Dawn of a New Era: Industry 4.0
With the many rapid technological advances we have witnessed in the last decade, the global conversation has turned towards Industry 4.0, setting the ambitious goal of changing the way companies manufacture their products. Industry 4.0 aims to dramatically increase efficiency, while offering a flexible and cost-efficient alternative to the status-quo – truly the dawn of a new era. But what does it mean for China, a historically labour-intensive market with limited access to industrial automation? In this article we address why China is the next big market for Industry 4.0 and what it means for you.
Smart Factories
The term Industry 4.0 was first coined in 2011 at the famous Hannover Fair in Germany by a working group of top industry leaders discussing the future of industrial automation. The idea behind it is that we are now entering the 4th Industrial Revolution, after the age of steam, electric power, and information technology, into the advent of the “smart factory”. At its core is the concept of “The Internet of Things”, i.e. that eventually everything will be connected over the internet in a giant network. Through this, we can create cyber physical systems, allowing machines, devices, materials and more to communicate with each other to create a more efficient production process.
Within the next 20 years, Industry 4.0 will completely revolutionise how we view manufacturing. We will be able to make highly individualised products that can communicate their unique specifications while being produced. Because of this, tomorrow’s manufacturing will be extremely flexible, resource friendly, and cost-efficient. Companies will be able to adapt to rapidly changing market conditions while globally connecting all production sites into one comprehensive network.
Since the concept of Industry 4.0 was first developed in Germany, it is no surprise that German companies are at the forefront of advancements in this integrated new system. International powerhouse Siemens has already developed new software and steering solutions to customise standard products, such as artificial knee and hip joints within 3 to 4 hours from several days. Trumpf, a leading German machine tool manufacturer, has worked on what they call a “social machine”: each component is “smart” and knows what work has already been carried out on it, while customers can receive pictures of the machine in real-time and provide feedback directly.
What does this mean for China?
Historically, China has been a readily available source of cheap labour. However, in recent years a steady rise in wages and a movement towards skilled workers has led the country to overtake Japan as the world’s biggest market for industrial robots. In fact, one of the major components of the government’s current 5-year plan is to develop the domestic intelligent manufacturing market. Currently, there are only 23 robotic units for every 10,000 workers in China, while the global average lies at 58. This is bound to change, as the government has committed to building 30 industrial parks devoted to robotics in an effort to grow the domestic market to reach RMB 3 trillion by 2020.
While coping with internal pressures of rising labour costs, an aging population and worsening environmental strains, China is also making efforts to not fall behind the “re-industrialising” developed countries by investing in smart technology. In addition, mounting competition from ASEAN countries providing cheap labour has encouraged China to put concrete measures and targets into place to stay ahead of the game. These include implementing “Big Data”, “Industrial Clouds”, and e-commerce to traditional industries and encouraging the development of producer service industries. A main focus will be to develop intelligent equipment with core values of digitalisation, flexibility and integration in key industries.
What it means for you
As China adapts and advances in the Industry 4.0 space, foreign companies will have to prepare for increased competition from domestic players. The Chinese government’s aim is to build up major local champions. Safeguarding your know-how may become more of a challenge, as digitalisation of all processes also makes companies vulnerable to cyber-attacks. Additionally, with this shift, the so-called “War on Talent” will be even more pronounced, as employees with fitting technical know-how will become scarcer and more sought after.