An American revolution

Chinese media sounds the alarm on rise of robot tailors in the US


20 Jul 2012
Week in China

If Harry Reid has been invited to this month’s opening ceremony for the London Olympiad, organisers would be well advised not to let him anywhere near the Olympic Flame.

Less than a fortnight before the start of the Games, the Senate Majority Leader has been in incendiary mood, and has led the grandstanding by US politicians on the wearing of ‘Made in China’ outfits by American athletes.

“I think they should take all the uniforms, put them in a big pile and burn them,” Reid ruminated. “I hope they wear nothing but a singlet that says ‘USA’ on it painted by hand. We have people in America working in the textile industry who are desperate for jobs.”

If that sounds like a faux sense of outrage on Capitol Hill (Italian suits, anyone?), it’s in synch with a growing anti-China mood in presidential campaigning. Topics like offshoring and outsourcing have been triggering testy exchanges.

But textile tension has also been evident in the Chinese media this month, on news that “overhead, pick-and-place robots” are being developed in the United States that could soon pose a threat to the country’s vast garment industry.

The claim? That a new era of ‘robot tailors’ may make it cheaper to make clothes in the US rather than shipping them in from China.

The China Youth Daily opted for Cold War imagery in its own assessment last week, warning of a new “containment strategy” in which American automatons “seize the commanding heights in a new round of technological and industrial competition”. Heady stuff. So perhaps it was just as well that no one at the newspaper seems to have picked up on the announcement that the company developing the garment robots – SoftWear Automation from Georgia – has received a $1.2 million grant from the Pentagon.

Robots can work three times more efficiently and don’t ask for pay rises.

The money came from an agency tasked with boosting US national security, although a more prosaic explanation could be that the Department of Defense is hoping to save something on a $4 billion yearly spend on uniforms.

Part of the backdrop to the new interest in robotics is the persistent increase in Chinese wages, and the likely peaking of the country’s labour market demographics by 2015.

The upward surge in salaries has continued relentlessly this year. The Wall Street Journal was reporting this week that pay for migrant workers – usually those on the factory front line – rose 14.9% in the first half, according to data from the National Bureau of Statistics.

At current rates, that means China’s private sector manufacturing wages will have doubled from their 2011 levels by 2015.

That leads to Chinese concerns that its own rising costs could trigger a renaissance in American manufacturing. Similar status anxiety (this time fed by fears that plunging natural gas prices in North America would boost US manufacturers) was getting mention just a few weeks ago. Now it’s the revenge of the robots that is earning the column inches.

A series of studies from the Boston Consulting Group over the last 18 months has also been looking at the competitiveness issue.

China’s rising wages are definitely a factor in narrowing the margin with the US, BCG says. But in the past, overseas businesses have often focused too much on their unit labour expenses, overlooking the fuller range of production costs in China. And when other expenses like transport, duties, supply chain risk and real estate are factored in, it already looks like it is becoming more cost-effective for some industries to relocate to places like Alabama and Tennessee rather than stay in China.

Some firms have already made the decision to expand their US production, with Caterpillar, Toyota, Honda and Nissan among those on the list.

Investing in robots is expensive and it also undercuts one of the competitive advantages of most Chinese manufacturers – their lower labour costs.

As WiC has mentioned before, Chinese manufacturers have a plan to delay the day of reckoning by moving more of their facilities inland. But this isn’t always going to provide an escape route, as interior cities lack the skilled workers, supply networks and transport infrastructure of the coastal zones, and this can offset some of the savings offered by lower wages.

So, curiously enough, the Chinese are considering investing in robots too. Wang Tianmiao, who heads a team charged with accelerating automation under the central government’s latest Five Year Plan, told the China Daily earlier this month that industrial robots are already cheaper than workers in some of China’s eastern regions. He says that a typical robot now costs Rmb300,000 ($47, 063) and requires about Rmb20,000 in annual maintenance costs. Over 10 years that turns out to be less expensive than a Rmb6,000-a-month technician, especially as robots can work three times more efficiently and don’t ask for pay rises.

Companies like Foxconn have also been saying that they will follow both cost-control strategies – head inland, as well as invest in more automated production – to stay ahead, although the Taiwanese firm has gone quiet on its plans for automation following an eye-catching announcement last year that it would have a million robots at the ready by 2013, according to Economic Information Daily.

In fact, imports of industrial robots by Chinese firms increased by 62% to $866 million last year, meaning that officials like Wang are also pushing for more robots to be made domestically rather than purchased from overseas.

But as BCG points out, this isn’t a straightforward transition. Investing in robots is expensive and it also undercuts one of the competitive advantages of most Chinese manufacturers – their lower labour costs. How the central government might respond if hundreds of thousands of workers start to be jettisoned out of their former jobs will also need some forethought.

Nor are manufacturers likely to make a complete retreat back to the United States. Products like cars and construction equipment are more likely to return first. And in spite of all the talk about new robot tailors, BCG thinks that higher-volume, labour-intensive industries (like apparel and textiles) may be slower to shift.

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