Interview – Hamed El-Abd
There are a couple new things here at the booth this week. The first of which is the JOT machine behind us – a Finnish company which has been around a long time. Can you tell us a little about the products you are using here?
Over the last five years and every time you have ever seen me, I have talked about automation, the importance of automation and that the world is going to go automation whether you like it or not. I have been focusing a lot of WKK’s attention in getting more technology for automation. This particular machine behind me is a cell. This machine has two cells within the major cell. Let’s say for example, you have your mobile phone, normally you would have hundreds of workers putting this phone together. In the end, you need this test process to make sure it is working properly before it gets packed into a box. What this machine is doing is taking the phone and putting it into the cells, plugging it in, turning it on, and checking to make that, first of all, everything is electronically correct, then it checks the screen to make sure it is actually working and is working correctly. Then it either passes or it fails. You can easily eliminate 30 people by using this process. Again, this is they way it is going, whether we like it or not, automation is coming. In China, it is coming very fast. They are going to spend millions and millions of dollars on automation because the cost of labor continues to escalate year after year. If they want to stay in business, they have got to automate. So does the rest of the world.
That is true. The central theme here at the show is automation.
Absolutely. If you look over there, we have an x-ray machine from Matrix of Germany. In the past, x-ray technology was very complicated and difficult to automate. Now they have finally have it so you put the board in one side, it goes through the machine, comes out the other and it tells you whether it is good or bad.
Let’s talk a little more in-depth about this automation. It started a couple of years ago in Europe with Industry 4.0. It is really taking off here in China. The big driver as you mentioned is the labor costs. The Chinese government really wants Chinese companies to move inland, but these companies prefer to stay on the eastern seaboard. The only way they can afford to do that is reducing labor by further automation. Would that be correct?
That is absolutely correct and also difficult to explain and understand. You have 1.5 billion people and a labor shortage.
A lot of people do not want to work in a factory today. A factory that is perhaps, hundreds of miles away from their home, their parents, their family. As they become educated, that is last thing they want to do. So the factories are drying up.
I think automation is only way for a business to continue to succeed. Within the next 10 years, our engineers and scientists tell us that the human will be totally replaceable. Whatever the human can do, the machine wil be able to do as well or more efficiently.
So basically, Terry Gou of Foxconn, his prophecy of lights-out factories is going to be a reality very soon?
Last year, I believe, they put in over 300,000 automated robots. This year they are going to put in over a million. That is just Foxconn. Then look at what all the others ones will be doing, otherwise they cannot compete. Some companies are choosing to leave China, and the Chinese government is well aware of that. They are working on enhancements so that automation can grow.
One story I heard was that the South China government Dongguan is investing one trillion RMB in a smart factory.
Yes that is true. That was a major story on the front page of the South China Morning Post and several other papers had that as well. Normally, if it is in the South China Morning Post, it is pretty real.
That is an incredible amount of money and it is government driven, the European governments are not putting that much into it and the certainly the United States government is not.
The key difference is that the Chinese government gets very involved in the economics of running the country, whereas in the United States or in Europe, they are very hands-off, let the business run itself. That does not always necessarily succeed. I do not want to be against any govern- ment, but if you do not get involved with making certain decisions that are positive for business … you know?
It is like the example I gave you about the United Sates where Audi and Toyota are building $1.4 billion factories in Mexico because the export conditions are better. They have free-trade agreements with Europe, their South American neighbors and Asia. These countries can avoid duties on those same cars from Mexico.
That is true. Let me give one other example. I recently saw a television show about BMW’s huge new factory complex in Spartanville, South Carolina where the whole factory is completely automated with robots. There are certain areas of automation with a car where you need a human to, let’s say, hang the door. In Germany and in Japan, they hang the door on the car because you have to align holes with very tight precision. BMW has sensors so that the robot actually does that. A human does not even touch the car or does so very little.
Talking about the lower labor market you mentioned earlier, a few factories are moving offshore, more than a few, actually. They are heading towards Vietnam and the Philippines. Can you talk about that?
You need to go to where the labor market is a lot cheaper. In regards to Vietnam, many of the work areas here like textiles or toys where it is a lot of hand assembly, they need to go to lower labor cost because no matter what you do, it is going to be too expensive here. Many of the other companies are choosing to go to the Philippines because of the low labor costs and they speak English.
What about security in a place like the Philippines?
There are always issues no matter where you go. You have security issue even here in China. Today, the governments are understanding of that problem and they are dealing with it. I do not think you see factories moving to the south of the Philippines where the majority of the issues are, where the former United States Clark Air Base is.
It is always fascinating talking with you Hamed, we could do it all day. You are a wealth of knowledge here in this part of the world especially. Thank you for giving us an update today and the best of luck with your new lines.
– TREVOR GALBRAITH