China Market Insider  How AI Factories Are Transforming the Manufacturing Industry: Example Midea

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China uses AI for concrete improvements in industrial production. In part one of our series, we demonstrate this using the example of Midea.

Where Sam Altman or Elon Musk aim to solve great human challenges with AI (global poverty, defeating cancer, such things), China sets more modest goals. "Building better washing machines," for example, as the Wall Street Journal recently noted with surprise.

China has begun integrating artificial intelligence into existing production processes in factories across the country. Both the manufacturing of "affordable mass goods" like umbrellas or pens and the production of electric cars, robots, and CNC machine tools are rapidly becoming more efficient and competitive with the help of AI.

In some car factories of the People's Republic, humanoid robots are already on the move, discovering "teamwork" thanks to AI. In other factories, groups of AI agents take over supervision, discuss solutions among themselves, and then autonomously send execution commands to cobots. In more and more warehouses, unmanned vehicles whiz back and forth between the shelves, ensuring perfect order thanks to their sensors and cloud-based control.

However, where entirely new construction takes place, bold statements are being made. Of the 201 "Lighthouse" factories recognized by the World Economic Forum worldwide for state-of-the-art production methods with automation, robotics, and AI, 79 are located in China, accounting for more than 40 percent.

A new type of plant has just emerged, the "AI Factory." In our series, we introduce five of them:

Midea in Jingzhou

The future of the manufacturing industry is often being shaped in China far from the glittering metropolises and more in the provinces, for example, in the relatively unknown city of Jingzhou with its five million inhabitants along the middle reaches of the Yangtze River.

Midea, one of the largest manufacturers of household electronics worldwide, produces washing machines here. A central "factory brain" controls all processes. It interacts with 14 AI agents, which in turn dispatch robots to perform specific tasks or instruct a cobot on how tightly to fasten a particular screw.

The few remaining people in the factory wear AI glasses to seamlessly integrate into this connected system of machines, sensors, computers, and AMR (autonomous mobile robots). An injection molding machine thus becomes one of many end devices, whose cameras provide images for image recognition, analysis, and decision-making for the next process step.

As it now becomes clear, Midea had a clear strategy when it first acquired 5.4 percent of shares in the German robot manufacturer Kuka in August 2015. "We firmly believe in the long-term trend that robots will replace human labor," said Zhou Xiaoling, IT Director at Midea, recently to the Chinese business magazine "Caixin," when the topic of Kuka came up once again.

In Germany, where China had until then merely been seen as a sales market for its own automotive and mechanical engineering industries, some commentators foresaw the consequences of the Kuka acquisition for the German manufacturing industry. The usual defensive reflexes ensued.

"The Asians must not gain access to the data heart of our economy. Whoever controls a robot manufacturer is sitting in the production halls of the automotive industry. That goes too far," said a commentary in the "Augsburger Allgemeine" on June 4, 2016.

But such indignation remained. Since then, little has been heard of German investments in the future of robotics with a bold and long-term strategy like Midea's. A holistic, forward-looking industrial policy, such as the Chinese government is currently demonstrating again with its "AI+" plan, is also nowhere to be found elsewhere.

With the Japanese robotics manufacturer Yaskawa, Midea already established two joint ventures in the southern Chinese province of Guangdong in 2015. First, the Guangdong Yaskawa Midea Industrial Robot Co., Ltd., where industrial robots are manufactured. Second, the Guangdong Midea Yaskawa Service Robot Co., Ltd., which specializes, among other things, in service robots for elderly and disabled care.

"This commitment was further solidified through our acquisition of Kuka and marked our determined entry into the robotics industry," said Zhou about that moment in November 2022, when Midea finally took over Kuka AG from Zugspitzstraße in Augsburg.

Midea subsequently provided Kuka with the support it needed to remain at the forefront of the global robotics industry. Today, the company is internationally successful under Chinese leadership.

And the parent company Midea invested more than seven billion euros in the past five years alone to expand its technological capabilities, established robotics as a second pillar of the company alongside household electronics, and hired hordes of programmers and AI experts.

Now that "embodied AI," the integration of AI into hardware of all kinds, is beginning to revolutionize entire industries, Midea finds itself in a "sweet spot" like few other manufacturing companies: it can not only build its own industrial robots and earn a lot of money with them but also promote their transition from machines for simple repetitive tasks to intelligent production tools that use AI to optimize complex processes in washing machine manufacturing.

Production is becoming more efficient, and the robots are getting better and better. "We have a complete industrial value chain from core components to the manufacturing and application of complete machines," says Xi Wei, Director of the Humanoid Robotics Center at Midea.

The narrative that "the Asians" merely seized German know-how with a lot of money is now definitively disproven. In Jingzhou, something entirely new has emerged with the help of Midea's research & development and smart corporate strategies. Kuka, as is now clear in hindsight, was only a piece of a much larger puzzle.

The "World Record Certification Agency" (WRCA) in London awarded Midea's factory in Jingzhou this year the title "World's Outstanding First Multi-Scenario Coverage AI Agent Factory." It was described as a "groundbreaking integration and application of intelligent manufacturing technologies" during the award ceremony.

What this means in practice is best illustrated by how the rear covers of dryers are assembled at Midea in Jingzhou. A collaborative Kuka robot of the iico brand, a cobot, works together with an AI planning agent. Humans are nowhere to be seen.

Through image transmission, the system identifies the model, and the robot then activates the correct screwing process. The flexibility of this cooperation between AI and robot "comes close to the adaptability of humans," says Midea. Different models of washing machines and dryers can be manufactured simultaneously on a single production line.

The key difference from a "Smart Factory," where processes are digitally monitored but humans still have to make many decisions, is the high level of autonomy in an AI agent factory. The system not only coordinates process steps but also continues to learn thanks to AI, constantly improving.

Midea aims to create a "living factory" with this AI agent factory, equipped with a brain and autonomous consciousness capable of interacting with its physical environment and independently evolving, the Chinese business journal quotes Lu Hongzhi, the general director of the Midea factory in Jingzhou.

What is happening in Jingzhou is currently being repeated thousands of times across China. Large language models (LLMs) and "chatbots" like Chat-GPT or Claude from the USA may currently dominate headlines worldwide. However, a quiet revolution is taking place in China's factories, with impacts at least equally significant. China has quickly become the undisputed world leader in the adaptation of artificial intelligence and robotics in the manufacturing industry.

In the coming years, this will likely result in a global competitive advantage that can hardly be halted by chip boycotts from Washington, tariffs on Chinese electric cars from Brussels, or other Western disruptions targeting China's economic development. China is boldly embracing the new key technology of AI and using it for tangible improvements in industrial production.

AI factories like Midea's in Jingzhou combine China's traditional strength as the "world's workshop" with the disruptive explosion of artificial intelligence.