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BEYOND Robotics
going beyond the robotics revolution
Though many of China’s emerging innovators grew out of previously state-owned enterprises, their landscape they now inhabit could not be more different from the lumbering, stagnant world of the nation’s public sector. Midea was once a state-owned bottle-cap producer, but has since become the nation’s leading home appliance brand with manufacturing facilities around the world.
Understanding China's Robotics Revolution
June 1, 2016
In 2011, Midea Group had already begun implementing a policy of production-line automation in response to increasing demographic pressures on labour resources, preceding Xi Jinping’s policy call for a Robotics Revolution by two years. For Midea, the end of cheap China had already begun.
Today, the robotics revolution is just about getting underway in Guangdong, the home of Midea’s global headquarters and China’s most productive province; but Midea have already halved their workforce and installed over one thousand robotic replacements across fourteen manufacturing bases in China.
Generally slow to react to changes in China, the international media has focused on the danger that Xi’s robotics revolution poses to blue-collar workers, losing their jobs to industrial robots that are able to increase efficiency by up to 50%, in Midea’s case. Writers from publications like the New York Times have reported a complete disregard for workers rights in the wake of the new policy, which has employers scrambling to apply for government subsidies to install industrial robots and replace human workers. What such writers fail to acknowledge, in their desperate pursuit of a hot topic, is that many workers replaced by robots more likely aged out than were laid off.
Lu Shuping, Director of Consumer and Marketing at Midea Group, explained that before 2011, Midea needed to rerecruit the equivalent of 30% new staff members each year to replace migrant labourers who returned home or older workers who had aged out and retired. Since committing to a new business strategy in line with German Industry 4.0 and production-line automation, Midea has allowed a 10% year on year decrease in blue-collar workers by simply not replacing those who leave. Dismissing workers without due cause is a difficult process in a modern China with increasingly strict social insurance policies. In the case of many companies like Midea, catering to an expanding global market, the need to automate was a direct response to the difficulties faced when trying to replace workers after the Spring Festival vacation each year.
Many international journalists focusing on the dangers of China’s plans to leap up the value-chain forget that upgrading production is about more than just replacing human workers. In the last five years, Midea has invested over 5 billion RMB in modernising production processes. Only 1.2 billion of this was spent purchasing industrial robots.
Many point to the recent announcement of plans to acquire a controlling share in KUKA Robots, valued at 4.6 million EUR (33.7 million RMB), as evidence of Midea’s central focus on robotics. However, this year Midea has also bought a majority stake in Toshiba’s Home Appliances Business, valued at 4.8 million USD (31.6 million RMB), in order to acquire valuable smart appliance technologies. Innovation is the new focus of many Chinese domestic companies. From the production line to the finished product, greater emphasis is being placed on smart technologies and new developments such as the internet of things (IoT).
The implementation of IoT technologies in production has also changed Midea’s product-to-market process. Five years ago, it would take one month to order, produce and transport a Midea brand product in China. Now, from the moment a consumer orders a fully customised home appliance product, to the moment it arrives at their door, takes only nine days. Three days for the order to process, three days to produce, and three days for the logistics of delivery. Every step of the process is monitored, recorded and trackable via the internet.
Product-side, Midea has developed an M-Smart platform to enable smart home interconnected devices to communicate. To develop these technologies, Midea has partnered with leading domestic innovators such as Xiaomi. Xiaomi is a brand famous for using OEM manufacturers and not owning a single factory. The value of Xiaomi is in software rather than hardware, another important area that many domestic giants are now exploring.
Digitalisation employs an entirely new generation of industrial workers with a rapidly developing skill-set. A spokesman for Taiwan-owned robotics producer E-Deodar argued that their competitive edge is dependent on the employment of software engineers and developers. Many local engineering colleges that traditionally churn out an annual cohort of blue-collar workers are being encouraged to develop IT and software departments working directly with companies such as E-Deodar. These companies typically employ post-graduate software developers at a rate of 100,000 RMB per year, a hefty investment for talent resources.
Around 15% of the Midea workforce are employed as innovators, charged with upgrading every aspect of the business, from process to product. In the coming five years, Midea aims to continue this process of digitalisation, leading to the use of less and less factory space to produce a wider variety of products with a higher rate of efficiency. The installation of industrial robots are just one component in the pursuit of a modern method of production, with the use of information technology at its core.
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