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Step into the factory of Chinese SUV and truck maker Great Wall Motors, and it’s easy to forget you’re in the world’s most populous country. Swiss-made robots pivot and plunge, stamping metal door frames and soldering them to the skeletal vehicle bodies of a mini-SUV called the Haval M4. The blue-smocked workers in yellow hard hats are few and far between here in Great Wall’s largest factory complex, located in Baoding, some 90 miles southwest of Beijing.


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“With automation, we can reduce our head count and save money,” says Hao Jianjun, Great Wall’s general manager, who has invested $161 million into mechanizing four plants with 1,200 robots. The average price of a factory-floor robot is around $50,000 before installation. “Within three years, this cost will be completely paid for in savings from reduced worker wages,” says Hao. After the robots were added, the number of welders at Great Wall dropped from 1,300 to around 400.

Last year sales of industrial robots in China reached 22,577 units, up 51 percent over 2011. That puts China just behind Japan and South Korea, but ahead of Germany and the U.S., in the purchase of new robots. With robot sales quadrupling from 2006 to 2011, China is on track to become the world’s largest industrial cyborg market by 2014, predicts the Frankfurt-based International Federation of Robotics.

China’s car industry has led the automation wave, particularly at its joint ventures with General Motors (GM), Honda Motor (HMC), and Volkswagen (VOW). Consumer electronics, food and beverage processing, and the plastics and textile industries are following suit. “What we are seeing is robots increasing in a lot of industries where they are already common in the rest of the world,” says Yuchan Li, an analyst with economic consultancy GaveKal Research. “For China, there is still a lot of low-hanging fruit when it comes to automation.”

China is now an important market for robot makers such as Japan’s Fanuc, Germany’s Kuka and Siemens (SI), and Rockwell Automation (ROK) of the U.S. Swiss-based ABB (ABB) has chosen Shanghai to base its global robotics business and produce robotic systems for auto and electronics clients.

One factor driving the switch to robots is demographics. Next year China’s labor force will peak at 1 billion before starting to shrink, in part because of the nation’s one-child policy. Labor shortages are already common and are driving wage inflation, up around 20 percent annually in recent years. Beijing is encouraging automation by forcing up minimum wages. A rise in labor costs “ups the ante for manufacturing companies so they change their production processes and move up the value chain,” says Louis Kuijs, chief China economist at Royal Bank of Scotland (RBS) in Hong Kong.

For the textile industry, facing ever-narrower margins, automation may be the only alternative to shutting down or moving. While some factories relocated to lower-wage Cambodia and Vietnam, Hong Kong sweater maker Milo’s Knitwear International upgraded. After spending $1.9 million for 29 Japanese stitching machines, its Dongguan factory has reduced staff from 140 workers to six. Average wages of $450 a month had been rising 20 percent a year, says managing director Willy Lin. “Machines can run 24 hours a day, with very little downtime,” says Lin. “Without this improvement in efficiency, I wouldn’t be able to survive at all.”

Worker protests have sped up the automation trend, says Milo’s Lin. Labor unrest at Foxconn Technology Group, the iPad and iPhone contractor employing more than 1.4 million Chinese, has forced shutdowns at its facilities in the cities of Taiyuan and Zhengzhou. Those demonstrations followed a spate of suicides at its Shenzhen factory in 2010. Last year the company announced the ambitious goal of adding a million robots to its Chinese factories within three years. GaveKal’s Li estimates Foxconn will have at least 30,000 robots in China by yearend.

Finally, the level of precision required to make many high-end consumer electronics and other products now lies beyond the abilities of most humans. Mistakes can be very costly, points out Raymond Tsang, a partner at consultant Bain & Co. in Shanghai.

Workers have one consolation. With manufacturing wages still less than a 10th of those in the U.S., Chinese factories are unlikely to soon be as robot-dependent as those in developed countries. As product cycles shorten and customers put in smaller orders more often, people can still be shifted more quickly to new production roles, says Bain’s Tsang. In China, “a fully automated, human-less factory will still be hard to justify anytime in the near future.”

The bottom line: With robot sales in China up 51 percent last year to 22,577 units, the switch from low-wage shops to high-end producers is under way.


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