Looking out at the mammoth factory floor where Samsung Austin Semiconductor assembles microchips, Cyrus Bavarian realized there was one thing missing: people. Bavarian, a 24-year-old process engineer hired last spring fresh from the University of Texas, Austin, had imagined the dust-free assembly floor would be crowded with workers wearing “bunny-suits,” those white booties and hair coverings that make the employees look like surgeons. Instead he saw only robots. “There is just nobody out there. You hear the whir of machines, and you see the lights but these tools are almost just operating themselves,” Bavarian told NEWSWEEK. “It’s like The Matrix.”
Even for a high-tech manufacturer like Samsung Semiconductor, this level of automation was new. Two years earlier, at a facility now closed, workers jockeyed for space on assembly lines, much like a more traditional factory. “With these workers the automation was very limited, you basically had them hauling [silicon] wafers [for microchips] between areas. It was labor intensive,” says Burton Nicoson, vice president of fab engineering at Samsung. Those jobs required lesser skills, didn’t need someone with a college education, and paid well—around $50,000 a year. “The industry has now automated that process,” says Nicoson. At the new facility where Bavarian was hired, the factory uses robotics to move the parts instead. As a result of the automation and other business shifts, more than 500 of these mostly less skilled employees lost their jobs in 2009. Meanwhile, Samsung is expanding its Austin operations and has added 600 high-skilled, higher-paid workers like Bavarian. But while the company has brought back some of its old workers, Nicoson says most of those manual-labor jobs are gone.
The story of Samsung in Austin is becoming the story of manufacturing in America. The crush of the recession and the lagging recovery have forced factories to accelerate their use of technology, as they’ve chopped 15 percent of their workforce—or more than 2 million jobs—since 2007. “When your profit margins get smaller and you keep cutting your workforce, you need to find a way to do those jobs with either computers or robotics,” says Tom Runiewicz, an industrial economist at IHS Global Insight, a market-research company. And now that companies have learned to do tasks more cheaply using machines, analysts say many of the more lower-skill factory jobs aren’t likely to come back.
The phenomenon of manufacturers using technology to trim the workforce is not new. Between 2000 and 2007, the manufacturing sector had already chopped around 30 percent, or 3 million, of its workers as it became more technologically savvy and faced intense pressure from cheaper overseas production. But during the recession and subsequent recovery, that process of adopting technology accelerated at a breakneck pace. Productivity at these leaner factories shot up 8.6 percent in 2010, the biggest gain in 20 years. Investments in technology by companies across the economy rose 15 percent—to $590 billion—the biggest increase in almost a decade, as companies sought high-tech ways to do more with less.
Companies whose layoffs totaled thousands of workers, such as Caterpillar, John Deere, and Parker Hannifin, also learned to use existing technology more effectively, allowing for leaner operation, says Alexander Blanton, an industrial analyst at Ingalls & Snyder LLC, a New York investment company. The distance of production lines was shortened at these companies, allowing parts to be produced faster—and with fewer people to inspect and move parts around. Blanton says that accelerated productivity gains during the recovery allowed companies such as Caterpillar to maintain or even fatten their profit margins, even in the face of falling sales.
And companies may have little incentive to bring workers back on as profits rise. Manufacturing profits rose above $122 billion last quarter, the highest figure for any quarter since 2006—and with companies using about 2.4 million fewer employees. Since the start of the recovery last year, the industry has added back 135,000 jobs, just a drop in the bucket compared with the 2 million lost. Factories won’t get back to prerecession levels for more than 10 years, according to IHS estimates. “We may never get back to 2007 levels,” says Runiewicz, the industrial economist.
But as the case of Bavarian at Samsung shows, the jobs that do come back will require more skills and more education. The Obama administration hopes that jobs such as building windmills and electric-car batteries will become the factory work of the future. But both unions and manufacturers agree that the country needs to do better at training people for a more high-tech factory floor. Engineers such as Bavarian are sure to be needed, but so will machine operators with better computer proficiency.
Community colleges could work closer with industry to fill this niche and provide training for cutting-edge jobs, says Robert Scott, an economist at the Economic Policy Institute. “What we are talking about is about 24 months of computer training to work at a modern factory,” says John Bernaden, spokesman for Rockwell Automation, which builds robotics used in manufacturing. “The factories of the future are going to be controlled by an iPad, so we have to make sure that workers aren’t afraid of an iPad.” If they are, they might find themselves replaced by even more machines.