Monday, October 16th, 2017

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Manufacturing Returning to the U.S., but Automation Could Slow Trend

Increased automation could help keep manufacturing in China.Especially early this year, many Americans looked at the booming manufacturing sector and saw a potential resurgence in the industry. New approaches to manufacturing could put a damper on some hopes for American manufacturing, however.

Reuters reported in May of this year that Boston Consulting Group released a report suggesting the U.S. could begin to see more manufacturing jobs move back from overseas as wages begin to rise abroad. At present, Chinese workers make only about 9 percent of the amount that the average American worker gets paid. By 2015, however, that proportion could rise to as much as 17 percent.

"All over China, wages are climbing at 15 percent to 20 percent a year because of the supply-and-demand imbalance for skilled labor," Harold L. Sirkin, senior partner of BCG, told IndustryWeek. "Wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states. After [inventory and shipping costs] are factored in, the total cost advantage will drop to single digits or be erased."

As a result, several companies have begun to build new factories closer to their client base, such as NCR Corp's new ATM factor in Georgia.

Not all companies have decided to take this route, however. Taiwan-based Foxconn – the primary producer of the iPhone and iPad, two products with their largest customer base in the U.S. – has decided instead to turn to automation, according to PCWorld.

The company recently announced it plans to dramatically increase automation at its factories, bringing the number of robots from around 10,000 to more than 1 million.

"There are many simple and repetitive tasks on the production line that a robot can do," a company source told the Daily newspaper in China, according to The Telegraph. "It was manual work before, but the robot is more efficient and more controlled."

One manager told the newspaper that robots would likely not be useful for precision work, such as smartphones, but the increased automation would likely ease the company's labor shortages. For a company that employs 1.2 million workers, those problems can be substantial. Potentially more importantly, by making use of existing factories, the shift will allow Foxconn to maintain its existing supply chain while still helping to control costs.

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