Posted by on October 22, 2017 9:45 pm
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Categories: apple Automation Bill Gross Brookings Institution Business China CNC detroit donald trump East Asia Economy FANUC Furukawa Group General Motors Indiana Industrial robot Industrial robotics International Federation japan Lights out machine learning manufacturing Michigan None Ohio Robot Robotics Roger Smith smartphone Technology United States Navy

As we’ve reported in the past, skyrocketing wages in mainland China have caused the adoption of robot workers by the country’s manufacturers to accelerate rapidly in recent years, cementing the country’s position as a world leader in industrial automation.

But while that trend has been widely cited and is widely known, particularly as the US plays catch up with one of its most prominent economic rivals despite President Donald Trump’s promises to bring back manufacturing jobs, what many don’t know is the worldwide boom in industrial automation has largely been driven by one press-shy Japanese company called Fanuc.

Fanuc, as Bloomberg Businessweek reports, manufacturers robots that can perform all manner of functions. From constructing complex motors to making injection-molded parts and electrical components. At pharmaceutical companies, Fanuc’s sorting robots categorize and package pills. At food-packaging facilities, they slice, squirt, and wrap edibles.

Sales of industrial robots in the US soared during the first quarter of 2017 as manufacturers spent more than half a billion dollars on new products bound for auto manufacturing centers in Indiana, Michigan and Ohio – and the overwhelming majority of these robots are being manufactured by Fanuc.

In the first quarter of 2017, North American manufacturers spent $516 million on industrial robots, a 32 percent jump from the same period a year earlier. A study published by the Brookings Institution shows many of them are ending up in steel and auto manufacturing centers such as Indiana, Michigan, and Ohio. According to the report, there are about nine industrial robots for every 1,000 workers in Toledo and Detroit—three times the figure for 2010. Many of these robots are Fanuc’s. Its machines are also in Tesla Inc.’s Gigafactory, in Nevada, lifting heavy chassis and delicately assembling battery trays, among other tasks. Its sorting robots, meanwhile, are ubiquitous at Inc.’s massive warehousing and shipping facilities.

But US sales are dwarfed by sales in China—which purchased some 90,000 units, almost a third of the world’s total industrial robot orders last year. Sales to China amounted to about 55 percent of the $5 billion that Fanuc’s automation unit generated in the fiscal year ended March 2017.

The International Federation of Robotics estimates that, by 2019, China’s annual industrial robot orders will rise to 160,000 units, suggesting Fanuc  will be insulated from any slowdown in the world’s second-largest economy. Yoshiharu told investors at his most recent Q&A session in April that the company expects demand in China to outstrip supply even after Fanuc opens a factory next August in Japan’s Ibaraki prefecture. The facility will be dedicated solely to keeping up with Chinese demand.

Fanuc, whose robots are painted in the company’s signature bright yellow, was founded in the 1950s by Seiuemon Inaba, a Japanese engineer. His son, Yoshiharu, now serves as CEO.

But of the many models of machines produced by Fanuc, none are more representative of the company’s dominance than the Robodrill – a machine used by Apple Inc. suppliers to make the metal casings that have been a feature of every iPhone since the iPhone four.

Analysts even cited Robodrill sales to discount rumors that the Apple 8 and Apple X wouldn’t feature the metal casing.

King of them all is the Robodrill, which plays first violin in one of the great symphonies of modern production: machining the metal casing for Apple Inc.’s iPhones. In the fiscal year surrounding the 2010 introduction of the iPhone 4, the first to use an all-metal casing, Robodrill sales more than doubled.


Since then, this relationship has become so chummy that, based solely on strong first-quarter Robodrill sales, analysts discounted early rumors the iPhone 8 would eschew metal casing for front-and-back glass panels. Instead, the recent iPhone 8 release and coming iPhone X launch spurred higher Robodrill sales to Apple’s manufacturers in China, some of which are building new factories to assemble the company’s phones. New iPhones also mean more demand for Robodrills from Chinese smartphone makers such as Xiaomi, Vivo, Oppo Electronics, and Huawei Technologies, which often present their own more affordable models in the wake of each fresh offering from Apple.

Indeed, Fanuc’s machines are directly responsible for the return of offshore manufacturing jobs to North America, as companies realize they can achieve more efficient streamlining and less costly economies of scale with “lights out” factories stocked with robots.

The Robodrill

Of course, this trend, as Bloomberg notes, won’t save American manufacturing jobs – if anything it will only slow the decline. Companies are spending more money than ever before on robots. And as academics and even investors like Bill Gross speak up about the potential for automation to reshape the global labor market in fundamental ways, there’s a strong argument that Fanuc is the most important manufacturing company in the world right now.

That this status is held by a Japanese company is hardly surprising. The country’s looming demographic crisis, driven by the lowest birth rate in the developed world, has bolstered domestic demand for machines that can augment or replace human workers.

And as China goes, so goes the rest of the industrial world. Multinationals that are reshoring operations from East Asia to North America and Europe are doing so in part because automation promises sophisticated production methods and labor savings; they, and companies who stayed out of China in the first place, are spending more than ever on industrial robots. The overarching pattern is less a reversal of the 20th century’s offshore manufacturing boom than an unraveling, with jobs vanishing from developing and developed nations alike.


Amid the tumult, there’s one clear winner: the $50 billion company that controls most of the world’s market for factory automation and industrial robotics. In fact, Fanuc might just be the single most important manufacturing company in the world right now, because everything Fanuc does is designed to make it part of what every other manufacturing company is doing.

Fanuc reached an important milestone in its conquest of the US market in the early 1980s when the CEO of GM purchased the first Fanuc robots to work on GM assembly lines.

The resulting press coverage caught the attention of Roger Smith, who had recently become president and CEO of General Motors Corp. Smith had joined GM’s accounting division 30 years earlier, after spending the final two years of World War II in the U.S. Navy. He’d risen through the corporate ranks slowly, gaining prominence as GM deftly navigated the gasoline crisis of the 1970s to become America’s top automaker.


When Smith took over, GM held 46 percent of the U.S. auto market, but the industry was in decline, and most companies were looking to cut costs and improve efficiency to compete with Japanese automakers. GM was in the enviable position of being flush with cash, and Smith had ideas, most of which sought to restore the company’s focus on technological innovation. Like Fanuc, GM had pioneered early developments in numerical control, including the use of a storage system to record the movements of a human machinist, then mimic them on demand. Such experiments had led Smith to imagine what he called a “lights-out factory of the future,” which would so limit reliance on assembly workers at GM plants that lights and air-conditioning would be unnecessary. The company failed to advance very far in that direction, though, choosing to focus instead on the traditional manufacturing methods that were helping it dominate the U.S. auto market.


Fanuc’s robots were unlike anything Smith had seen outside his own dreams, and he soon decided he’d found the way forward for GM. A year after he became CEO, on a humid June afternoon in Troy, Mich., a yellow robot bowed first to Smith and then Inaba before swinging its arm to cut the ribbon for a joint venture called GMFanuc Robotics Corp.

As advances in automation and machine learning continue to accrue, human workers in all but the most-skilled professions will slowly see their jobs lost to an army of robots. But as Bloomberg points out, while an optimist might hope the consequences of automation might be limited to workers enjoying more meaningful pursuits with their free time, whether automation will lead to a higher standard of living for all – or rather further imbalance already lopsided economic inequality remains to be seen.

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