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Inside MEP firm Midea’s automated robotics factory in China

Midea’s automated air-conditioning facility in China highlights why construction firms must adopt technology

SPECIAL REPORTS, Sectors

A cache of robots is humming away in an almost synchronous motion. While the robots may appear to be dancing, the actual task they are performing could well be  considered mundane: they are manufacturing and assembling a spilt air-conditioning device. However, they are carrying out their work on their own, without any human intervention.

Construction Week checked out these industrial robots at Midea’s residential air-conditioner facility in the Nansha district of Guangzhou, China. The visit to the factory was organised by the company in collaboration with its UAE-headquartered distributor, Taqeef.

The fully automated, 118,000m2 Nansha facility has a monthly average production capacity of 500,000 sets. In a bid to completely automate its operations, Midea has, over the years, cut down on the number of people that work in the manufacturing facility.

So why is a company in China – one of the world’s largest knowledge economies – cutting its staff numbers? For one, it is because younger populations do not enjoy working in a factory, Peck Zhao, senior marketing manager for overseas sales at Midea Commercial Air Conditioner (CAC), says during Construction Week’s tour of the site.

He explains: “Automation is a long-term strategy for us, and we think the future will be fully automated. Firstly, the labour costs can be reduced by automating operations. Also, young people do not like working in a factory, so eventually you have to invest in automation. 

“That is not just because of the low [production] cost, but largely due to people’s preference. More people choose jobs in an office environment rather than factories. So we are investing now for our future.” 

The Chinese government is also playing a major role in the push for innovation, and hopes to increase the country’s research and development (R&D) spend to account for 2.5% of its gross domestic product (GDP) by 2020. Credit Suisse estimates that this hike would represent an increase of 73% in China’s R&D spend compared to 2015.

The Chinese government also encourages multinationals to set up R&D centres in the country, through which local graduates can learn the skills required to commercialise innovation. 

Midea has an innovation centre in the town of Shunde in the Guangdong Province, where graduates are recruited and trained. Zhao says the company has already taken steps to align its strategy with a more automated future, adding that Midea invests around 4% of its total revenue in R&D.

“In the past five years, $3.8bn has been invested in the R&D department, [which is] always our richest. We think this will bring a big change in the industry, as we cannot predict what might happen as we keep innovating. For instance, our Nansha factory is fully automated. Staff here do not need to touch anything; they only need to monitor operations,” Zhao says.

Price wars

While automation may be a ubiquitous fixture in the Chinese economy, the country, and its companies, still grapple with the after-effects of global product perception. Even as recently as a decade ago, the belief was that, due to their low cost, ‘Made in China’ products were of poor quality. As automation takes over the country’s manufacturing market and reduces production costs, Chinese firms may be able to sell at even lower prices, but could actually make it harder for local companies to competitively brand and differentiate their products on the global stage.

Zhao says collaboration is key when is comes to facing such intense competition, as Midea’s partnerships with brands such as Carrier, Hitachi, and Toshiba, prove.

“Nobody can really survive independently in this market,” Zhao says. “If you try, you will fail. Everybody is competing and cooperating at the same time.

“Hitachi has been acquired by Johnson Controls and we are [now] competing, but we also use some of their components [for our business]. Toshiba is our partner, but in the variable refrigerant flow (VRF) sector, we are competitors.

“[Competing] helps us grow together, and it also benefits Chinese manufacturers by thwarting the [incorrect] perception that Chinese-made products are of low quality. In the real world, China has already changed – the concept of low-quality ‘Made in China’ products [was prominent] 10 years ago. Now we focus on only high-quality products.”

However, Midea is most competitive in terms of its product pricing strategies, and this aspect of its business is likely to be enhanced as operations are further automated, Zhao explains. 

“We now have more robots to reduce labour costs and manage component cost. We can maintain the price as it was three years ago.

“This is how we will survive as Chinese manufacturers. In the next five years, this is also our main advantage over other manufacturers, because we have huge volumes – not only in China, but also outside the country. This means our average cost will be more competitive.”

Midea’s major competitors in other markets include Daikin, LG, Samsung, and Mitsubishi Electric. However, as Zhao explains, Midea has business cooperation agreements in place with each.

The shift away from traditional business divisions by Japanese manufacturers has also given Midea the upper hand, he adds: “Japanese manufacturers are looking at different business fields. 

“They may give up some of the old businesses, like home appliances and air-conditioners. They are now investing in healthcare, robotics, batteries, and solar energy. This is the current trend and this is very beneficial for Midea’s air-conditioner, home appliance, and robotics businesses. But in the next 10 years, it will be difficult to say [what will happen].”

This shift could help Midea to consolidate its current operations, especially as the market has not yet witnessed full-scale technological innovation in the heating, ventilating, and air-conditioning (HVAC) segment: “Even though every manufacturer has new launches in the VRF sector, it is hard to call that a big revolution,” says Zhao. “[The developments are] more of an evolution, and include extending capacities and increasing the efficiencies, improving the flexibility of controllers, and boosting production efficiency.”

Midea’s push for automation is, in part, helped along by its previous investments – for instance, the company is the majority shareholder in Kuka, a German manufacturer of industrial robots and solutions for factory automation. Throughout China in 2017, the company sold products worth $17bn, of which air-conditioners accounted for $6bn.

“And of that $6bn, about $2bn-worth are sold through [the e-commerce sites] Alibaba and Jingdong,” Zhao reveals.

Midea’s CAC facility in Shunde, although not fully automated, sees its major tasks performed by industrial robots, and has an annual manufacturing capacity of three million units per shift. In the near future, this 110,000m2 facility will also be fully automated, says Zhao.

VRFs in the Middle East

Midea’s main focus in the Middle East is its VRF business, which among its projects counts a 5,000-villa development in Al Ain. The project involves sophisticated VRF-powered HVAC technology capable of providing both cooling and heating.

According to Zhao, these HVAC systems are very quiet and energy-efficient, because the variable-speed compressor runs at the capacity needed for existing conditions by varying refrigerant flow to indoor units, based on the exact demands of the individual areas.

“The kind of VRF systems installed [in the Al Ain project] feed more than 30,000 indoor units and 5,000 outdoor units,” Zhao explains.

“We also have several projects in Saudi Arabia. We have worked on a big tower of more than 30 floors in the kingdom, for which we installed mini VRF systems. Mini VRFs can be installed on a floor-by-floor basis, and large VRFs work for big villas or office buildings.”

Zhao also says that since district cooling is not efficient for villas, VRFs are gaining popularity for villa developments in the Middle East. This is a view shared by Ahmad Bin Shafar, chief executive officer of UAE-based district cooling company, Emirates Central Cooling Systems Corporation (Empower). During an interview with MEP Middle East this February, Shafar said that district cooling was the proper choice only for high-density areas, such as a cluster of towers, each of which may have more than 250 units.

“If you want to provide air-conditioning for [hundreds of] units through chillers, then who will pay the bill in freehold property? District cooling is not the solution for villas, because we [would] have to spend on the network, [and] it is not going to be very efficient,” Shafar added.

Zhao adds that installation costs for district cooling are higher, as it requires long piping and large pumps to circulate water. In contrast, VRF pumps typically have a maximum length of 30m.

Addressing the issue of leakage and operational data with VRF systems, Zhao says: “Leakage is not a concern, because after more than 10 years [of operation], there are very few [reports of] leakage from VRF systems. And if – or when – a leakage occurs, there will be a warning or alert made by the sensors. 

“If people are really concerned, they can install leakage sensors. We also have software to provide operational data and energy efficiency details, in addition to monthly operational performance and other billing information.”

Hadi Ismail, senior director – energy solutions and mega projects at Taqeef, states that, although many suppliers tend to compare villas to VRFs, this is not a fair comparison. 

“The air-cooled chillers business will stay in the market and keep growing, but the VRF segment is growing faster than chillers. However, it must be remembered that VRFs were not made to compete against air-cooled chillers. 

“Only three years ago, VRFs started taking off in the Middle East – there was no proper foundation for the preparation of VRF planning until then.”

Zhao says VRFs must be used for only their intended applications, adding that he is optimistic about the system’s global growth in the years to come.

“The Middle East market is sure to choose VRFs over chillers because the latter requires more water. Even in China, there is a scarcity of water in most cities, so the Chinese government is pushing for VRFs,” he explains. “Chillers require a lot of water and services, so cost is very high. For instance, 80% of the buildings in Shanghai are using VRFs, not chillers, for commercial applications.” 

He concludes: “About 30 years ago, no VRF technology was available, but now most hospitals, office buildings, and apartment blocks choose VRFs over chillers.

“This is how it is in China, and I think this will happen in the Middle East, too.” 

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