Technology news late last month was abuzz with the announcement that Foxconn, a Chinese-based manufacturing company, perhaps most famous for iPhone production, planned to fully automate its plants in China.
Fully automated factories, of course, have been coming for some time, fueled by smart machines and the Internet of Things (IoT). Both mean that robots and systems that make products can communicate with those products, and vice versa.
Two years ago MarketWatch was predicting that the coming of the fully automated factory was a decade into the future. German factories in 2014 were already 75% automated, but still required a cadre of product and systems managers.
Foxconn doesn’t plan to do away with people, but Fortune characterizes the number of humans left in its plants as “a handful.”
Foxconn: Good for the Bottom Line
Foxconn has been at the forefront of business leadership managing automated factories, with about 40,000 robots working in its plants. Foxconn makes its own factory robots, which are called Foxbots.
The company divides automation into three stages.
- Stage 1 – robots help workers at specific stations.
- Stage 2 – production lines are fully automated. These currently exist in Chengdu, Chongqing, and Zhengzhou.
- Stage 3 – a factory whose workforce and production lines are almost entirely robots or automated systems.
Automation is likely good news for Foxconn’s bottom line. In addition to the iPhone, the company’s factories produce monitors and personal computers. Robustly producing factories with no human workers may seem like a recipe to reduce labor costs and thus be highly profitable.
In March 2016, Foxconn announced that 60,000 jobs had been cut in just one of its factories due to automation. The company has indicated that this will be far from the last.
The resultant cash could be used, Fortune points out, to fund expansion or acquisition, such as Foxconn’s acquisition of Sharp, the once Japanese-owned electronics company.
Perhaps Not So Good for China’s Economy
Full automation may exert beneficial effects on the company’s bottom line, but the effects on the overall economy of China could be negative.
China’s economic boom has been fueled by consumer spending and a rising middle and even upper middle class – as a result of more jobs required to build the country’s growing infrastructure. Foxconn’s workers have been part of that rising middle class. Foxconn has relied for several decades on low-wage workers, initially from rural China, who emigrated to the company’s locales specifically to work in their plants. Low wages were still higher than what rural Chinese typically earned, increasing spendable income.
Can an economy that relies on purchases of consumer and other goods continue to flourish with a diminishing workforce?
Will the worker displacements caused by automation cause political unrest?
Will they be seen as fostering inequality between the displaced and the still-employed?
Fortune points out that displacements, and any political effects, could have “outsized effects in China” because its current political structure implicitly depends on a sustained economic engine to spread its benefits.