Real-time Stock quotes, portfolio, LIVE TV and more.
Jun 28, 2010, 06.57 PM IST
Confronted with rising wages and a shortage of labour, a supplier of car body frames to Honda Motor last month earmarked the equivalent of a half year's profit to triple the number of robots at its three Chinese plants.
The surge in wages and impending revaluation of the yuan will undoubtedly prompt some companies to move factories to countries with lower labour costs such as Vietnam.
One example is the retail industry. Nitori, which owns a chain of interior goods stores in Japan and imports about 60 percent of its products from Chinese factories, said last week it would consider shifting some production outside China.
Bain's Tsang says not all production will go the way of automation given that wages, while rising, are still in most cases a fraction of what they are in the West. It also makes little sense to automate when a manufacturer's business model is based on being flexible to deliver volumes based on demand.
"Further automating their factories is something that most of them are thinking about doing. But they may not do it in same way as we see in Germany or in the U.S. where production line is 100 percent automated with robotics," Tsang said.
But the overall momentum behind automation is strong and there is little chance that manufacturers will ditch China as a production base. Among other things, producing in China keeps a maker close to the fast-growing domestic market.
Shin-Etsu Chemical, which had been reluctant to place a factory in China due to the difficulty of procuring a stable supply of raw materials, said on Monday it would build a silicon plant in Jiangsu Province in response to rising demand.
The Japanese chemical firm plans to invest about $95 million, its first major investment in China, to boost its annual silicon output by about 30 percent.
Electronics parts maker TDK Corp is also planning to add new machinery at its Chinese factories.
THK Co Ltd, which makes linear motion guides for machine tools, received orders of 274 million yuan (USD 40.35 million) in the quarter to March in China, a record high for a second straight quarter.
Fanuc, which is also a top maker of industrial robots, plans to lift its monthly output of robots to a record high by this fall to meet surging demand in China and India.
"Japanese automation-related makers such as Fanuc have been in a better position than European rivals to benefit from the trend as their products are generally cheaper," said Mitsushige Akino of Ichiyoshi Investment Management.
"But the recent weak euro is supporting European makers such as Siemens to gain momentum. Japanese and European makers are even in their product quality, and thus the real game is going to start now."
May 18 2013, 17:26
- in MARKET OUTLOOK
May 17 2013, 12:39
- in MARKET OUTLOOK