iPad, Kindle, Android: Have Humans Reached the End of the Production Line?

As researchers like IHS predict 2011 shipments as high as 60 million tablets and 264 million smartphones, one thing looks clear: before long, humans are going to have little to do with making them.

Rather, the sole human element will be the concept and design. Getting people to buy them will require a little genius and making them must-have items will take what James Schrager, a professor at the University of Chicago's Booth School of Business, labels fashion technology.

For sure, the human hand will likely go out of fashion in assembly. This week, Taiwan's Hon Hai Precision Industry -- Apple's principal manufacturing contractor -- reported dismal second-quarter results. Net profit slid 23 percent to NT $12.98 billion (U.S. $447 million) as revenue rose 23 percent rose to NT $633.9 billion.

Its 70-percent-owned Hong Kong unit, Foxconn International Holdings, which makes most of the smartphones for Motorola Mobility and Nokia, said its net loss narrowed to $17.6 million from $142.6 million a year ago. Revenue eased 7 percent to $2.99 billion.

Foxconn factories in China were the subject of global attention in 2010 amid reports of many suicides among its workers who work long days under trying conditions and reside in corporate dormitories away from spouses and families.

Hon Hai Chairman Terry Guo said in early August she planned to buy as many as a million robots for Foxconn's China factories. They already deploy 10,000 robots.

Foxconn's Foxbots will replace people for coating, welding and assembly, she said. Other tasks, such as polishing iPhone cases, will remain in human hands.

These kinds of problems clearly are on the minds of leading U.S. makers, headed by Hewlett-Packard -- which announced it's likely to spin off its business to shareholders -- and Dell, No. 2, which reported slow second-quarter growth.

Taiwan's Acer Group, No. 4, reported a loss while No. 3 maker, China's Lenovo Group, was probably the shining light of the sector, with sparkling second quarter earnings and revenue growth. Lenovo, which bought IBM's ThinkPad laptop lines is now selling ThinkPad and NextPad tablets.

Hon Hai says it's budgeting NT $450 million for its automation offensive, and plans to build robots in-house rather than buy them from big makers like Switzerland's ABB or Japan's Fanuc.

Foxconn is already the world's No. 1 contract manufacturer. If it is not thriving making iPads and the like, what will happen to some of its smaller competitors including U.S.-based Sanmina-SCI and Jabil Circuit, as well as Singapore-based Flextronics?

Not too long ago, former Apple CEO Steve Jobs decided to hand over virtually all the work of manufacturing to contractors like the old Sanmina, based around San Jose, Calif. Visitors could see harnesses for MacIntoshes at the factory with the Apple label.

But over time, those operations shifted offshore, to Singapore, Malaysia, Taiwan and now China, where even Hon Hai is having a hard time making money. As well, must-have products are getting thinner, lighter and shinier, with a touch and feel that makes them essential to what Chicago's Schrager calls fashion technology.

Not even Apple can sell iPads for $1,200, though, which means the contractors have to shave costs as much as possible so that an Apple a rival can make money. Amazon, which has already sold 17 million Kindles assembled by contractors, is expected to ship a Kindle tablet in the fourth quarter.

For sure, Amazon CEO Jeff Bezos, a Princeton-trained electrical engineer, has done the math. He personally patented a tablet. The manufacturers are eager for the business.

The same holds for all the smartphone makers in lieu of Google's plans to acquire Motorola Mobility to expand the Android market.

No matter what device the designers cook up, the contractors will be squeezed to take out as many costs as possible, so that the brand labels they slap on -- Apple, Amazon, Motorola, Nokia or whatever -- are attractively priced for profitable sales.

When HP discloses its fourth-quarter results, it's likely to reveal costs involved with discontinuing the TouchPad as well as some of the thought behind CEO Leo Apotheker's decision to get out of the PC business.

Fashion technology electronics will keep getting more and more versatile, smaller and offer more kinds of pleasure than ever, ultimately involving TV and high-end entertainment.

But over the next five years, the biggest question may be: how will the contractors, mainly in developing countries, squeeze production costs out while keeping themselves and their customers profitable?