In a bid to accelerate growth and reduce labor costs, Apple supplier Foxconn cut 60,000 jobs at a single factory, work that is now being completed by robots. As many as 600 companies in the Chinese manufacturing hub of Kunshan may have similar plans to automate their workforce, according to a government survey.
Foxconn spokesperson Xu Yulian told the South China Morning Post, “The Foxconn factory has reduced its employee strength from 110,000 to 50,000, thanks to the introduction of robots. It has tasted success in reduction of labor costs.” He added, “More companies are likely to follow suit.”
These changes are spurred in part by a desire to reduce labor costs, but have also been made in response to an explosion at a Kunshan factory in 2014 that killed 146 people. The explosion was attributed to unsafe working conditions in the Taiwanese-owned metal polishing factory, which were recognized and documented. After the explosion, the local government pledged to reduce the population and to maintain 0% growth in land development in Kunshan, where 46% of land is covered by buildings and factories. The government also pledged 2 billion yuan per year in subsidies to support companies that install industrial robots on their production lines.
In order to change over from human workers to robots, where possible, Foxconn and other Taiwanese companies in Kunshan spent 4 billion yuan ($610 million US) on artificial intelligence in 2015. The job cuts represent a significant portion of the population of Kunshan, which has 2.4 million people, two-thirds of whom are migrant workers in the local factories according to a 2014 survey.
While the prevalence of manufacturing jobs has helped to sustain the Chinese economy’s double-digit growth and allowed many Chinese people to overcome poverty levels, recent trends have shown some of these jobs being transferred to India and other competing countries with low labor costs. A drive to replace humans with industrial robots represents an effort to retain those jobs in the face of rising Chinese labor costs. While Kunshan was still rated the top ‘county-level’ city in China for GDP, it experienced its first drop in GDP from 2013-2014. This, combined with the 2014 explosion, may have contributed to the support for investment in industrial robotics.
Worldwide sales of industrial robots more than doubled from 2004-2014. Industrial production numbers for China as a whole have declined over the last five years, from 15% of the national economy in 2011 to 6% in 2016.