The Rise of Robots in Emerging Markets

 

The relentless rise of robotics in manufacturing around the world that is expected for the next decade will affect the development of emerging market economies in different ways. The “East-Asian Tigers,” including China, are embracing robotics full-heartedly as the way to preserve the manufacturing intensity of their economies and build global market share in medium and high-value added industries, like automobiles, electronics, semiconductors and batteries. Germany and Japan are also manufacturing powers determined to maintain their manufacturing base through innovative engineering.

Most middle-income countries throughout South-east Asia and Latin America are lagging seriously behind in the robotics race and may find it increasingly difficult to move up the value chain to compete for market share in many highly-automated industries. These middle-income countries also face rising competition in low-value-added manufacturing from the new wave of industrializing countries with significantly lower labor costs, such as Vietnam, Bangladesh, India, Pakistan  and Indonesia.

Until today, robot deployment has been highly concentrated in a few industries, namely motor vehicles, electronics and metal-working.

However, accelerating trends in robotics technology is changing this focus in important ways. For example, robot suppliers are beginning to offer automation solutions for clothing and shoe manufacturing, industries that today are highly dominated by low-income economies. This trend may allow for the preservation of these industries in current high-cost producers like China, and even relocation to Europe and North America, in a process dubbed “robot-shoring.”  Moreover,  teamed with computer-aided-design (CAD) and 3D printing, which dramatically accelerate product design, automated manufacturing in developed countries will permit much shorter production chains and give producers  greater ability to react quickly to consumer trends. This is particularly true for high fashion-content clothing and shoe-wear, so it should not be a surprise that Nike and Adidas are leading the “robot-shoring” trend.

Both Nike and Adidas are working with tech partners on solutions for automating the most labor-intensive part of the sneaker manufacturing process, the fusion of the many parts and layers that make up the upper part of the sneaker. Nike invested in 2013 in a company called Grabit that uses a process called eletroadhesion to use static electricity to manipulate soft materials like leather and cloth, and this year Grabit commissioned upper-assembling robots in Nike plants in Mexico and China that work at 20 times the pace of human workers. This is a significant step towards bringing back production closer to consumers in developed markets.

Adidas’s Speedfactory in Ansbach, Germany is another experiment towards using 3D Printing and robotics to bring back sneaker production home. Adidas has partnered with Oechsler Motion, a German machinery supplier, and plans to produce 500,000 units a year in 2018. A second plant is under construction in Atlanta. Adidas believes technology can solve a huge mismatch between the typical 18-month production chain with Asia and the 12-month “fashion-life” of a sneaker.

Another company, Softwear Automation of Atlanta, Georgia, is intent on using its “Sewbot” technology to disrupt the world apparel-making process and the lives of millions of $5/day sweatshop employees scattered around South-East Asia and Central America.. Sewbot has solved the difficult task of robot manipulation of fabric, and Softwear Automation claims to have dominated the automated production of T-shirts and denim bluejeans. The company estimates that its process is 17 times more productive than human labor. Tianyuan Garments, a large Chinese firm that supplies Adidas, is building a plant in Arkansas that will have 20 Sewbot production lines and aims to produce 1.2 million T-shirts a year. Tianyuan estimates human labor will amount to $0.33/shirt on its completely automated production line, which compares to about $0.33/shirt in Bangladesh, the current low-cost producer.

China has made robotics a key part of its government supported “Made in China 2025” plan, both in terms of usage and domestic supply. The goal is to make China one of the world’s top 10 most intensively automated nations by 2020, with 150 industrial robots per 10,000 employees, which compares to today’s leader South Korea, with 531 robot units, the USA with 176 robot units and Germany with 301 robot units.

In 2016 China led the world in terms of both the amount of new robots installed (87,000 units, of which 27,000 came from Chinese firms) and for the total stock of operational robots (340,000, +33% over 2015).

The deployment of manufacturing robots around the world is extreme in its geographic concentration. As the data from the International Federation of Robotics shows,  the great majority of robots are being deployed in East Asia, North America and Germany. Middle-income countries with significant manufacturing bases, such as Brazil, Thailand, Malaysia, Turkey and South Africa, and European powers like France and the U.K, are being left far behind. The positive exceptions are Italy and  Eastern Europe, perhaps because of the latter’s close integration with the German supply chain.

Us Fed watch:

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China Watch:

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  • Michael Pettis on China’s slowing growth (Carnegie)
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China Technology Watch:

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  • Chinese firms eyeing passenger drones (WIC)
  • Alibaba wants to bring big data to 1 million small shops (Caixing)
  • China’s  Anyuang to make T-shirts with robots in Arkansas (Bloomberg)

EM Investor Watch:

Technology Watch:

  • Nike’s Static-Electricity robots (Bloomberg)
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