This Secretive Japanese Company Is Driving The Global Boom In Industrial Automation

Tyler Durden's picture

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 Amazon.com 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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Crazy Or Not's picture

So Obi Wan discovers the Clone Army....?
we know what happens next... 

peddling-fiction's picture

The Georgia Guidestones were built around the premise of these robots.

anarchitect's picture

Oh FFS.

"Fanuc" isn't even a properly formed Japanese word.  How the fuck do you write that in kana?

Stuck on Zero's picture

Robots are the reason we need to bring in millions more unskilled immigrants.

Theosebes Goodfellow's picture

~"Robots are the reason we need to bring in millions more unskilled immigrants."~

Actually, you still need semi-functional human monkeys to load the code, load and unload the pies being made, (or at the least loading material to be worked.

The first FANUC controller I ran into was on an AMADA NC press brake back in the early 1980s. Despite it being a tad clunky to program, it did hold position very well and once dialed in was a joy to run. The controller was the size of a small refrigerator with a shitload of 0-9 number wheels for each value.

FANUC is easily one of the few stocks you can buy and hold knowing that you will die long before they become obsolete.

espirit's picture

Bitchez, make me a sammich!

"they slice, squirt, and wrap edibles."

SafelyGraze's picture

The Georgia Guidestones were inscribed with a large CNC mill and installed with an RC crane

 

localsavage's picture

Fanuc....secretive.  That's a laugh.  Most machine shops in America have at least one machine with a Fanuc control on it.  

hxc's picture

100%, good easy controls to use and streamlined electronics on the inside. There are good american companies that make their own controls as well. Dunno why we ought to be scared of them.

HardAssets's picture

Fanuc has been around for a very long time and is well known in the factory automation and machine tool world.

land_of_the_few's picture

And lets have a shout out for probably their main robotics competitor ABB Robotics and Motion division, since the article didn't mention them, they have 35 years experience building robots. They now owe me a Swedish beer I suppose. I will have an imaginary one.

https://www.robotics.org/company-profile-detail.cfm/Supplier/ABB-Inc/com...

ABB robots building 3rd-gen Mercedes A-Class at Valmet factory, Finland.

http://www.abb.se/cawp/seitp202/d04126eb6224b91bc1257cb6002f6253.aspx

ABB robots building Mercedes GLC-class compact SUV at Valmet factory, Finland.

http://www.abb.com/cawp/seitp202/e737c3d06874707bc1257f6c004092f2.aspx

factorypreset's picture

"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."

 

Bullshit.  The reason the Japanese have technological superiority regarding robotics is that their govt saw the trend 30-40 years ago and worked with their top corporations to ensure they were competitive.  Just like they did with surface mount technology (invented in the US in the 50s) in the 80s they saw where electronic packaging technology was headed and did the same thing 20-30 years prior to that which enabled them to dominate the consumer electronics market for a few decades. 

The US will be blindsided by all this because short term profits, what football players are protesting, Russian Interference, the latest tweetstorm, and the Norks are WAY more important than long term innovation and planning. 

tmosley's picture

Lucas pusses out on his secret Darth JarJar plot?

Guess Soros' janitor wasn't behind it all the whole time.

ScratInTheHat's picture

Not Star Wars! We are looking at Dune History here.

Arrest Hillary's picture

"There must be a mistake .... are we sure it isn't a Nigerian .... nor a Venezuelan company ?"  Latitude With Attitude, comparative government service

Clock Crasher's picture

Technological unemployment will destroy global capitalism and perhaps modern day civilization as we know it.

Bring on the Resource Based Economy.

bruno_the's picture

What do you do when money wears out? Use UN for a resources grab. 

Sustainable Development

 

hxc's picture

Communism doesn't fucking work. Central planning has never once improved the lot of a nation

old naughty's picture

tell that to Anu (um, Luci)...

VIS MAIOR's picture

its will bring just more uneplyment and more revolutions and wars.. pradox  becouse states are soo deep in debts, they can not just pay for that people without job. bla blah about "not enought educations" is lie as we see after years. also is here problem -no money for pensions.. europe is actually this problem , but Eu do it much for hidde this big problem for whole europe in soon future . just watch next 10 years))

this revolutions and other will come soon.this robotization is also part of succes trump win in election. becouse globalist want this, like japan..

FoggyWorld's picture

My impression is Trump and ALL politicians ignore this because it is so clearly disruptive to the things they have to say.

Oldwood's picture

Trump works to slow this but no one can reverse it. Technology aggregates into the hands of fewer and fewer owners and GM's dream of a "lights out" factory will be realized as a "lights out" economy. The balance that has violently been sustained between the codependency of the elites and the rest of us is ending. They will soon no longer need us to produce and fight for them. The technology that we have been encouraged to embrace as our savior is in reality our end.

Only an idiot sees technology as our society's salvation. What hope do we have once we accept that we serve no function in society? 

Useless eaters, once the can provide no useful political purpose, will be pitted against each other to ultimately yield the progressive population ideals.

When robots can produce EVERYTHING their owners require, including replicating themselves, and the ONLY thing of value is raw materials, and the only threat is those who compete for those resources, WE realize our future.

desertboy's picture

What? Fanuc??  They are just another well-known industrial controls/robotics company - just like all the others - ABB, Kuka, Siemens, Allen-Bradley, etc, etc.

This is nothing more than an ADVERTISEMENT for a common company.  Wake TF up, ZH!

Glassport's picture

Yeah, were programming these things on US auto lines back when they were called GE Fanuc.  Nothing at all new here.

Able Ape's picture

Will robots be taxed and have their pockets picked every two weeks by the gov't?  If not, where's the revenue coming from?  Printing presses?...

Omen IV's picture

In 1981 I started a grass roots based startup in the steel processing business for oil field downhole pipe- OCTG - oil country tubular goods - in order to cut threads on Tubing and casing  -  i choose Fanuc based controllers for the lathes which cut the threads on the upset tubing

very fast compared to traditional methods in the major pipe mills - J & L Steel / US Steel / Wheeling Pittsburg / Babcock & Wilcox /  so we were able to deliver to the major oils companies and independents from 1981 to 86' below the  cost of the integrated mills for this reason and other cost cutting methods

I put women on the programming for the controllers for the Fanuc tools (they were the smartest)- white boys on the balance of the processing line and Mexicans  - all illegal  - on all the furnaces eventually. I paid the illegals less (1979 was the beginning of the great Mexican wave)  than the white boys and then higher wages to the Mexicans than the whites because they showed up consistently and could take the enormous heat from the steel the easiest.

That was 37 years ago - Im sure Fanuc is still reliable.

DipshitMiddleClassWhiteKid's picture

the (((elites))) will have to decide whether to cull the herd or implement a UBI that works for everyone

 

look at the heroin crisis thats going on in America..its being done intentionally. they want to get rid of these people because they no longer serve a purpose to the industrialists and are becoming a burden 

 

once they're gone, the white goy shabbos liberal will be fed to the dindus. look no further than south africa if you want to see what the future of America will look like

 

while this is all going down i will be on a beach in tel aviv licking the asses of young nubile israeli jewesses and a few french/norwegian/german shiksas while I cackle and rub my hands together ala le happy merchant

 

 

Blue Steel 309's picture

UBI is a nirvana fallacy. You would have to change the nature of man to make it work.

This is just pressure on population reduction, but we already exceed carrying capacity by around 4 billion people.

DipshitMiddleClassWhiteKid's picture

It will be implemented, IMO..for a short period of time before the next big event happens that will re-shape out world.

 

PitBullsRule's picture

Well they missed most of the electronics revolution, which went to pick and place machines.  Pick and Place machines spray circuit boards out like machine guns spraying out shells.  And now the future looks like it will be 3D printing, which they might also miss.  

The car is probably on its way out, people will probably work from home over the internet.  The only reason we drive to work is because big companies haven't figured out its stupid yet.  

You never know which way technology will go, machines imitating humans has always been a Japanese skill, but manufucturing may not need to immitate humans, it may need to immitate something faster and more efficient.

VWAndy's picture

 How much of their sales are credit driven? Just saying. If these cats can get all there robots on the 0% credit gravytrain they could be as great as GM.

Falconsixone's picture

General Managers? Work cheap, no breaks or grab ass and dont take shit....good idea!

GreatUncle's picture

The fake CB economic climate pretending their is growth takes hold ... the need to increase robotics to maintain profits will gather pace and nothing you can do about it. The thing that gets me is that the unemployment rate is not rising when so much more work hours is being taken over by robots.

Unless the CB is manipulating the jobs data to keep up ... the % in the workforce is up or down?

Gods's picture

Simple "they" create jobs that leach off the production of these products. Red tape, paper pushing cubical work.

RayKu's picture

China does what every other country does. Outsource. Cheap labor put them on the economic map, outsourcing to laos, Cambodia etc kept them there, and the next phase will be a combination of outsourcing and robotics. The next logical step after that is to swing into robotics removing the vast majority of human interface either outsourced or home grown.

So what's a country of ~1.3 billion people going to do with all that now redundant labor force? For that matter, how about the rest of the world? By the time it comes fully into play there would be ~8.5 billion people in the world baring war, pestilence, or other event. I find it hard to believe the Chinese government or most of the world's 'elite' hasn't already gamed that scenario.

Let your mind follow that to its inevitable logical conclusion if you can.

Blue Steel 309's picture

Industrial automation necessarily leads to political violence. Onwards sinusoidal DNA muppets!. A mean will emerge, when the gun smoke settles.

PitBullsRule's picture

There's a lot of dead bodies in Somalia that would disagree with you.  Africa and the Middle East are not knows for their industrial automation, and they have been fighting for centuries.

mo mule's picture

Well if Trump gets his tax cuts and he probably will. Then America will be the new cheap labor center of the world.  No need to pay shipping just build china shit for wallmart in missouri and arkansas....haha!

Falconsixone's picture

SAVE THE HUMANS ! 

BOMB THE ROBOTS !

 

 

 

 

can they do my dishes? 

Oldwood's picture

All we ever really had to do was say NO.

We could have said no to cheap imports.

We could have said no to automation.

We could have said no to debt.

We could have said no to the stock markets.

We could have said no many times, but it's not in our nature to turn down "something for nothing".

TuPhat's picture

When did you get something for nothing?

old naughty's picture

yes OW, we could,

but we didn't...

so Luci got (and getting) away with we-exercise-freewill (while he just provided the lure)...

getting a bit late as harvest is coming fast and furious now ! 

My Days Are Getting Fewer's picture

A FANUC robot costs the same money to purchase, install and maintain in the USA and China.  No one will bother to buy China stuff anymore.  It will be cheaper and more efficient to buy from a USA-based supplier.

We integrate our systems with FANUC.  They have a spare parts depot in Michigan with $150 million parts on racks.  FANUC trains people over the phone and internet and at their facility in MI.  FANUC is an excellent company.  They have been the leader in robots for the manufacturing plant for a long time.

All competitors for FANUC robots for manufacturing are biting the dust.  We are compelled by our customers to use FANUC.  We tried other supplier. FANUC is the best for this application.

Some people make better stuff.  Like Stiehl chainsaws.

espirit's picture

It's Stihl.

Use ethanol free fuel though.

TuPhat's picture

Had a Stihl, hard to start wouldn't run good.  Only their high end stuff is any good.  For occasional use they suck.