Orange robot arms weld and assemble with extreme precision. Digital cameras, powered by the latest computer vision technology, monitor parts as they move through the assembly line. Autonomous robots transport materials in, and finished products out, of the building silently and without human supervision.
Human beings have been physically removed from this assembly line, replaced by robots and digital-savvy technicians and engineers operating at a distance, who can monitor events in real-time via a digital panel accessible from anywhere in the factory via a portable device.
This is what a modern microwave-making factory run by Midea, one of the world’s largest home appliance makers, looks like in the southern city of Foshan, China, today.
What used to require 16 people now only needs four, said Xu Nian’en, a director at this Midea plant. The company has, over the last six years, invested 4bil yuan (RM2.59bil) to transform itself, raising efficiency by 62% and reducing its workforce by 50,000.
Amid the rapid digitalisation of China’s economy, the second-biggest in the world, Midea’s factory represents a snapshot of the future – one in which manufacturing processes and employees need to adapt to increased automation and machine-driven learning.
The challenge is an acute one for China as it continues to move up the value chain from what was once considered the world’s factory floor and has become more pressing as it confronts an impending demographic crunch that will change the country’s workplace for generations.
Adding more urgency was the recent once-in-a-decade census survey, released on May 11 by the National Bureau of Statistics (NBS), which revealed that the country’s population in 2020 rose at the slowest pace since the 1950s, reaching 1.412 billion.
China’s working-age population, people between the ages of 15 to 59, accounted for 63.35% of the entire population last year, a decline of 6.79 percentage points from a decade ago, the census data showed.
“The proportion of the working population is likely to get lower and lower,” Wang Xiaosong, professor of economics at the Renmin University of China, lamented at an online forum.
Moreover in 2020, the figure was only three-quarters of the total in 2011 and will fall to just above half by 2050, according to Lu Jiehua, a professor of population studies at Peking University.
At the same time, interest in factory jobs among young workers is shrinking, Midea’s director of information technology Zhou Xiaoling told the Post.
The census data does however, show progress in higher education with the number of people gaining a college education jumping from 8.93% in 2010 to 15.5% in 2020, putting the country ahead of many developing nations.
And this is the promise of artificial intelligence (AI) and technology – that many of the dirty, repetitive manual jobs of yesteryear will be replaced by more highly-skilled jobs in future.
The change is already being felt as factories find it harder to find younger workers willing to toil away on production lines.
“Nowadays, the generation in their 20s prefer service jobs, like live-streaming or sitting in offices,” said Yuan Jing, a deputy general manager of a medium-sized smart classroom equipment manufacturer based in Hebei province.
Thousands of factories across the country are already hard at work replacing manual labour with automation, robotisation and digitalisation.
Yuan’s company is doubling down on new technology at a new plant under construction, investing about 60mil yuan (RM38.96mil) on automation that will reduce the number of line workers needed for some processes by about half.
Midea plans to replace an additional 30% of its front-line workers over the next three years with the help of digitalisation and automation, said Midea’s Zhou.
Over the past decade, China has gradually been transforming itself from a low-cost and low-skill labour country that churns out everything from cheap plastic toys to new iPhones, into a hub for smart manufacturing for more value-added products.
“In some senses, [the demographic changes] are not news,” said Xi Ning, chair professor of robotics and automation at the Hong Kong University (HKU). “The government actually anticipated this many years ago.”
Factories in China are now applying AI to crunch vast amounts of data and automate many processes, while the government included a policy to regulate and make data available to boost the industrial internet in its 14th five-year plan.
Companies are building up data centres to offer cloud services and help many industries go online, while state-supported 5G network expansion is under way that will support smart factories and their automation needs.
The shift has been boosted by state-directed efforts, ranging from national initiatives, such as the Made in China 2025 industrial policy plan, to local government efforts.
Financial support for robotics manufacturers and automation businesses comes from various levels of government in the form of subsidies, low-interest-rate loans, tax relief, or land rental incentives.
For the robotics industry, China’s government offers lavish subsidies that account for roughly 20% of its net profit, according to Sinolink Securities, a financial services firm.
China has been the world’s largest industrial robot market since 2013 with companies like Midea, which acquired German industrial robots maker Kuka in 2017 for €4.5bil (RM22.73bil), leading the way.
In March, Midea became China’s second company after Haier to have two facilities named as “lighthouse factories” by the World Economic Forum (WEF), an international honour recognising “the world’s most advanced factories” which are judged to be “leading the way in the adoption of Fourth Industrial Revolution technologies”.
This year’s list also included factories around the world at companies such as HP, Johnson & Johnson, Siemens and Proctor & Gamble.
The Fourth Industrial Revolution, also known as Industry 4.0, refers to the ongoing automation of traditional manufacturing and upgrading of industrial practices, and the use of modern smart technology to achieve more efficient and profitable growth.
“The process of digitalisation means altering a country’s core competitiveness at a fundamental level,” said Zhu Min, former deputy managing director of the International Monetary Fund and the head of Tsinghua University’s National Institute of Financial Research, in a speech last month.
“The labour cost for a Midea air-conditioner today is only about 10 yuan (RM6.50) – this was inconceivable in the past.”
And unlike other countries with legacy systems that need to be overcome for the industry to upgrade, the whole industrialisation process in China happened in the past 30 years, meaning manufacturers can effectively start from “a blank slate”, said HKU’s Xi Ning.
Xu Shaoyuan, a research fellow at the Development Research Center of the State Council, said that the decline and ageing of the working-age population were unlikely to have a significant impact on the country’s industries, as technological progress might be faster in replacing manpower than the demographic changes.
“With improvements in physical health, many people are still willing and able to work even after reaching the retirement age of 60. And with the advancement of technology, the physical requirements for workers are, in general, declining,” Xu said.
Meanwhile, while labour costs have been rising steadily over the last decade in China, many factories have moved from more expensive coastal areas to relatively impoverished and cheaper areas in the west of the country.
The national annual average wage of employees in urban private companies in China nearly tripled to 57,727 yuan (RM37,463) in 2020 from 20,759 yuan (RM13,479) in 2010, according to the National Bureau of Statistics.
For the manufacturing sector, the average annual wage of employees of enterprises was 74,641 yuan (RM74,641) in 2020, while in 2017 that figure was 58,049 yuan (RM37,694).
However, China’s robotic workforce still pales in comparison to its human workers, with 187 robots per 10,000 employees currently.
In comparison, Singapore has the highest density of robots, with 918 robots per 10,000 employees, followed closely by South Korea with 868 robots, according to January data from the International Federation of Robotics.
Beijing’s plan to make more made-in-China industrial robots has also fallen behind target, with most of the market still dominated by Japanese, European and South Korean companies, data from Shenzhen Gaogong Industry Research (GGII) shows.
And while the demographic crunch may be met with a smaller, more skilled workforce in China in future, it could be a negative for those workers who are unwilling or unable to adapt fast enough to more advanced workplace technologies.
China and the world will also have to embrace an upgrade in education and jobs. As traditional blue-collar jobs become obsolete, many of these factory workers will have to upskill or change their profession.
“Many workers will not be doing mechanical work on production lines, they will need to be able to handle data analysis and other more valuable things,” said Midea’s Zhou. “Our existing employees must transform, otherwise they could be phased out.” – South China Morning Post