Bad Luck

Chaos Manor View, Monday, July 06, 2015

“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded—here and there, now and then—are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

“This is known as ‘bad luck’.”

– Robert A. Heinlein

Entrepreneurs are fleeing Greece. Some Greek politicos are threatening to turn Greece into a way station for Near East refugees fleeing to Germany and Belgium. The result should be interesting,

China’s Hunger for Robots Marks Significant Shift

Country’s emergence as automation hub contradicts assumptions about robots, global economy

By

Timothy Aeppel and

Mark Magnier

July 5, 2015 2:26 p.m. ET

http://www.wsj.com/articles/chinas-hunger-for-robots-marks-significant-shift-1436118228

Having devoured many of the world’s factory jobs, China is now handing them over to robots.

China already ranks as the world’s largest market for robotic machines. Sales last year grew 54% from a year earlier, and the boom shows every sign of increasing. China is projected to have more installed industrial robots than any other country by next year, according to the International Federation of Robotics.

China’s emergence as an automation hub contradicts many assumptions about robots and the global economy.

Economists often view automation as a way for advanced economies to keep industries that might otherwise move offshore, or even to win them back through reshoring, since the focus is on ways to reduce costly labor. That motivation hasn’t gone away. But increasingly, robots are taking over work in developing countries, reducing the potential job creation associated with building new factories in the frontier markets of Asia, Africa or Latin America.

A confluence of economic forces is behind the trend in China. Labor costs, while low relative to advanced economies like the U.S.’s, have soared. That has undermined the calculus that brought many of those jobs there in the first place. And new robot technology is cheaper and easier to use than ever before. In addition, many of China’s fastest-growing industries, such as vehicle-making, tend to rely on automation regardless of where the factories are. Some jobs, such as delicate operations in electronics plants, can only be done with machines.

“We think of [the Chinese as] producing cheap widgets,” but that is not what they’re focused on, said Adams Nager, an economic research analyst at the Information Technology and Innovation Foundation in Washington, D.C. China, he said, is letting industries that rely on lots of manual labor, such as clothing and shoe production, shift out of the country to focus on capital-intensive industries such as steel and electronics where automation is a driving force.

In this sense, what’s happening in China is no different than what has occurred in many other parts of the world.

The fact that it is happening in China, though, underscores a significant shift. Some economists believe China may be one of the last places where industrialization spawns the kind of massive job growth that allows a country to leapfrog into the ranks of the wealthier nations. If the automation trend continues, it will mean slower job growth, though that isn’t apparent yet in China.

The International Federation of Robotics estimates about 225,000 industrial robots were sold world-wide last year—a record number and up 27% from the year before. Robot sales grew in all the major markets, with over half the growth in Asia. But China is the rising star, with about 56,000 robots sold there in 2014.

One reason China will continue booming is because it has relatively low “robot density,” the trade group says. China has about 30 robots for every 10,000 factory workers. In Germany, the density is 10 times that amount.

“China has explosive growth [in robots],” said 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.

Terry Hannon, chief business development and strategy officer for Adept Technology Inc., a U.S. robotics maker based near Silicon Valley, said he was startled to see 400 new domestic robotics makers at a Chinese trade show last year. Among those jumping in: Hon Hai Precision Industry Co.—better known as Foxconn—which has announced plans to build and install thousands of robots to assemble Apple Inc.iPhones and other products.

There is a pride factor at work in China’s rapid adoption of robots, whether made by domestic companies or manufactured in China by Western firms. “When the Chinese started to export, they often got pushback about what kind of quality they could deliver,” said Steven Wyatt, head of marketing and sales for ABB Robotics in Zurich. “They want to be able to say, ‘We use the same robots as you guys use in Western Europe and North America.’ ”

That is one reason the Chinese government is pushing the trend. In 2013, Beijing outlined a 2020 goal of having at least three globally competitive robot makers, eight subcontractor clusters, a 45% domestic market share for Chinese high-end robots and a tripling of robot penetration to 100 per 10,000 workers.

Some say this top-down approach can create something of a herd mentality and spur misdirected spending. “If you give funds to the wrong companies, you can crowd out those who will be the most productive,” said Gan Jie, a professor at Cheung Kong Graduate School of Business and a longtime board member of DJI, a Shenzhen, China-based drone maker.

Meanwhile, there is little evidence so far that robots are having a big impact on employment. Average urban wages in China rose more than 10% in 2014, even as the country remains on target to create at least 10 million new jobs this year.

Also important in spurring broader use of robotics, say factory owners, is their growing difficulty finding young Chinese willing to do often mind-numbing assembly-line work. Some electronics makers say they are battling turnover rates of up to 20% a month.

The job impact may be felt instead by other developing countries, since jobs that might have migrated out of China in search of lower-cost labor will remain rooted there.

Chen Zhengxiao, manager of Ruian Carbide Tool Co. in eastern Zhejiang province, a maker of parts for lathes and milling machines, said labor costs weren’t a factor in the company’s decision to use more robots. “Touching a product by hand causes quality problems,” said Mr. Chen. “The precision can’t be guaranteed. The process is also faster with robots.”