Made in China. For several decades it’s been a label synonymous with inexpensive labor and mass production – a strategy that’s worked remarkably well for China, and the rest of the world. But with the advent of a new manufacturing era—Industry 4.0, the Internet of Things, the smart factory—is China keeping pace?
According to a recent study by German-based industry consultant Staufen AG, only 10 percent of Chinese firms have started to make the transition towards the web-based, real-time networking of objects, machines and people, and a third of Chinese companies have not dealt with Industry 4.0 in any way whatsoever.
But while China may lag behind Germany, North America, and Japan in terms of its technical prowess, it remains a manufacturing powerhouse with a robust supply chain and infrastructure, a cheap bill of materials, and a government willing to invest countless millions to maintain a top spot in the global market.
Despite a slow move into Industry 4.0, China-based companies recognize its potential and believe their business models and workforce will change considerably in the next five years because of it, says Staufen. A majority anticipate a shift to smart production will bring fresh economic gains.
Made in China 2025, a ten-year government-sponsored program aimed at putting China on equal footing with Western industrial nations, should help pave the way.
The plan is strongly focused around automation and the development of cyber physical systems that will boost lean production and cut dependency on an outdated cheap-labor model.
A shining example sits in Dongguan city, north of Shenzhen.
Dongguan is a center for Chinese manufacturing and home to the country’s first ‘unmanned’ factory run by computer-controlled robots, computer numerical control machining equipment, unmanned transport trucks, and automated warehouse equipment.
The factory owner, Changying Precision Technology Company, a cell phone module manufacturer, says its robots can make better products faster. It claims to have replaced 600 human assembly-line workers with 60 robots, resulting in a fivefold reduction in manufacturing errors and an increase in production of over 250 percent.
And improving the bottom-line isn’t the only benefit to factory automation. It may also offer a solution to China’s looming workforce crisis – currently 200 million of China’s population are above the age of 60 and this is set to rise sharply in the coming years.
But China must take care not to automate factories where unnecessary, experts warn.
Although automation can overcome labor issues and cut costs, there are instances when wage hikes are more cost-effective than replacing workers with robots.
In Japan, for example, where labor costs are five times that of China, automation is a less lucrative proposition.
A Japanese company could afford to use two robots to replace one worker, says Deng Qiuwei, general manager at Shenzhen-based Rapoo Robotics Applications. “But in China, it’s only worth considering when one robot can replace three workers.”
In a related and somewhat ironic move, China’s neighbor South Korea recently announced a $16.75 billion investment in robotics technology to reduce its dependence on rising-cost Chinese labor. In partnership with industry giant Samsung, it hopes to build 600 smart factories for starters. And that’s just the tip of the iceberg.
“We are pushing to build 10,000 smart factories by 2020 for the smart ecosystem of the country’s manufacturing,” says Vice Minister Lee Kwan Sup of South Korea’s Ministry of Trade, Industry, and Energy.
It’s hoped that once affordable robots reach the South Korean market and are more widely used in smart factories it will bring about far-reaching innovations to that manufacturing sector.
Further east, Japan’s factory floor doesn’t need the same level of overhaul, say industry experts.
According to a recent study by Cisco, smart factories represent a $139 billion value stake for Japan, much lower than the rest of the world. This is because Japan already has an advanced manufacturing sector which includes a good mix of technologies.
For Japan, Industry 4.0 has less to do with technology and more to do with mentality.
Industry 4.0 is premised on openness and connectivity, something Japanese manufacturers are less inclined towards, preferring instead to rely upon proprietary technology and a black-box approach. Yet Industry 4.0 depends not only on networking and interlinking across machines and manufacturing facilities, but also across businesses and people.
Other countries like South Korea and Singapore do a much better job of sharing information and collaborating on Industry 4.0 initiatives on a global scale, something Japanese businesses are gradually waking up to.
Perhaps a step in the right direction is the recently launched ‘Industrial Value Chain Initiative’—whose members include Mitsubishi, Fujitsu and Panasonic—which aims to connect factories worldwide and reposition Japanese businesses in a more open system.
Image by JoshEwwAhh on Flickr (CC BY 2.0)