Why China May Have the World's Most Factory Robots Two Years From Now

The relentless race to the bottom of the production cost cycle.

No one should be surprised that having built its position as the world's dominant export platform, China is demonstrating a fierce determination to maintain its lead.

Though the original advantage was based on the work of numberless low-paid workers, China is now moving up the value chain by employing robots to do the work its workers deem not well-enough compensated to be worth their while. This gives China the potential to capture more of the profit margin in the production process. But it also gives other locales - Africa anyone? - the opportunity to supplant them. JL

Timothy Aeppel reports in Real-Time Economics:

Having devoured many of the world’s factory jobs, China is now handing them over to robots.China is already the world’s largest market for industrial robots—sales of the machines last year grew 54% from 2013. The nation is expected to have more factory robots than any other country on earth by 2017, according to the German-based International Federation of Robotics.
A perfect storm of economic forces is fueling the trend. Chinese labor costs have soared, undermining the calculus that brought all those jobs to China in the first place, and new robot technology is cheaper and easier to deploy than ever before.
Not to mention that many of China’s fastest-growing industries, such as autos, tend to rely on high levels of automation regardless of where the factories are built.
“We think of them producing cheap widgets,” but that’s not what they’re focused on, says Adams Nager, an economic research analyst at the Information Technology & Innovation Foundation in Washington. Mr. Nager says China is letting low-cost production shift out of the country and is focusing instead on capital-intensive industries such as steel and electronics where automation is a driving force.

China’s emergence as an automation hub contradicts many assumptions about robots.
Economists often view automation as a way for advanced economies to retain industries that might otherwise move offshore, since the focus is finding ways to save on costly labor. Some of that is certainly going on. But increasingly, robots are gobbling up jobs in developing countries, reducing the potential job creation associated with building new factories.
“China has explosive growth (in robots),” says Henrik Christensen, head of Georgia Institute of Technology’s robotics lab, adding that all the world’s biggest automation companies are rushing to build factories there to supply demand for new machines.
The International Federation of Robotics estimates about 225,000 industrial robots were sold throughout the world last year—27% more than the year before and a new record. Of those, about 56,000 were sold in China.
The trade group says one reason China will continue booming is because it has relatively low “robot density.” China has about 30 robots for every 10,000 factory workers. In Germany, the density is 10 times higher. In Japan, it’s 11 times higher.
“The automation of China’s production plants has just started,” said Per Vegard Nerseth, a managing director of ABB Robotics, in a report prepared by the trade group