Impact of automatization on the organization of the High Tech industry







Foxconn International Holdings, one of the largest manufacturer of mobile phones, whose clients include Nokia, Motorola and Apple, plans to automate a lot of its manufacturing processes by using increasingly more robots instead of humans as labour costs in China surge.
Foxconn, a Taiwanese firm, is a typical example of the High Tech industry organization: Foxconn manufactures in China products designed in developed countries but now faces strong demand to increase salaries of Chinese workers. Looking at the broader picture, it is interesting to notice that rising salaries in China will have some macro impact on highly integrated industries like the High Tech industry. Historically, high tech jobs have been moved from developed countries to developing countries like China because of the savings related to using a cheap labour force. However, now that the gap in salaries is shrinking and humans are replaced with robots in manufacturing plants, there is no more competitive advantage from manufacturing in China rather than in a developed country like the USA.

Does this mean that high tech jobs will return? In the short-term probably no because China has now built huge manufacturing capabilities and human skills in this sector and now benefits from a positive network effect. But in the longer term, it means that we will play on a more leveled field and the next Apple (ie the next "hot" high tech company after Apple) may well design AND manufacture its products in a developed country.

Comments

  1. AnonymousAugust 17, 2014 at 12:56 PM

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