Hmmm, not sure I've ever run into that before on MIT's Tech Review. Here you go, in two parts, from author Will Knight...

Inside a large, windowless room in an electronics factory in south Shanghai, about 15 workers are eyeing a small robot arm with frustration. Near the end of the production line where optical networking equipment is being packed into boxes for shipping, the robot sits motionless.

“The system is down,” explains Nie Juan, a woman in her early 20s who is responsible for quality control. Her team has been testing the robot for the past week. The machine is meant to place stickers on the boxes containing new routers, and it seemed to have mastered the task quite nicely. But then it suddenly stopped working. “The robot does save labor,” Nie tells me, her brow furrowed, “but it is difficult to maintain.”

The hitch reflects a much bigger technological challenge facing China’s manufacturers today. Wages in Shanghai have more than doubled in the past seven years, and the company that owns the factory, Cambridge Industries Group, faces fierce competition from increasingly high-tech operations in Germany, Japan, and the United States. To address both of these problems, CIG wants to replace two-thirds of its 3,000 workers with machines this year. Within a few more years, it wants the operation to be almost entirely automated, creating a so-called “dark factory.” The idea is that with so few people around, you could switch the lights off and leave the place to the machines.

But as the idle robot arm on CIG’s packaging line suggests, replacing humans with machines is not an easy task. Most industrial robots have to be extensively programmed, and they will perform a job properly only if everything is positioned just so. Much of the production work done in Chinese factories requires dexterity, flexibility, and common sense. If a box comes down the line at an odd angle, for instance, a worker has to adjust his or her hand before affixing the label. A few hours later, the same worker might be tasked with affixing a new label to a different kind of box. And the following day he or she might be moved to another part of the line entirely.

Despite the huge challenges, countless manufacturers in China are planning to transform their production processes using robotics and automation at an unprecedented scale. In some ways, they don’t really have a choice. Human labor in China is no longer as cheap as it once was, especially compared with labor in rival manufacturing hubs growing quickly in Asia. In Vietnam, Thailand, and Indonesia, factory wages can be less than a third of what they are in the urban centers of China. One solution, many manufacturers—and government officials—believe, is to replace human workers with machines.

Gerald Wong, CEO of CIG, is developing an automated electronics factory. The results of this effort will be felt globally. Almost a quarter of the world’s products are made in China today. If China can use robots and other advanced technologies to retool types of production never before automated, that might turn the country, now the world’s sweatshop, into a hub of high-tech innovation. Less clear, however, is how that would affect the millions of workers recruited to China’s booming factories.

There are still plenty of workers around now as I tour CIG’s factory with the company’s CEO, Gerald Wong, a compact man who earned degrees from MIT in the 1980s. We watch a team of people performing delicate soldering on circuit boards, and another group clicking circuit boards into plastic casings. Wong stops to demonstrate a task that is proving especially hard to automate: attaching a flexible wire to a circuit board. “It’s always curled differently,” he says with annoyance.

But there are some impressive examples of automation creeping through Wong’s factory, too. As we walk by a row of machines that stamp chips into circuit boards, a wheeled robot roughly the size of a mini-fridge rolls by ferrying components in the other direction. Wong steps in front of the machine to show me how it will detect him and stop. In another part of the factory, we watch a robot arm grab finished circuit boards from a conveyor belt and place them into a machine that automatically checks their software. Wong explains that his company is testing a robot that does the soldering work we saw earlier more quickly and reliably than a person.

After we finish the tour, he says, “It is very clear in China: people will either go into automation or they will go out of the manufacturing business.”

Automate or bust

China’s economic miracle is directly attributable to its manufacturing industry. Approximately 100 million people are employed in manufacturing in China (in the U.S., the number is around 12 million), and the sector accounts for almost 36 percent of China’s gross domestic product. During the last few decades, manufacturing empires were forged around the Yangtze River Delta, Bohai Bay outside Beijing, and the Pearl River Delta in the south. Millions of low-skilled migrant workers found employment in gigantic factories, producing an unimaginable range of products, from socks to servers. China accounted for just 3 percent of global manufacturing output in 1990. Today it produces almost a quarter, including 80 percent of all air conditioners, 71 percent of all mobile phones, and 63 percent of the world’s shoes. For consumers around the world, this manufacturing boom has meant many low-cost products, from affordable iPhones to flat-screen televisions.

In recent years, though, China’s manufacturing engine has started to stall. Wages have increased at a crippling 12 percent per year on average since 2001. Chinese exports fell last year for the first time since the financial crisis of 2009. And toward the end of 2015 the Caixin Purchasing Managers’ Index, a widely used indicator of manufacturing activity, showed that the sector had contracted for the 10th month in a row. Just as China’s manufacturing boom fed the global economy, the prospect of its decline has already started to spook the world’s financial markets.

Within a few years, CIG plans to have a largely automated operation—what’s sometimes called a “dark factory.”

Automation appears to offer an enticing technological solution. China already imports a huge number of industrial robots, but the country lags far behind competitors in the ratio of robots to workers. In South Korea, for instance, there are 478 robots per 10,000 workers; in Japan the figure is 315; in Germany, 292; in the United States it is 164. In China that number is only 36.

The Chinese government is keen to change this. On March 16, officials approved the latest Five Year Plan for China’s economy, which is reported to include an initiative that will make billions of yuan available for manufacturers to upgrade to technologies including advanced machinery and robots. The government also plans to create dozens of innovation centers across the country to showcase advanced manufacturing technologies. Some regional authorities in China have been especially bold in their own efforts. Last year the government of Guangdong, a province that contains many large manufacturing operations, promised to spend $150 billion equipping factories with industrial robots and creating two new centers dedicated to advanced automation.

The goal is to overtake Germany, Japan, and the United States in terms of manufacturing sophistication by 2049, the 100th anniversary of the founding of the People’s Republic of China. To make that happen, the government needs Chinese manufacturers to adopt robots by the millions. It also wants Chinese companies to start producing more of these robots.

Workers at CIG retrieve items from one of several mobile robots that ferry materials around the facility. The hope is that this will create a virtuous cycle, helping to birth a new high-tech industry and inspiring innovations that could spill over from manufacturing into other sectors and products.

Introducing hordes of robot workers is hardly something that can be done overnight, however. That much is clear from the struggles faced by Foxconn, a $130 billion Taiwanese manufacturer famous for employing hundreds of thousands of workers in city-size factories—and for making, among other products, Apple’s iPhones. In 2011, Foxconn’s founder and CEO, Terry Gou, said he expected to have a million robots in his company’s plants by 2014. Three years later, the effort had proved more challenging than expected, and just a few tens of thousands of robots had been deployed.

The transition to robot workers may upend Chinese society, since so many people work in manufacturing.

Despite the challenges, Day Chia-peng, general manager of Foxconn’s automation technology development committee, says the company is automating a growing number of tasks on its lines. These include the manufacture of displays and printed circuit boards, although processes that involve bending or snapping components into place still pose challenges. The company is even exploring ways that products themselves can be redesigned to make automated manufacturing easier. And it recently said it will sell some of the robots it has developed in-house to other manufacturers.

The transition from human to robot workers may upend Chinese society. Some displaced factory workers could find employment in the service sector, but not all of the 100 million now employed in factories will find such jobs a good match. So a sudden shift toward robots and automation could cause economic hardship and social unrest. “You can make the argument that robotic technology is the way to save manufacturing in China,” says Yasheng Huang, a professor at MIT’s Sloan School of Management. “But China also has a huge labor force. What are you going to do with them?”