[MUSIC] We are speaking again with Jeremy Moon, Senior Vice President of the Aztec Group, at their manufacturing facility in Dung-Gwon City. They set up the factory in China in 2001, attracted by China's cheap labor costs. However, wages in China have doubled over the past decade. So, now they are thinking of solutions to maintain their cost competitiveness. >> So, here we have our lines. >> So, how many workers are there in your company? We have just over 2,000 operators right now so they are currently doing the manual insertion on one of our data communication products. >> I see, so these are circuit boards. >> These are the circuit boards that we produce so we have got about 400,000 every Monday. >> And what is the typical wage for a worker today? So the take-home pay is close to around $4,000 RMB. >> So that's pretty good salaries compared to other companies. >> For the basic skills, as well as overtime, and allowances. >> I've heard that it's difficult now in China to find workers and retain them. How is you company handling that? >> It's always a challenge to bring in the workers, we manage by providing them with a good conducive environment. The food is provided for and they have rather good dormitories where they live and play as well. >> I see, so what are these workers doing, this is the end of this section of the line. >> So from beginning we do the menu insertion it will pass through the machine, that's the wave [INAUDIBLE]. And this is the pose holder processors where they do the final inspections, visual inspection. Touch ups, before it goes on to the next station for the final assembly. >> I see. Over the past decade, the minimum wage in Dongguan has increased by 250% from 450 Yuan per month to 1510 Yuan per month, but the typical wage is much higher. The real average salary is nearly 3,500 Yen, so Chinese labor costs are not nearly as cheap as when the company was first established in China. >> Are wages still rising in China and what do you think's going to happen in the future? >> It's been rising for the last ten years by double digit figures. So I think the train is continuing to go in that way and that's why the automation is something that is not just something that the company wants to do. But it also what the government is encouraging the firms to do. >> So you think that the production can continue to be competitive if it adopts these automation? >> Definitely. >> And what do you think about the all the workers, I mean if all the workers are being replaced by machines? Are they going to have any difficulty finding jobs either in your factory or in other places? >> I think it's relatively easy to find a job here in China especially when you have such a huge population. Staff that leave us usually goes back home and they are not joining like some other factories. They rather be going back to their hometowns to set up their own smaller business or maybe join a company that's really near to where their hometown is. There's a lot of opportunities back in the where they come from. >> So this is a new automation machine, right? >> Yes, this replaces the manual insertions for that we saw earlier that we saw earlier. Typically, a machine like this can replace maybe two to three operators, depending on the complexity of the design itself. So we have just recently acquired this for us, and subsequently more might be brought in as part of the automation. >> And this looks like a very complicated machine, is it produced in China, or is it imported? >> It's produced and designed in China. >> So are a lot of other companies in the River Delta also adopting a lot of automation machines? >> I think with the government encouragement, a lot of companies, a lot of factories actually, investing more into the automation. So this could be one of the products if they are running an electronics company. >> And do you think automating will really make a big difference in staying competitive in terms of costs? >> Definitely, we are looking at our eye within a year for this equipment. >> So that means that it'll pay for itself. >> Right. >> The savings will pay for the amount that the machine costs within just one year. >> That's right, the technology and the product, itself, has to come hand in hand. >> Right. >> So when we invest in equipment, we also have to invest in our own. Engineering to resign the product to make it fit the equipment. >> The company is also starting to automate the production in LED lights. A process that formerly required 15 to 20 workers divided into multiple shifts can now be done by one large automation machine. Which saves cost and reduces the errors as well as the viability of production. By introducing more automation machines, the company hopes to reduce the number of employees in order to reduce their production cost. Given the automation reforms the number of workers is slightly going to fall in the future. >> I guess it will fall further but again, it depends on the kind of new products that we're introducing and how we make use of automation to help us to reduce the manpower. >> So it's hard to estimate like if you do all of the currently planned automation reforms. Whether worker number fall from 2,000 to like 1,500 or half or even more than that or? >> I think that's a possibility for that happening, we have got some investor in some robotic arms. And in future even some of the automated vehicles on the production line to deliver parts to the lines itself. So this is going to help us not just reduce the number of manpower. Also reduce the space required on the production line from the storage of parts on the production line itself. So we have got like on-time delivery onto the production line as and when the parts are needed for the production and the assembly processes. >> The Taiwanese firm Sintech Automation, China that we are visiting in Dongguan is producing exactly the kind of automation equipment that companies like Aztec are increasingly adapting. We are talking with Kenny Rho, the general manager of the company. >> This is one of the machines that your factory produces? >> Right. >> Can you explain what it does? >> Yes, sure, the machine that we produce for industry to use. The main is the printing socket and for the machine, the function is for the pick and create. To pick the material of the go into the next station for the main process of the PCP industry. >> I see, so this replaces the workers who would be otherwise just picking things up and putting them into the next. >> Right, right, before we used to use the workers we used. >> Workers, right. >> But right now it's automation machine to replace that worker. Yeah and these machines are custom made for each producer so we- >> Right, right, we based it on the customer respect and requirement and we do the customized machine for different customers. >> Syntec is finding strong demand for it's automation products among Chinese manufacturers. The Dongguan government is supporting the move toward automation by providing subsidies for up to 5 million Yuan to manufacturers that purchase automation equipment. Well, a lot of your business end is in, is from companies who want to place workers with automated machinery. >> Right. >> And this is something that we're hearing a lot about in China. >> Yes >> As being something the government has been encouraging, so has business been good for you because of this movement from the China industry side? >> Yeah, yeah, we have a very significant growth in past five years. So I remember from the year 2012, we only have a revenue around 70 million. But a gloss to last year already come to 200 million so talk about more than 30% [INAUDIBLE]. >> Seems like your company is really benefiting from what's happening in China. That companies producing many different products are trying to address this high this high labor cost kind of challenge by automating their production systems. Do you think that trend is likely to continue in China? >> Yes, of course, China government has a policy set manufacturing 2025, so the government support. All of the company that used the automation equipment to replace the labors to increase their value for the production so that demand will be increased from the policies. Okay, and also many many labor-intensive companies, they need to drive their labor costs down, right? And increase their efficiency, so automation equipment demand also increased by this reason. Another reason why is the many, many product come in more precise, so some of the components or module you can not use deliver to assembly. You need to use automation machine can reach the quality so I think more and more automatic machine will be going more fast on the market. >> So, some people have been saying manufacturing in China is declining because of the labor costs and it's really the service sector. Listening to you talk about the potential for automation makes me feel more optimistic. That maybe manufacturing can continue to grow and be competitive in China, what is your opinion? >> Yes, yes, right now, very hard topic talk about industry 4.0, so many, many even the traditional industry or the consumer product industry. They trying to understand what can do to achieve the industry 4.0 label In that table, so many many cannot be automated equipment will be used. And also the many many software be integrated together become a system for the company. So that is a standard in the future, so I think, right now, just beginning. So automation equipment industry should be a pretty good vision in the future. >> We have seen from these factory visits in China that firms are struggling to cope with rising labor cost. And with local government support, are increasingly turning to automation to maintain cost competitiveness, this could prolong Chinese industrial dominance. Even as wages continue to rise, and provide new business opportunities to supply automation equipment and services. This also could affect ability of advanced countries, to reindustrialize, why automate in the US when you can automate more cheaply in China?
