Think tank observation: miniaturization, intelligence, specialization into new features of production

Yu Bin, the Minister of Macroeconomic Research at the Development Research Center of the State Council, recently released the "China Economic Outlook." While many macroeconomic issues are beyond our control, several of his key points—particularly the fourth, fifth, and sixth—have direct relevance to corporate management.

Especially the fourth point:

"Production capacity and industrial organization: enterprise mergers and acquisitions, relatively concentrated production, and miniaturization, intelligence, and specialization have become new features."

This aligns closely with recent trends in Japanese industry.

In recent years, Japan has been pushing for "production miniaturization," a concept that may seem confusing to some in China, where leaders and experts often promote the idea of "bigger and stronger." Why would Japan, known for its advanced manufacturing, advocate the opposite?

To achieve production miniaturization, certain conditions must be met:

- Reducing the size of the production workshop;

- Maintaining or even increasing output levels.

The benefits of a smaller workshop include:

- Lower rent and fixed asset costs;

- Reduced energy consumption;

- Shorter logistics distances within the factory;

- Fewer employees, and less reliance on skilled labor.

How is this possible? The answer lies in the growing use of intelligent, numerically controlled (CNC) equipment.

What’s the difference between CNC and automation? Automation requires frequent equipment adjustments, making it more suitable for mass production. CNC machines, on the other hand, don’t need constant adjustments—this is what makes them "intelligent." As a result, they can handle small-batch, customized orders efficiently.

Previously, automation aimed to minimize manual handling and complete processes in one go. Now, with CNC technology, all operations—from drilling to milling—are done on a single machine, reducing waste and improving precision.

Therefore, production miniaturization relies heavily on intelligent and automated equipment.

Let’s look at a simple example:

- A CNC machining center can replace four manual vertical lathes and two manual drills.

- A machining center occupies about 22–25 square meters, plus material storage, around 40 square meters.

- In contrast, four lathes and two drills require about 60 square meters, plus storage space—around 100 square meters.

That’s over 50% space savings with a CNC machine.

Entire plants, from preparation to final machining, can save more than half the space when using CNC systems.

Moreover, CNC improves quality significantly. Manual machines produce parts that are not interchangeable, while CNC ensures high standardization, making assembly and packaging much easier. Parts can even be shared across different products, reducing the need for specialized groups.

Paint shops also benefit from miniaturization. Automated rolling, infrared drying, and robotic spraying all contribute to space efficiency and cost reduction.

With intelligent equipment, the need for skilled workers decreases. General workers can manage the process, and the number of staff is significantly reduced.

Take the earlier example: one CNC machine only needs one worker, while traditional setups require six to eight workers. This drastically increases productivity per person.

This is the essence of production miniaturization, combined with intelligent equipment and professionalized production organization.

Earlier, I mentioned the industrial cluster in Muar, Malaysia, where specialized factories focus on producing just one product or component. These facilities use simple equipment and non-technical labor, yet their per capita output reaches about $300,000 annually. Even though they produce inexpensive dining chairs priced at $20 each, by changing designs and materials, they could double the price and output value.

Japan follows a similar model, with furniture design limited to 6–7 styles. Factories specialize in specific areas—bedroom sets, living room sets, or drawers—ensuring high productivity and efficiency. Some drawer manufacturers operate with just one or two factories, supplying the entire market.

As a result, Japanese furniture factories achieve very high per capita output, often exceeding RMB 1 million per year—four to five times higher than in China.

The State Council’s proposal for miniaturization, smart manufacturing, and specialized production aims to shift away from outdated, large-scale, and inefficient methods toward modern, intensive, collaborative, and specialized approaches.

This transformation is essential for the furniture industry and beyond.