The View

Here’s the perfect rebuttal to automation alarmists who say robots are taking over

iPhone manufacturer Foxconn says the robot revolution is a gradual process limited by the need for rapid adaptation on the assembly line

PUBLISHED : Monday, 01 August, 2016, 10:02am
UPDATED : Monday, 01 August, 2016, 10:57pm

For those who may have missed it, a very interesting interview with a Foxconn Technology Group executive ran in this paper over the weekend. The world’s biggest single employer of factory workers came clean on its grand plan to switch to robot labour: it won’t be happening.

The plan was first mooted in 2011, when the iPhone manufacturer’s chief executive and chairman, Terry Guo, vowed that within three years, a million robots would be deployed at its China-based factories. The “million” figure was unsettling, because that was approximately the number of human workers at Hon Hai Precision, aka Foxconn Technology. Moreover, those workers, recognising that size brings clout, were agitating for better pay and conditions. Was it really possible to just replace them with robots in three short years?

Banking analysts who cover this listed company were doubtful. However, technology boosters and automation alarmists seized on the story. Even low-cost factory workers in China were about to lose their jobs to machines! What surer sign of the coming apocalypse for labour.

In early 2014, business professors Erik Brynjolfsson and Andrew McAfee, in their book The Second Machine Age, reported a very puzzling update on the story: that Foxconn had already installed hundreds of thousands of robots to replace human workers, and a completely automated future was just around the corner.

In fact, as Sanford Bernstein analyst Alberto Moel explained to me at the time, there was no evidence of such an undertaking, which would have appeared on the balance sheet in the form of an explosive expansion in capital expenditure. For sure, Foxconn was increasing its investments in automation, and saving labour costs in the process. But the company was not about to go full robot.

Foxconn has rarely made an effort to publicly disabuse those who kept touting Guo’s grand plan as feasible. So it is refreshing to now hear straight talk from the company’s general manager of the automation technology department committee, Dai Chia-peng.

“Highly automated manufacturing is still an ideal,” Dai told the Post reporter He Huifeng in a story that ran on Friday.

Foxconn hits bumps in road to full automation

Foxconn has in fact installed only about 40,000 fully operational industrial robots, Dai said, though it also has hundreds of thousands of other pieces of automated equipment.

More to the point, Foxconn still has 1 million workers in more than 20 factories across China putting together Apple’s iPhones, iPads and smart devices for several other Chinese and overseas brands.

This does not mean that Foxconn should be faulted for dreaming, or for investing in robot technology.

Automation and artificial intelligence technologies are indeed improving at a brisk pace. These trends have generally been tough on workers, putting downward pressure on wages in many sectors. But in the future, when the world is increasingly populated by retirees, industrialised economies will be grateful for the robots.

Just look at Japan. Its population began shrinking more than a decade ago, a challenge for such an export-oriented economy. Today Japan has one of the world’s most automated manufacturing sectors, just after South Korea, another demographically-challenged nation.

China is scarcely automated when compared to Japan or South Korea, but if the country wants to maintain its top spot as a global exporter, it will have to increasingly rely on robotics. It has already started running out of workers. The mainland’s working-age population peaked this year, and the worker-to-retiree ratio will look pretty bleak by 2030.

The demographic outlook explains why China’s government is subsidising research and development of its automation sector. Last year, about 68,000 industrial robots were sold in the country, up 17 per cent from a year earlier.

Besides using robots, China wants to make them for export. The number of robot makers has mushroomed in recent years. Foxconn’s niche is in low-cost robots, which it has branded the Foxbot.

But the robot revolution will not happen overnight. As Foxconn’s Dai frankly explains: “The life cycle of consumer products like smartphones has become shorter and shorter, so it’s not cost-effective to spend money on a fully automated production line.”

It turns out that humans are still more cost-effective and flexible on many types of assembly line work. The question still remains - for how long?

Cathy Holcombe is a Hong Kong-based financial writer

This story was amended to correct a reference to Dai Chia-peng, the general manager of Foxconn’s automation technology department committee