Will Robot change the rules of globalization?

This morning on my radio station they talked about this topic, and I really liked it. Since it is in German and I need some practice anyway, I thought, why not translate it for you guys. The German original can be found here and I highly recommend listen to it if you know German.

At the end I will put a short tl.dr and my thoughts on the topic.



A montage hall of the car part producer Hella in Lippstadt. They produce high-quality LED-headlights for upper-class cars. Robots and humans work hand in hand together. 

Engineer Carsten Schwarzenberg:"Most of the production lines are build symmetrical. This means, we have one line for the left headlight and one for the right headlight. There are different steps along the way, but the parts will always move into a highly specialized gluing cell."

Robot arms will montage and glue the casing and the electronic parts into the finished product. Even though they have high-end technology, they only produce for high range cars. The company´s mid range headlights have long been produced in Eastern Europe, Asia and Middle America, because of lower labor costs. In the seventies a lot of European and North American companies moved their production abroad. 

Economist Bela Galgoczi:"This resulted in the loss of textile and clothing production in the high labor cost sector. This was the first wave. Similar things happened to the "white-goods sector", stuff like washing machines, fridges and even television sets, all of which were important industries in Europe, but have been reduced dramatically."

Topic: Will Robot change the rules of globalization? 

Today most of the computers, toys and smartphones, that are traded worldwide, are being produced in Asian production lines. The percentage of gross value added by industry in the EU is a low 16%, in the UK and France it´s even lower at 10%. But with the next level of automation the cards of the poker game are reshuffled. Experts think it is possible that the mass production of some branches will go back into high labor cost corset. 

In a commercial of a German machine manufacturer it says:"Germany is on the verge of a technological jump. German engineering has been lending wings to further worldwide industrial advancements. The term "Industry 4.0" stands for the vision of a new revolution in industry. But is it really a revolution? Companies of the Mittelstand (mid-sized companies) prefer the term evolution, because technological advancements happens on a day to day basis in Germany."

Nothing has changed montage, and with it industry and jobs, more than automation. The researcher Engelbert Westkämper saw his first robots in the sixties. 

Engelbert Westkämper:"There has been different techniques, one was electric and the other one hydraulic. Both were able to lift parts, but you couldn´t position them accurate. You could still use them to move parts from A to B."

Since then man have improved and created robots with new and astonishing abilities. A electrical giant of robot greets visitors of the Hannover fair. Industry 4.0 is a big topic. A new generation of robots revolutionizes factories and the interconnection of production via the internet has begun. Machines are starting to talk with other machines.

The Fraunhofer Institute of production-technique is located directly next to the University Stuttgart-Vaihingen. The compound is secured with walls and cameras. Visitors have to to move through a security check, because of the research of production-techniques that could decide which national economy remains competitive. Engelbert Westkämper lead the 400+ employee strong institute until he retired. There are few that have as much experience with production techniques as he has and this resulted in being a highly requested adviser for politics. In his opinion, intelligent production techniques are a blessing for the industry in Europa: In the beginning of the seventies a lot of people were skeptical when it came to robots.

Engelbert Westkämper:"Because a lot of people were afraid that robots would kill jobs. But exactly this has not happened here in Germany, quite the opposite is the case. We have a high amount of automation in few branches and in specialized branches.There was, of course, a substitution-effect on manual labor, but a lot of new jobs in the preparation, planning and programming have been created. Today we can say that the amount of jobs created compared to the jobs lost is a positive one. "

Kolbingen is a village with 1.200 inhabitants on the "Großen Heuberg", a part of the western Swabian Alps. The company "Hipp Medical" is producing surgical instruments like bone saws and drills. This member of the Mittelstand is being influenced by automation. The mechatronics engineer Andreas Dieter is standing in front of a fully automated machine. 

Andreas Diener:"Here we have a five-time-CNC-grinding machine that is grinding a bone drill out of a metal rod. It will do every step on its own. First it will do the spiral, then the tip and then anything additional our costumer might want. The machine get all the parts automatically from the storage and runs - in extreme cases - up to 2 and a half days per article. On the computer you can see the progress and how many tools have been made. You can see here that there are 1 day, 1 hour and 30 minutes left until it´s done. This means it will be done tomorrow at 1 PM."

The company founder Markus Hipp has lived through the dramatic change of production himself. Just like his father he worked as a home worker and build the first medical precision tools by hand. He founded the company in 1994 and build up a factory in Kolbingen. Hipp is enthusiastic about the possibilities with automation.  

Markus Hipp:"The value-adding process, this includes lathing and grinding, has a very low labor cost. We have the first shift consisting of 2 people per 10 machines, then a second one with 1 person and the last one that is a ghost shift."

Ghost shift - this means that the production is still running at full capacity, but without human employees in the company. The machines can even run through weekends if necessary. If one of them catches fire, it will extinguish itself. If you would do this with manual labor, it would take 10 times more employees. Additionally the autmation allows for a higher flexibility and production rates.

Markus Hipp:"Just think about the following. If we do batch sizes of 10 up to 30 fully automated, we have a really good price level. And of course we also have very short reaction times for product realization, where other companies, not matter where in the world they are, take much longer"

Today Andreas Diener can check if the machines work fine at home after work or on weekends from his couch. He can check access the machines with his tablet and gets the same information. And he can do troubleshooting from home. If there are problems with the software he can simply restart the machine. If there is a workpiece that is not the way it should be he can turn off the machine and prevent the waste of energy and resources. The remote control of machines was already introduced in 2012 at Hipp Medical.

Around 50 years earlier - 1961 - the car manufacturer General Motors was the first one to use a factory robot: Unimate. He removed hot casting parts from the furnace and smoldered the car body together. Over time robots became more and more versatile and powerful. They are sell very good. 180.000 robots were sold worldwide in 2013, that´s an increase of twelve percent. For a long time only big companies like plane and car manufacturers used robots. Small companies were scared because of the high investment. But due to a big pressure for cost reduction, and also reduced prices for automation a lot of bosses of small and middle-sized company change their mind. 

Markus Hipp:"This means the bill for automation has become positiv."

Because of automation the labor cost part sinks in a product. But if this part gets smaller, others become more important like transport costs, infrastructure, reliability of the power grid and quality of workers. The calculation for some abroad places don´t look as good.

Markus Hipp:"Flexibility is lacking, because there is a risk in currency, there are fluctuations in employees, delivery times are higher and product realization takes longer. For small amounts it´s not smart to produce them in far east. I can imagine these being produced more in Germany again."

Currently around 400 German companies are moving their production back to the country. These include toy manufactorer Steiff, the chainsaw producer Stihl and the home appliance producer Fackelmann. For employees here it means approximately 8.000 new jobs every year. Signs for the return of mass production into classical industrial countries, in which - not like in Germany - a huge deindustrialization took place, mainly the USA. The hightech company Apple is manufacturing it´s computer in a Texan factory and the internet company Google is building it´s data glasses in the Californian Silicon valley. Other branches that have returned are the steel industry and carpentry industry. They point at - thanks to controversial fracking - the cheap energy costs in the USA and the possibility of automation. Right now it´s only about 10% more expensive to produce something in California compared to China. Because of this small difference a lot of people think about producing in the USA again, reinforced by the often better quality. 

Leipzig, Amazon distribution center. The manager Armin Cossman is looking down to the main hall from a bridge. Employees take out wares from a truck, others place articles in  shelves or package books, toys or other orders for shipment. 

Armin Cossmann:"In principle it´s a chaotic storing, since any article could be anywhere. Important is that you scan the barcode and place it in the shelf with the same barcode. If you scan both, the system knows where the cat food, the book, the television is. If a customer orders it, a colleague will get a message on his scanner and now knows where it is. 

According to this barcode Amazon-employees can follow the way of the ware. Automatic identification plays an increasingly important role in the industrial production - and in the factory environment of tomorrow, machines, robots, parts and the finished product will talk with each other constantly. Every part will have it´s assembly instruction saved digital in the form of a barcode or a chip. Montage robots will be able to read this to figure out which kind of part is in front of them and how they have to handle it. Parts will also be able to report back if they are lying at one spot for extended periods of time. Companies are already thinking of new ways to use automation. 

The football (soccer) player Bastian Schweinsteiger, Manuel Neuer and Mezut Özil advertise for a shoe from Adidas. Shoes like this are mostly stitched together by Asian women in factories that produce for several different companies. Now all of these sports goods companies are researching together with the technical Universities of Aachen and Munich the project "speedfactory". If they are successful, there will be small automatic factories that stitch sneakers according to the wishes of customers, so called individualized products. The combination of new technology and individual fitted products should make mass production of clothing, shoes and electronics in Europe worthwhile again. 

Engelbert Westkämper:"I have in my suggestions, to do something about tech oriented consumer goods. This is the class for household good and for parts of relevant technical produced. This would be the first thing, where you should be the fastest to progress. I can imagine textile and other branches that will be producible here again. I have shared these thoughts in the city Mailand to the shoe and textile industry and have received a lot of resonance, because they have seen, that with this technology you are able to bring back production, if you are, at the same time, also produce the individual product for every person. Then you need short ways and extremely efficient and flexible techniques. 

The world of production sites could change dramatically by technological advances. The Indians have been the world leader in textile for centuries - by using millions of manual loom. Thanks to industrial advances the Brits stole the leadership in the 18th century. Since 1970 they slowly moved back to Asia, due to lower labor costs. And now they might return back to Europe thanks to automation - at least partially. It could lead to grave changes for people in Asia. For example for the 3,5 million people that work in the textile production in Bangladesh. Their jobs might be paid horribly and the working conditions are awful but it´s still a job. Big economies like China and India should have no problem losing these jobs, but smaller and more specialized economies like Bangladesh a relocation could lead to disaster. But will this lead to the often desired increase in jobs for the bad European job market? The economist Bela Galgoczi works at the European Research Institute of Trade Union. Since the beginning of the financial crisis not even every second young adult gets a job in a lot of southern European states. Can these - and a lot of older unemployed people - hope of new jobs in the industry?

Bela Galgoczi:"If you are able to regain more competence is a good question and I am confident that a lot of countries will be able to do it, there is no way that will work for everyone. Another thing: You will not be able to gain many jobs trough robots and automation."

Since the work is done by machines, it just creates a few jobs for specialists. And with all of the euphoric planning one should not forget that the trend to digitization and standardization still goes on and will destroy more jobs. 

The distribution center of Amazon in Leipzig. Like Nicole, who doesn´t want to say her second name, are almost all workers busy taking in goods, distributing them to shelves and afterwards looking for them and package them for shipment.

Nicole: "This is the goods reviving department. The packages come on the conveyer belt where we take it off. We take one off. Then we scan them so they are in the system. Then we open the package and scan every article unless it´s a bulk shipment. "

Maybe Nicole and her colleges will soon have to compete against robots, like her colleges in the US-American storages. 

Armin Cossmann:"We are talking about driverless transport systems, that have been used in the car industry for over 20 years. They basically bring the wares to the people. Right now the people have to go by foot. The company Kiva is already doing this, the bring the shelf to the employee."

A flat and compact robot moves underneath the shelf, lifts it up and brings it to a  employee that can simply take out the ware. This would make the job of the person obsolete who walk through the storage to supply people. Ten thousand of these robots are being deployed in the USA for testing. Since they are working day and night and don´t need breaks or vacation they will probably replace 25.000 jobs.

A strike in Schilde-Halle in Bad Hersfeld. A few hundert employees of Amazon are gathered around tables, many of them wear yellow strike-vests. In the back of the hall people can write themselves on strike-lists. Since Mai 2013 a part of the 9.000 German Amazon-employees has laid down work to strike for better working conditions and payment. It is more likely though, that robots replace their jobs, than it is for their strike to be successful. Amazon is pushing for automation. You can see it by looking at the recent acquirement of the robot manufacturer  Kiva by Jeff Bezos in 2012. But automation will not only hit packager people. According to a study of the Oxford-economist Carl Benedikt Frey and Michael A. Osborne every second job of the 700 they looked at is endangered by robots. 

Bela Galgoczi:"These are forecasts and prophecies and yes they are difficult to foresee. A lot will happen and you could say, no job is safe."

A good example is a software that has made a whole generation of jurists in the USA obsolete. Back then their job was to look for leading cases - this can now be done by a computer in seconds. The same thing could happen with diagnosis software and doctors. The entrance of robots in developing countries has already started. Foxconn - one of the world leading companies for electronics - is going to install millions of robots in their Asian factories. This is going to make human work force obsolete. But there will still be work says Bela Galgoczi.

Bela Galgoczi:"Humans cannot be replaced everywhere, and where he can be replaced there will be new possibilities. You cannot predict what the bottom line is going to be. The only thing that is sure, is that a working week will not stay at 40-44 hours but will be reduced to around 30 hours."

A social debate about the topic of shorted work time is urgently needed, but not done. If everything stays the same, the fight between workers will be fierce and the differences in income will become worse. The amount of national income in Germany was split by 72% to the working force and 28% by capital investments in 2000. Now the percentages have changed to 67% for the working force and 33% by capital investments. At least a part of the German industries should be able to profit of this in the following years. Somebody has to build the new intelligent factories. And the German economy is perfect for this. 

Engelbert Westkämper:"We have an export of 60, 70, 80 percent. The Germans are the factory suppliers of the world."

For the building of modern factories you need specialist of dozens of different specializations. This is why regions where there are a lot of specialists have a advantage.

Engelbert Westkämper:"This whole thing promotes lokal and regional cooperation and region that have a lot of different technical branches. Those who have the biggest diversity of technology will be the winners of this development. This all leads to the point that Baden-Württemberg is the best place in the world to do this." (Editors note: Can you guess where this guy is from?)

There is one big weakness the European economic has though - the information and communication-technology. Silicon Valley is far ahead. They could be the biggest competitor to the German Companies. 

Michael Hüther:"The risk is, that you have to see that all the companies that are leading in information and communication-technology are not European. And this will be the big question. Will automation be the mainly advanced by classical machine engineers, or is it going to be a internet company like Google? This question is not yet answered."

There is the possibility that internet companies will advance factories - and not the German engineers. Disconnected from this, the basic rules of economics will not change. The stuff that has the highest profitability, will be produced. A lot of things predict that products will be produced close to costumers. The losers will be the countries that mass produce by manual labor. Thanks to economical advances the competition for jobs will be drastically increased for everyone. The only way for everyone to profit from this is by fair distribution of profits between the workers and investors. It´s time for a social debate!


tl.dr version: There is now a trend for bringing back production into the old industry countries due to cheaper production thanks to robots. 



pretty good post! One of the main reasons why Americans fear AI so much is due to that 'robot' fear they have implanted on themselves. They still fear the robots taking their jobs!

of course, automation will move production back to the local scene. this will of course be a huge problem for china as they are currently the global manufacture center

Which is actually pretty funny, considering that most of the manual labor is done abroad anyway. Or in prisons. let´s not forget about them.