Economic Times: Technology advances to end China’s manufacturing dominance, open up new possibilities for India
The next decade will show that China's manufacturing advantage was short-lived. How will these advances affect India? Mostly in a positive way.
While China raced ahead to become a manufacturing superpower, India focused on IT services. Without the infrastructure and ability to displace populations, India had little choice. Meanwhile, US manufacturing suffered a steady hollowing out as its corporations rushed to China. Seduced by government subsidies, cheap labour, lax regulations and a rigged currency, these corporations had little choice.
The next decade will, however, show that China’s manufacturing advantage was short-lived. Technology is changing so fast that its manufacturing industry is destined to suffer the same hollowing out as what the US experienced. That’s because with robotics-based automation and the advent of digital manufacturing, it won’t be economical to manufacture in China any more. Why ship raw materials all the way to China for assembly when they can be manufactured or be digitally ‘printed’ locally for a lower price? China’s biggest advantage has been its cost of labour, but with robotic manufacturing, this cost shrinks to almost zero. The jobs that will be created with the new technologies will primarily be in design and service – the skills that are now in abundance in India thanks to its IT outsourcing industry.
The technologies that will change the equation include robotics, artificial intelligence (AI), 3D printing and nanotechnology.
Last week, a Boston-based company called Rethink announced a robot called Baxter that has two arms, a face that displays simulated emotion, and cameras and sensors that detect the motion of human beings that work next to it. It can perform assembly and move boxes – just like humans do. It will work 24 hours a day and cost only $22,000. This is just the latest advance. Robots are now capable of performing surgery, milking cows, doing military reconnaissance and combat, and flying fighter jets. In the US, ‘do-it-yourselfers’ are crowdsourcing the development of new capabilities for these robots. There are dozens of startups selling robot-development kits to university students and open-source communities. They are creating ever more sophisticated robots and applications for these. The factory assembly that the Chinese are performing is child’s play for these robots.
AI is software that makes computers do things that, if humans did, we would call intelligent. It is powering all sorts of technologies. This is the technology that IBM’s Deep Blue computer used in beating chess grandmaster Garry Kasparov in 1997 and that enabled IBM’s Watson to beat TV show Jeopardy champions in 2011. AI is making it possible to develop self-driving cars, voice-recognition systems such as Apple’s Siri and computer systems that can make human-like decisions. AI technologies are also finding their way into manufacturing and are powering robots like Baxter.
A type of manufacturing called ‘additive manufacturing’ is making it possible to cost-effectively ‘print’ products. In conventional manufacturing, parts are produced by humans using power-driven machine tools, such as saws, lathes, milling machines and drill presses, to physically remove material to obtain the shape desired. This is a cumbersome process that becomes more difficult and time-consuming with increasing complexity. In other words, the more complex the product you want to create, the more labour is required and the greater the effort.
In additive manufacturing, parts are produced by melting successive layers of materials based on 3D models – adding materials rather than subtracting them. The ‘3D printers’ that produce these use powered metal, droplets of plastic and other materials – much like the toner cartridges that go into laser printers. This allows the creation of objects without any sort of tools or fixtures. The process doesn’t produce any waste material and there is no additional cost for complexity. Just as, in using laser printers, a page filled with graphics doesn’t cost much more than one with text, in using a 3D printer, we can print sophisticated 3D structures for about the cost of a brick.
3D printers can already create physical mechanical devices, medical implants, jewellery and even clothing. The cheapest 3D printers, which print rudimentary objects, currently sell for between $500 and $1,000 in the US. Soon, we will have printers for this price that can print toys and household goods. By the end of this decade, we will see 3D printers doing the small-scale production of previously labour-intensive crafts and goods. In the next decade, we will be 3D-printing buildings and electronics.
Even if the Chinese automate their factories with AI-powered robots and manufacture 3D printers, it will no longer make sense to ship raw material all the way to China to have them assembled into finished products and shipped back to the rest of the world. Manufacturing will once again become a local industry in the US as it largely is in India, with products being manufactured near raw materials or markets.
How will these advances affect India? Mostly in a positive way. For better or worse, India could never match China’s manufacturing prowess, so it has little to lose. Since manufacturing is a local industry in India, it will benefit from better tools, materials and processes.
Most importantly, India is a leader in the global knowledge economy. Instead of building a smog-producing, river-polluting and labour-abusing manufacturing industry, it used its brainpower to build a $100-billion IT industry and become an R&D hub for the world’s leading companies. These are the skills that will be in the highest demand in the future.
The new manufacturing environment will need hordes of 3D designers and people who can operate and maintain sophisticated computer-based equipment. This is what India’s engineering graduates do best – you see AutoCAD and computer-technician training centres all over the country. Designing new machines and building ever more sophisticated software to operate robots also play well to the strengths of India’s IT workers – these are just new computer languages and platforms that they can easily learn.
The biggest opportunities for India’s outsourcing industry, however, lie in helping old-line US companies take advantage of the advancing technologies. New manufacturing plants need to be designed, new technologies and processes implemented, and workers trained to operate sophisticated machinery. This is a logical progression from what Indian companies have been doing for America’s IT departments.
Then there are India’s technology entrepreneurs. India’s tech scene is now booming as people who have worked for years in the IT outsourcing industry became restless and caught the entrepreneurship bug. In every city, you see legions of experienced IT workers becoming entrepreneurs and starting companies. You also see fresh graduates taking the plunge into entrepreneurship.
The challenge is to make these entrepreneurs aware of the rapidly-accelerating technologies so that they do their magic and help India innovate its way out of its infrastructural handicaps. And India’s IT outsourcing industry has to realise that a period of massive change lies ahead – it needs to adapt or perish.