Huge employer in China makes big step toward robots

Foxconn, a big contractor for Apple and others, breaks ground for robot facilities. It plans to replace 500,000 workers with 1 million robots.

Workers are seen inside a Foxconn factory in the township of Longhua in China’s southern Guangdong Province in this 2010 photo. After a spate of employee deaths and complaints about working conditions, electronics manufacturer Foxconn has broken ground on new robot facilities. Within five years, it says it plans to replace 500,000 workers with 1 million robots. Photo: (Bobby Yip/Reuters/File)

But earlier this month, officials from Hon Hai Precision Industry and its subsidiary, Foxconn, took the next step, signaling a potential sea change in the electronics industry. They broke ground for new robotics R&D and manufacturing facilities in a new industrial park in Taichung, central Taiwan. Foxconn, which made its name by using cheap mainland Chinese labor to supply the likes of Apple, HP, Sony, Dell and Nokia, says it will replace 500,000 workers with robots in the next three to five years.

The plan is so sweeping that its implementation would have huge implications for China and the robotics industry worldwide. It signals that Chinese labor may no longer have the low-cost advantage it once enjoyed and that the robotics industry is ripe for change.

Start with China. Most of Foxconn’s 1.2 million employees work there. So an automation plan that would replace nearly half the company’s workforce suggests that the cost of those workers is rising. In a press release, the company said mass producing assembly-line type robots was part of its plan to cope with labor shortages and rising wages.

Foxconn has special reasons for speeding up factory automation. During the past 15 months, at least 14 Foxconn workers have died in apparent suicides, most of them in the Chinese city of Shenzhen, where harsh working conditions were said to exist. The company received so much negative publicity and scrutiny from labor groups and clients, Apple in particular, that it began a two-pronged effort to reduce labor costs.

Foxconn has been relocating factories closer to its source of employees, inland China and central Brazil, and is moving ahead with its robot development. The company expects its new robot R&D and manufacturing facilities to create 2,000 jobs in Taiwan. The new robots which will be deployed in China, will allow Foxconn to move displaced workers up the skill ladder to better paying and more interesting jobs. How many workers are kept on is anybody’s guess. But with sufficient growth, Foxconn has an incentive to redeploy most of them, which would avoid having to hire, train, and house additional workers as production needs increase.

Foxconn’s move also represents a wakeup call to ABB, KUKA, and Fanuc – the world’s largest robot manufacturers currently. Its plan to develop robots on its own implies that the current lines of industrial robots are not flexible and easily trainable enough for the likes of Foxconn.

Foxconn’s move into the robotics business reflects how things are changing in the industry. The days when industrial robots had a small library of moves but precisely and reliably repeated those moves 24/7 are no longer. New tech is more personalized and manufacturing is following with small quantities of thousands of variants of base products. Robots have to keep up with those changes. At present they have not.

Foxconn’s plans are hugely ambitious, nevertheless. According to the latest statistics from the International Federation of Robotics (IFR), there were 52,290 industrial robots in China of which approximately 10,000 were in Foxconn factories. Thus, the company is aiming to go from 10,000 to 1 million robots in three to five years.

That would nearly equal the number of industrial robots currently deployed worldwide –1,035,016, according to the IFR.

Some analysts remain skeptical that Foxconn really intends to build robots. It will concentrate on automation machinery instead, they say. But two sources – both claiming not to be able to provide details because of nondisclosure agreements – say the opposite: Foxconn is planning on entering the robot manufacturing business with a variety of flexible, easily trainable, and low-cost assembly-line robots.

China is the fastest-growing market for the use of industrial robotics, IFR says. It forecasts that industrial robotics applications in China will increase by 64 percent next year.

Swedish power and automation technology company ABB Group recently built a robot manufacturing facility in China, supplementing numerous sales and integration offices.

The stock of Foxconn’s parent company, Hon Hai, has fallen about 22 percent so far this year, but margins are improving as plant relocations are completed. One Barclay’s financial analyst says the next 12 months look much better. Factory relocation costs have still taken a toll on Hon Hai’s bottom line profitability, though analysts say the expansion could pay off in the long-run, thanks to the lower wages that Hon Hai will be able to pay in these less affluent regions.

This posting first appeared in The New Economy, November 17, 2011, The Christian Science Monitor and is copied and cross-linked with permission.

Frank Tobe is the owner and publisher of The Robot Report, and is also a panel member for Robohub's Robotics by Invitation series.

Frank Tobe is the owner and publisher of The Robot Report, and is also a panel member for Robohub's Robotics by Invitation series.