Rise of the machines

Rise of the machines

Labour cost is just one of many reasons why automation is gaining a bigger foothold across Southeast Asia.

Prof Viboon Sangveraphunsiri, head of the Regional Centre of Robotics Technology at Chulalongkorn University, demonstrates a rehabilitation robot that can help patients who cannot move their arms.
Prof Viboon Sangveraphunsiri, head of the Regional Centre of Robotics Technology at Chulalongkorn University, demonstrates a rehabilitation robot that can help patients who cannot move their arms.

A small four-wheeled robot with two long black pipes extending from its front and rear circles slowly around a big plastic tank. Operated remotely, the wall-climbing robot is checking for any flaws that might cause leaks of the liquid the tank contains.

The robot was designed by a small team at the Regional Centre of Robotics Technology, part of the Department of Mechanical Engineering at Chulalongkorn University. Costing more than 2 million baht, it is now ready to be used by Qualitech Plc, a SET-listed oilfield maintenance services company.

Qualitech has contributed 20% of the cost of developing the robot, with the rest coming from the university and the Commission on Higher Education. Once on duty, the robot could replace four workers that normally carry out inspections at oil and gas installations.

"Back around 1997, when the economy was growing strongly, there was high demand for robots from the industrial sector because sometimes the quality of work by human employees was not uniform," said Prof Viboon Sangveraphunsiri, the head of the centre.

But as economic growth has slowed in recent years, demand for robots from the manufacturing sector has also declined. However, there's been a significant increase in demand for robots for medical purposes, he told Asia Focus.

For example, the centre has joined with Chulalongkorn Hospital to develop a rehabilitation robot to help elderly or paralysed patients who cannot move their arms.

In general, though, the number of Thai businesses that are planning to automate operations trails that of their Asean peers and is below the regional average, a recent survey by the consulting firm Grant Thornton has found.

According to the Grant Thornton International Business Report (IBR), 44% of businesses surveyed in Asean planned to automate key operational processes over the next 12 months. In Thailand, the ratio was just 36% despite that fact that the country has a very low unemployment rate and a rapidly ageing population,

That means Thailand risks falling behind its neighbours unless it devotes more attention to automation and productivity, the report said.

Globally, more than half of 2,571 executives surveyed in 36 economies said they were either already automating business practices or may do so over the next 12 months. In emerging Asia Pacific, two-thirds of businesses plan to automate a key operational process over the next 12 months, slightly above the global average of 56%.

As labour costs continue to rise while technology costs get lower, more businesses are embracing the use of automation. In addition to reduced costs, they are looking for greater accuracy in terms of operations and increased flexibility when increasing or cutting production.

"Automation becomes a viable option when a business suffers from human involvement to a degree that would be more than compensated by having a machine do the same job," said Tantra Tantraporn, a management consulting partner at Grant Thornton in Thailand.

Further research by Grant Thornton points to a rise in business spending on research and development, underpinning the growth in automation. In 2011, 23% of businesses globally said they were planning to boost R&D spending. That figure has risen to a five-year high of 29% this year, compared with 26% in 2014.

"In this digital age, businesses are looking to technology at an ever-increasing pace. Post- financial crisis, companies continue to strive for greater efficiency and better productivity," said Steven Perkins, Grant Thornton's global leader for technology.

"Fifty years on from PCs going into mass production, costs of capital are low while labour costs are increasing. As businesses consider whether to invest in staff or machines, for many, the latter are becoming the more cost-effective option."

Technology over the past two decades has gained a growing influence over every facet of human activity, from the rise of big data to the app revolution. That trend will continue and it means that the nature and size of workforces in the future will look radically different to those of today. How businesses and governments deal with these changes will be critical to long-term economic growth prospects.

"Automation in the first industrial revolution made us stronger, automation in the second made us faster, and in the third we will have tremendously greater insights. The possibilities are enormous," noted Mr Perkins.

Some commentators now say the third industrial revolution has almost run its course and will soon make way for a fourth. The first industrial revolution was propelled by steam engines, the second by electric power and the third by computers. The fourth revolution, with artificial intelligence entering the picture, is about to begin.

"No sector or profession is immune," Mr Perkins continued. "Increased dialogue between governments, businesses, and educational institutions will help us better understand where gaps in the labour market will exist, to ensure we have a pipeline of people being educated and trained to fill those roles."

ASEAN VIEWS

In Malaysia, the government's drive to make the country a developed nation by 2020, embodied in its Economic Transformation Programme, is expected to promote rapid growth in several sectors and spur automation demand.

As the world's second-largest palm oil producer, Malaysia will remain an attractive market for automation vendors, said Krishnan Ramanathan, senior research analyst for automation and process control at Frost & Sullivan Asia Pacific.

"With industrialisation gathering momentum, new industries will present opportunities for automation vendors as it will become important to achieve economies of scale in the long run," he said. "For instance, with the emergence of the Internet of Things, the electronics and semiconductor industry will require automation solutions."

Malaysia, according to Mr Ramanathan, is more receptive to using automation systems but Thailand and Indonesia are also very big markets for automation in the Southeast Asian context.

"To be very specific, it depends on the potential a particular industry offers in these countries," he told Asia Focus.

For example, the automotive industry in Thailand is the biggest in the region and hence the adoption of factory automation will be higher than in Malaysia. All new developments designed for the automotive industry will find more acceptance in Thailand.

"But Malaysia is more advanced than both Thailand and Indonesia when it comes to the ability to use automation in most industries," said Mr Ramanathan.

Capacity utilisation is a key issue for businesses when they look to adopt automation. Companies in sectors such as oil and gas and electricity generation realise that comprehensive process automation can help reduce downtime and shutdowns of systems that must be kept running continuously, he added.

Oil and gas and power generation are the biggest end users of automation in Malaysia. Beyond these, the government has identified 12 National Key Economic Areas (NKEAs) with high growth potential. These include electronics and healthcare, two sectors that automation vendors consider very attractive.

In Indonesia, a number of different trends are driving opportunities for automation technology suppliers, according to ARC Advisory Group, a technology research and advisory firm for the industry and infrastructure sectors.

The automated systems and services market in Indonesia has been projected to grow strongly in the five-year period from 2014-18, the company wrote in its "Automation Systems Market Outlook for Indonesia".

As development accelerates over the next 15 years, automation suppliers will play an important role in the growth of the country's manufacturing, energy and extractive industries, as well as in infrastructure modernisation, said Bob Gill, Southeast Asia general manager for ARC and co-author of the report.

There is a pressing need in Southeast Asia's largest economy for technology to help run plants across a range of industries productively, safely and securely. The country needs to overcome marked shortcomings in energy and infrastructure, which offers lucrative opportunities for automation suppliers to industries such as oil and gas, power, cement, and water and wastewater, he added.

JOB LOSSES

Inevitably, the rise of technology will lead to a fall in demand for human workers in some areas, but not as big a decline as some people had feared.

The Grant Thornton global survey found that 43% of manufacturing companies expected automation would eventually replace at least 5% of their workforce. Clean technology was in second place with a 39% response rate, followed by the technology and food and beverage sectors at 35%.

At the other end of the spectrum, just 9% of hospitality, education and healthcare companies expect 5% or more of their workers to be replaced by machines.

Clearly, the rise of artificial intelligence (AI), supercomputers and sensors will have profound consequences for jobs, pay, and the makeup of the workforce, said Mr Perkins.

"Are robots set to replace [the human] workforce? That may be premature; technology has been introduced to the workplace since the industrial revolution and job roles have adapted accordingly," he said.

"While some job losses will occur as technological advances increasingly transform both the private and public sectors, technology will complement and enhance human capabilities."

The survey findings also suggested that opportunities will rise for workers to assume new roles created by the increased use of technology.

Globally, 54% of companies that are adopting automation expect to redeploy workers in other areas, with 28% saying they would be trained to operate the new machinery. Even in manufacturing, 44% of businesses plan to redeploy rather than lay off staff.

Mr Tantra said that having other useful functions for affected workers could mitigate reputational damages caused by job cuts.

"If job loss is inevitable, providing as much [opportunity] as possible would be an advantage," he said.

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