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Midea : US$800 Million to Be Spent on Automation in 5 Years

05/22/2015 | 10:41pm US/Eastern

T his year is proving to be a big one in terms of automated technology in China. Midea was cited by leading financial publication Caixin in March as a leader in this field.

"2015 is a watershed for robot technology," said Wu Shoubao, vice president of manufacturing at Midea Residential Air Conditioning (RAC). "This year, we will spend US$130-160 million, and over the next five years we will spend just over US$800 million. In the three years from 2012-2014 we only spent US$160 million on automated technology."

"A machine has to have six rollers to be considered a robot. That currently costs nearly US$13,000. So far we have only purchased relatively simple instruments," Wu said. In 2012, Midea began implementing policies that would lead it to more automated manufacturing. By the end of last year, the company had 800 relevant instruments, this year it will add 600.

Midea's residential air-conditioning, compressor and commercial air-conditioning factories have already made this breakthrough. This year the whole group will follow. RAC is a leader in the field of cost-cutting through automation.

The factory employed 2800 people a decade ago, that figure has halved. By the end of 2015 it will be down to 900 and in three years down to 450, according to manager Chen Jiansheng.

The remote-controlled machines at the factory boast flexible arms and shoulders, shells on the outside which allow them to be controlled, chips, and button boards.

"With automation, work that used to require seven people can now be done by two, by the end of this year that will be down to one," said Chen.

"The peak production period for air conditioning is around Chinese New Year, a time during which we have historically suffered from recruitment problems. With the recruitment of large numbers at a time, there are often safety concerns. Automation is making this a thing of the past," said Chen.

RAC has a world-class production line. In 2015 it will employ 26,000 people and efficiency will go up 30 percent. In 2016 it will employ 24,000 people and efficiency will go up 25 percent. In 2017 it will have 22,000 people and efficiency will go up 25 percent. In 2018 it will be down to 20,000 people, meaning the US$11 billion turned over in 2014 will reach US$16 billion.

Last year Midea Group turned over US$23 billion and currently has over 120,000 employees. According to Group President Paul Fang, by the time Midea turns over US$32 billion in a year, it will be down to 100,000. Automation will lead to Midea being able to offer the best packages which will help recruit yet more top talent.

"Currently, we do most of our recruiting ahead of the peak season. During peak seasons, we require 30,000 people, the rest of the year we only need 15,000. Over the next year or two when we have introduced more automation, we will only require 20,000," said Wu Shoubao.

"It won't so much be a case of mass layoffs as recruiting fewer people. Moreover, the people we recruit will have at least a Bachelor's degree as we need skilled workers to control the robots," Wu added.

The installation of automated manufacturing equipment requires good cooperation with research and development (R & D) departments. "We need to be careful in figuring out which lines are suited to automation. It is imperative that output and quality do not decrease," said Wu.

Over the past four years, automated manufacturing has been at its pioneering stage. First companies have had to embrace it, after that distributors and customers have had to accept it.

Group Vice-President and head of R & D for Commercial Air Conditioning (CAC) Hu Ziqiang told a company source about the division's efforts to keep up with the times. "We have all been working hard at the standardization and modularization of the design," said Hu.

At the same time, Midea Group's Hong Kong-listed subsidiary Welling Motors is already making components and motors for robots that will be used in manufacturing. Midea will also work with the Foshan Municipal Government to build The South China Robot Research and Development Institute.

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