Robot Automation and the East Asian Workforce

As was mentioned in Japan Races to the Factory of the Future: “Since the 1930s, Japan has been visited six times by an industrial divine wind: in the 1930s manufacturing Dodge trucks; in the 1950s after buying Bell Labs’ plans for the first transistorized computer; with Joe Engelberger’s robot in the 1960s; with W. Edwards Deming in the 1960s for management and manufacturing; in the 1970s for creating the modern automobile industry; and now here in 2016 for its sixth with the Factory of the Future.

The technology is a marriage of Japan’s advanced robot technology and America’s information technology. FANUC, an industrial robot maker, and Cisco, the communications network developer; and they’ve already made $38 million wiring together smart factories, with GE—of all people!— using the team to connect up 100 of its factories.

Adding even more class-A strength to that squad comes from Rockwell Automation, as well as the Japanese artificial intelligence (AI) start-up called Preferred Networks (PFN).

And now, just to add another giant to the already potent mix, Japan’s Masayoshi Son, chairman and chief executive officer of SoftBank, has plunked down $32 billion for the U.K.’s ARM Holdings.

As the Nikkei Asian Review put it:  “Although ARM is small in scale…it’s the cornerstone of the smartphone chip market. One official at a leading chipmaker said ARM had ‘no rival at present.’

“ARM captured its current unique positon thanks to the widespread use of smartphones.”

With miniaturization, digitization, and Moore’s Law cascading from smartphones and into robotics, ARM holds a great advantage for providing the chips that power the Industrial Internet of Things (IIoT).

Japan now has in its hands on all of the elements necessary to make the Factory of the Future purr with an ability to pump out countless billions of dollars. And that’s just the potential success on the home front in Japan.

This IIoT industry will be larger than any industry previously built by Japan, namely because all other industries will depend on IIoT for the future. Toyota, for instance, will need to retool with IIoT tech in order to survive the coming world of smart factories. That means every one of Toyota’s present-day factories will need retrofitting for IIoT!

The Factory of the Future is of enormous and incalculable benefit for Japan and its people. This new industry will put millions of people to work while adding a whole lot of swagger back into Japan, Inc.

Better still, the Japanese are not building the Factory of the Future just for its home market, although there are decades of IIoT retooling awaiting tens of thousands of factories in the homeland. Rather, as with all of their former industrial triumphs, it’s being built for export! Yes, just like a Camry.

China
China’s great size (1.3 billion people) can be its own worst adversary as well as its own best advantage when it comes to finding employment for millions of workers in the coming race to the Factory of the Future.

In migrant workers alone, China has 160 million; that’s half the population of the U.S. Millions of those workers found new homes for a decade or more in places like Shanghai, Shenzhen and Guangzhou, which will now turn them out by the hundreds of thousands to return to their hometowns  to the west.

Foxconn turned out 60,000 workers from just one factory in Kunshan, in Jiangsu province. Another 600 Jiangsu companies look to trim their headcounts as well.

With tens of thousands of robots being deployed or soon to be deployed along China’s east coast, lots of worker confusion, anger, and social unrest could well follow in the wake of the potential millions of ensuing layoffs.

Added to that grim picture is the advent of KUKA and Huawei initiating their own race to the Factory of the Future, and things could turn from grim to worse in a hurry.

From making Nikes to urban farming
“Last October, Fu Chang Electronic Technology, a supplier to the telecommunications equipment makers Huawei and ZTE, shut its doors unexpectedly,” reported the New York Times. “The closing prompted a protest by thousands of workers in front of a government building in Shenzhen.”

Sadly, more of that is on its way.

In Dongguan, which used to supply one out of every four pairs of running shoes worldwide, is now stumbling as cheaper production bases in Asia have gained ground, says the Dongguan Shoe Industry Commerce Association. Some Dongguan shoe makers have already moved to Bangladesh. Other Dongguan production staples like furniture and garments are headed south to Vietnam and Malaysia.

The rub: low-cost, light manufacturing is being obliterated by foreign producers. The bottom line here is that what they used to produce somebody else now does it cheaper, while domestic markets won’t buy the low-end products.

So why not produce what the Chinese people will buy?

Feeding China
Like what? How about food, something everyone in the domestic market needs on a daily basis? All it takes is a little bit of mental reframing.

Dongguan could easily become a zone for “vertical” farming like Tokyo’s Spread that produces 21,000 heads of lettuce a day. Yes, daily.

Dongguan shoe makers could easily, and probably most willingly, convert themselves to lettuce farmers growing lettuce indoors on farms that go straight up to the ceiling, right there in downtown Dongguan.

China just spent $5.3 billion to buy 62 percent of the U.S. soybean yield this year; China will use it to feed cattle and pigs. Yes, cattle for beef in a traditional chicken and pork-eating population.

China has changed its eating habits while everyone was watching shoe workers lose their jobs. China now is the number one consumer of beef worldwide.

Beef cattle need food, like grazing land. At China’s consumption rate for beef, China would need grazing land about the total land area of the U.K., which just so happens to be the same amount of China’s farmland made toxic by factory expansion in the 1990s.

China also just became number one in freezer capacity in the world, taking over from the U.S., the former world leader. Freezer capacity is just an industry term that means the Chinese buy more refrigerators than Americans do.

And what do the Chinese put in all of these new refrigerators? Food.

With 25 percent of the world’s population, China has barely 7 percent of the world’s arable land. With China’s population growing and with its middle-class (160 million) looking at new and different diets, food is big. Grumbling coal miners from Jixi might like the idea of changing occupations. There’s no black lung disease from heads of lettuce.

Until the KUKA-FANUC juggernaut gets cranked up, the millions of Chinese factories and warehouses will continue to perform, eventhough robots are taking over the coastal east.

Economist, Tyler Cowen, sees China’s enormous size as a distinct advantage while waiting for robot-driven automation to knock on the door. In his recent (April 2016) paper: Economic Development in an “Average is Over” World, he demonstrates why he thinks Chinese workers will retain their jobs while growing more jobs on the domestic front:

“If there is a bright side to the Chinese situation, it is this: the country is so large, it has continued to diversify its manufacturing rather than specializing.

“If we look at the history of say industrialization in South Korea, at first the country produces all sorts of manufactured goods, if only to drive its own growth.

“As the economy matures, it trades more for the most efficient inputs and thus home country manufacturing specializes more, namely domestic Korean companies specialize in what South Korea can sell effectively in global markets. Samsung and

“Hyundai persists, but the local manufacturer of diapers may or may not prove competitive.

“That is a natural pattern for smaller countries. In China, however, the country is still producing a wide array of manufactured goods for the home market.

“The Chinese market is so large, and the value of direct access to that market is so significant, that China has not significantly specialized its exports the way many other developing nations have. That holds out some prospect for a relatively high level of manufacturing employment in China, looking forward.

“It is also possible that some of the recent measured slowdown in global trade comes from China building more fully integrated structures of production for its manufacturing, relying on domestic inputs in cases where it used to import.

“That also would help China maintain its manufacturing employment over time.”

The Fourth Industrial Revolution is stacking up to be a difficult but doable road ahead for the people of East Asia’s big three.

 See also: Taiwan: What Have You Done to Yourself?