemarket. It can put together car-dashboard electronics, wristwatchesand eyewear.YuMi, which is manufactured both in Sweden and in a sister factory inShanghai that opened a decade ago, was designed as a “collaborative”robot, meaning it is small and safe enough that it can share themanufacturing line with humans and doesn’t require a protectivecage, as many large industrial robots do.Over the past five years, China has become ABB’s largest market forrobotics customers, according to Steven Wyatt, ABB’s head ofmarketing and sales.Mr. Wyatt said China originally started adopting automation en massein response to concerns over the quality of goods manufactured in theRELATEDChina’s Impending Robot Revolution (http://www.wsj.com/articles/chinas-impending-robot-revolution-1470241843) (Aug. 3)China Wrestles With Wage Dilemma (http://www.wsj.com/articles/china-wrestles-with-wage-dilemma-1469513223) (July 26)China’s Working-Age Population Sees Biggest-Ever Decline(http://blogs.wsj.com/chinarealtime/2016/01/22/chinas-working-age-population-sees-biggest-ever-decline/) (Jan. 22)8/17/16, 5:58 PMChina’s Factories Count on Robots as Workforce Shrinks - WSJPage 4 of 5http://www.wsj.com/articles/chinas-factories-count-on-robots-as-workforce-shrinks-1471339805?mod=djemlogisticscountry. Now, however, Chinese factories—including those that makeconsumer goods—are buying robots to fill positions that wouldotherwise 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 itsfactories,” Mr. Wyatt said.Another factor is cost. Robotics technologies that were onceprohibitively expensive are now cheap enough that they are feasiblefor Chinese factories.Budapest-based OptoForce Ltd. manufactures €2,500 ($2,796)sensors that can be attached to robotic arms and used to polish metalparts that go into car transmissions and other products. Its head ofsales, Szabi Fekete, said such sensors have become significantlycheaper to produce in recent years.“Ten years ago when a force sensor cost €20,000, no one wanted toautomate polishing, because it was cheaper to
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