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Chinese factories add automation to control rising labor costs
Confronted with rising wages and a shortage of labor, a supplier of car body frames to Honda Motor Co. last month earmarked the equivalent of a half year's profit to triple the number of robots at its three Chinese plants.
The $22 million (150 million yuan) investment by Japan-based H-One is part of a push to automate factories across China that is expected to gather pace in the wake of the recent burst of strikes.
"The automation equipment industry is growing very, very fast," said Raymond Tsang, head of consultancy Bain & Co.'s Greater China industrial practice. "Sensors, frequency converters, conveyor belts, pneumatic systems, power tools -- you name it. We're seeing anywhere from 20 to 30 percent growth in those sectors year over year."
The series of high-profile strikes in recent months has affected mostly Japanese-owned auto and parts factories including Honda and Toyota Motor Corp. in southern China. It has put a spotlight on growing unrest among China's massive migrant worker population wanting a greater share of the country's growing wealth.
Although labor remains a small portion of overall Chinese manufacturing costs, some see the worker unrest as further spurring a move to mechanization.
With China accounting for 15.6 percent of the world's manufactured goods -- having last year surpassed Japan to become the second largest after the United States -- the automation trend holds the promise of big profits for equipment suppliers such as Japan's Fanuc Ltd., Germany's Siemens AG, and U.S.-based Rockwell Automation.
According to Nomura Securities, the ratio of machine tools in China that use numerical controls, a good measure of the level of automation, climbed to 27 percent in the quarter to May, up from 22 percent in 2009 and 19 percent in 2008.
This brings China to the level of Japan in the 1980s when it was in still in a phase of strong economic growth. Japan's numerical control ratio has since risen to a world-leading 82 percent, offering a glimpse of where China may be headed as its economy develops.
Yaskawa Electric says China demand helped it log record orders overseas for its industrial robots in May, and it reckons the prospect for further growth is strong with the ratio of China plants using robots at just one-fourth the level of Japan.
"The pace of automation in Chinese factories is faster than Japan in the 1980s," said Wenjie Ge, an analyst at Nomura Securities, which forecasts wages to double in China in five years.
The $22 million (150 million yuan) investment by Japan-based H-One is part of a push to automate factories across China that is expected to gather pace in the wake of the recent burst of strikes.
"The automation equipment industry is growing very, very fast," said Raymond Tsang, head of consultancy Bain & Co.'s Greater China industrial practice. "Sensors, frequency converters, conveyor belts, pneumatic systems, power tools -- you name it. We're seeing anywhere from 20 to 30 percent growth in those sectors year over year."
The series of high-profile strikes in recent months has affected mostly Japanese-owned auto and parts factories including Honda and Toyota Motor Corp. in southern China. It has put a spotlight on growing unrest among China's massive migrant worker population wanting a greater share of the country's growing wealth.
Although labor remains a small portion of overall Chinese manufacturing costs, some see the worker unrest as further spurring a move to mechanization.
With China accounting for 15.6 percent of the world's manufactured goods -- having last year surpassed Japan to become the second largest after the United States -- the automation trend holds the promise of big profits for equipment suppliers such as Japan's Fanuc Ltd., Germany's Siemens AG, and U.S.-based Rockwell Automation.
According to Nomura Securities, the ratio of machine tools in China that use numerical controls, a good measure of the level of automation, climbed to 27 percent in the quarter to May, up from 22 percent in 2009 and 19 percent in 2008.
This brings China to the level of Japan in the 1980s when it was in still in a phase of strong economic growth. Japan's numerical control ratio has since risen to a world-leading 82 percent, offering a glimpse of where China may be headed as its economy develops.
Yaskawa Electric says China demand helped it log record orders overseas for its industrial robots in May, and it reckons the prospect for further growth is strong with the ratio of China plants using robots at just one-fourth the level of Japan.
"The pace of automation in Chinese factories is faster than Japan in the 1980s," said Wenjie Ge, an analyst at Nomura Securities, which forecasts wages to double in China in five years.