ASEAN firms upbeat on Industry 4.0

A majority of ASEAN companies are optimistic about the benefits of Industry 4.0, underscoring the transformative potential of emerging technologies such as advanced analytics, 3-D printing and industrial automation across the region’s manufacturing industries. 

According to a study by McKinsey, 96% of ASEAN businesses believe Industry 4.0 will bring new business models to their industries. Nine in 10 respondents said improved performance will be one of the main benefits from new technologies.

Additionally, in manufacturing-based economies such as Indonesia, Thailand and Vietnam, respondents were generally optimistic about prospects of Industry 4.0, with more than 70% of respondents from each country saying their view of Industry 4.0 had improved over the previous year.

But optimism has not led to action, at least according to the findings of the McKinsey study, where only 13% of respondents said they had begun an Industry 4.0 transformation.

The global management consultancy warned that ASEAN manufacturers cannot risk failing to capture the large opportunities made possible by these new technologies. “By embracing Industry 4.0, ASEAN manufacturers can become the next leaders in their fields,” it said.

Specifically, Industry 4.0 can help ASEAN manufacturers reclaim the ground that they had ceded to China as the region’s manufacturing powerhouse, despite having lower labour costs.

“The digital technologies associated with Industry 4.0 can help ASEAN manufacturers overcome relatively low productivity rates to regain their stature as factories to the world,” said the study.

According to McKinsey, Industry 4.0 is expected to drive productivity increases comparable to those generated by the introduction of the steam engine in the industrial revolution.

Globally, it is expected to deliver between $1.2tn and $3.7tn in gains. Out of this, ASEAN, whose member economies have significant manufacturing components, can potentially glean productivity gains worth $216bn to $627bn.

Among industries, the chemical and electronics sectors in ASEAN are likely to be the biggest beneficiaries of Industry 4.0.

Companies in the chemicals sector, for example, could optimise their operations and improve profit by around 3% at active production units, while predictive maintenance could help reduce maintenance costs by 10% and boost production by 2%.

Among electronics manufacturers, automation using robots could improve labour productivity by up to 40%, McKinsey said.

To get Industry 4.0 initiatives off the ground, McKinsey said manufacturers “could try to isolate use cases that apply directly to their industry and concentrate on understanding those that could deliver significant or immediate impact”. 

They would also need to unlock and facilitate data flows, mitigate security risks and build the talent they need to roll out emerging technologies.

Backed by a strong institutional framework, Singapore currently leads the ASEAN region in terms of structure of production, according to World Economic Forum’s inaugural Readiness for the future of production report.

The city-state continues to be forward-looking, having developed the Singapore smart industry readiness index to help companies evaluate their current manufacturing capabilities, and map out the next steps in adopting advanced technologies and processes.

Singapore’s strong manufacturing base has also drawn the likes of HP to set up a facility in the city-state to oversee global print supplies manufacturing and test the use of robots, data analytics and 3D printing to improve production efficiency.