Apple suppliers are struggling to survive industrial robots

Some suppliers (including ASE Semiconductor and several affiliated companies of Foxconn) have made it clear that it is impossible to accept Apple orders without reasonable profits.

Apple’s suppliers are struggling to survive and are ready to force industrial robots. Compared with Apple’s scenery in the consumer electronics market, Apple’s suppliers have always been in a difficult situation, mainly in two aspects:

Apple’s “exploitation”. In order to improve its bargaining power, Apple has identified nearly a thousand suppliers around the world. This makes suppliers can only get Apple orders at low prices and in large quantities-earning “hard money”. What’s more serious is that Apple will also reduce the order volume and ask for lower quotations, which means that the supplier’s profit margin is further compressed.

Labor costs are putting pressure on. While Apple’s OEM compensation continues to decline, labor costs are soaring. In the past, suppliers were still able to make money by volume. When labor costs rose rapidly, the prospects for this profit model were worrisome.

Above, the industry believes that there are two paths for suppliers to solve their own survival dilemmas:

• One is to get rid of Apple’s dependence. With Apple’s mobile phone still the world’s best-selling consumer electronic product, it is difficult for suppliers to have the determination to “break the wrist”, so few people take this path.
• The second is to reduce operating costs. Considering that Apple’s quotations have been declining year by year and labor costs have been rising, suppliers need to find new ways to reduce operating costs. Industrial robots are one of the directions.

The strategy of machine substitution accelerates the rapid growth of the industrial robot market. Compared with traditional manpower, the biggest advantage of industrial robots lies in efficiency and low cost. Take cost as an example. If a factory needs three mature welding workers, the factory will cost 216,000 yuan per year. The industrial robots are depreciated based on their ten-year service life (including maintenance costs), and the annual cost is about 50,000 yuan. Therefore, it can be concluded that under the same benefit, the cost of industrial robots is about 23% of the labor cost.

Not only that, considering that labor costs will rise year by year, while the cost of industrial robots has hardly changed, the advantages of industrial robots compared with ordinary labor are further expanded.

Therefore, under the background that Apple’s bargaining power is irreversible, suppliers represented by Foxconn have begun to make efforts in the field of industrial robots.

According to media reports, Foxconn invested 4 billion yuan in artificial intelligence in 2015. Industrial robots were also introduced in the Foxconn factory in Kunshan, Jiangsu. The number of employees replaced is expected to be as many as 60,000-because of the introduction of industrial robots, The number of employees at the Foxconn factory in Kunshan dropped from 110,000 to 50,000.

At the same time, many Kunshan electronics manufacturing companies also want to introduce industrial robots (the media reported that there are more than 600 companies with this idea), which reflects the soaring labor costs and declining OEM profits. A firm determination to transform factories into industrial robots.

Driven by this kind of power, the “machine substitution” strategy of Chinese factories will accelerate, and the market demand for industrial robots will therefore further increase. TrendForce’s research brand Extension Industry Research Institute (TRI) predicts that the demand for industrial robots in China will reach 95,000 units in 2016.

In 2015, the sales volume of industrial robots in China was approximately 68,000 units, an increase of approximately 18% year-on-year. Based on the demand for 95,000 units, the sales volume of industrial robots in 2016 increased by approximately 39% year-on-year. This market is showing a trend of rapid development.