The narrative that automation will eliminate low-wage manufacturing jobs is flawed. Robots have high upfront costs and lack the flexibility of human labor. For industries like garments, a firm can hire and fire cheap labor to match fluctuating demand, whereas a $100,000 robot represents a fixed, inflexible cost.
Related Insights
The reshoring trend isn't about replicating traditional manufacturing. Instead, the U.S. gains a competitive advantage by leveraging automation and robotics, effectively trading labor costs for electricity costs. This strategy directly challenges global regions that rely on exporting cheap human labor.
A leading-edge fab may only employ 5,000-10,000 people while generating tens of billions in value, making labor cost insignificant. Robotics capital is better spent on massive markets like construction or logistics, rather than solving a problem that is already largely solved.
While consumer robots are flashy, the real robotics revolution will start in manufacturing. Specialized B2B robots offer immediate, massive ROI for companies that can afford them. The winner will be the company that addresses factories first and then adapts that technology for the home, not the other way around.
The narrative of "evil capitalists" replacing jobs with robots is misguided. Automation is a direct market response to relentless consumer demand for lower prices and faster service. We, the consumers, are ushering in the robotic future because we vote with our wallets for efficiency and cost-savings.
The playbook of leveraging a large, low-cost workforce to become a manufacturing power is obsolete. Future competitiveness will be determined by automation density (robots per 100,000 people), making it impossible for nations like India to simply replicate China's industrial rise.
Responding to fears of job loss from automation, Siemens' CEO frames it as a necessary shift. In aging societies with labor shortages, automating manufacturing allows for economic growth while redeploying human workers to essential, non-automatable sectors like healthcare and social services.
The primary force behind replacing human labor with robots isn't corporate greed but relentless consumer pressure for lower prices. Companies automate because the market rewards efficiency and punishes higher costs, making automation an economic inevitability.
Industries with fixed demand (accounting) will see job losses as AI handles the necessary workload. Sectors with expandable demand (software engineering) may absorb AI's productivity gains by creating vastly more output, thus preserving jobs for a longer period.
The term "clankerfication" describes the impending disruption of physical industries by cheap robotic labor. Similar to how AI coders devalue software, humanoid robots will attack companies whose moat is skilled human labor and operational expertise in areas like mining or logistics, shifting value to owners of scarce physical resources.
Automation is hollowing out the labor market from both ends. Robots are replacing low-skill manufacturing jobs, while AI is automating high-skill knowledge work. For now, the most resilient jobs are skilled trades requiring high physical dexterity in unpredictable environments, like plumbing or electrical work.
