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The China Exodus: Survey Shows Sourcing, Manufacturing Moving Out

The China Exodus: Survey Shows Sourcing, Manufacturing Moving Out

A Gartner Inc. survey of 260 global supply chain leaders in February and March 2020 found that 33 percent had moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years. Survey results show that the COVID-19 pandemic is only one of several disruptions that have put global supply chains under pressure.

“Global supply chains were being disrupted long before COVID-19 emerged,” said Kamala Raman, senior director analyst with the Gartner Supply Chain Practice. “Already in 2018 and 2019, the U.S.-China trade war made supply chain leaders aware of the weaknesses of their globalized supply chains and question the logic of heavily outsourced, concentrated and interdependent networks. As a result, a new focus on network resilience and the idea of more regional manufacturing emerged. But this kind of change comes with a price tag.”

READ: Impact of COVID-19 On The Automotive Manufacturing Supply Chain

READ: Coronavirus Outbreak Reveals the Weakest Links In The Supply Chain

Tariff Costs are the Primary Reason to Move Supply Chains

For decades, China has been the go-to destination for high-quality, low-cost manufacturing, and it has established itself as a key source of supply for almost all major industries including retail and pharmaceutical. However, Gartner research showed that the margin between those companies planning to add jobs in China versus taking them away narrowed sharply in 2019. The primary reason is the increase in tariff costs.

“We have found that tariffs imposed by the U.S. and Chinese governments during the past years have increased supply chain costs by up to 10 percent for more than 40 percent of organizations. For just over one-quarter of respondents, the impact has been even higher,” Raman said. “Popular alternative locations are Vietnam, India, and Mexico.

The second main reason for moving sourcing and manufacturing out of China is that supply chain leaders want to make their networks more resilient.”

READ: Trade War Pushes Apple’s Manufacturing From China To Vietnam

READ: Taiwanese Companies Shift Production To Taoyuan As Trade War Heats Up

Balancing Efficiency and Resilience

Only 21 percent of survey respondents believe that they have a highly resilient network today—meaning that they have good visibility and the agility to shift sourcing, manufacturing and distribution activities around quickly. However, 55 percent expect to have a highly resilient network in the next two to three years—a reaction to disruptions such as Brexit, the trade war and COVID-19.

However, resilience has a price. Fifty-eight percent of respondents agree that more resilience also results in additional structural costs to the network.

“We are at a crossroads in the evaluation of global supply chains that pits just-in-time systems designed to improve operational efficiency against just-in-case plans that emphasize planning and preparing for a range of plausible scenarios,” Raman added. “To find balance, supply chain leaders must engage in risk management to assess their organization’s willingness to take risk onboard and decide how to quantify that risk against other network objectives such as cost effectiveness.”

Moving Closer to the Customer

One-quarter of survey respondents stated that they have already regionalised or localised manufacturing to be closer to demand. Despite the cost of adding more players to the ecosystem and increasing the overall network complexity, regional supply chains can ease delays and shortages in times of disruption—if the model is economically viable.

“Many Western organizations will have to explore new forms of automation on the factory floor to decrease the costs of near- or onshore production. Some also favour a partial option, such as manufacturing in Asia and moving only the final assembly closer to the customer,” Raman concluded.


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Impact Of The US-China Trade War On Vietnam’s Manufacturing Sector

Impact Of The US-China Trade War On Vietnam’s Manufacturing Sector

In 2018, disbursement of FDI projects in Vietnam reached a record high of USD 19.1 billion, showing the high confidence of foreign investors in Vietnam’s business and investment environments. This is an increase of 9.1 percent year-on-year amid global concerns over the tension caused by the US China Trade War. Additionally, the rapid growth of both privately and state run enterprises such as Vingroup or Viettel is an indication of Vietnam’s economy prosperity and the fact that the country’s business environment is capable of nourishing large corporations of global scale.

However, as tensions over the Trade War continue to escalate in 2019, uncertainly over the status of the global manufacturing sector has continued to plague the industry and much attention has been focused on Vietnam due to the country’s status as an emerging manufacturing hub. Currently, the Trump administration has imposed tariffs on USD 250 billion worth of Chinese imports while China has retaliated by imposing tariffs on a cumulative value of USD 110 billion worth of US imports.

In short-term, Vietnam is projected to capture some of China’s global market share in labour-intensive manufacturing, although, in the long-term it is uncertain if Vietnam will continue to benefit from the displacement of manufacturing from China. This is because, Vietnam could face the risk of trade frauds as China looks to route US-bound products through the country to evade existing tariffs at an increasing pace. Furthermore, there is also the risk of Chinese products saturating the Vietnamese market, resulting in increased competition with domestic producers.

Thus, as the trade war drags on, experts have advised Vietnam to develop a new development strategy to evade potential risks. This is also due to the fact that global investors are starting to withdraw their investments from emerging markets, including Vietnam.


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Contraction Of Singapore’s Manufacturing Sector For Fourth Consecutive Month

Contraction Of Singapore’s Manufacturing Sector For Fourth Consecutive Month

Singapore’s manufacturing sector has contracted again in December 2018, with the key electronics sector declining further. This is aligned to a weakening global outlook for the manufacturing sector and the current fallout between the US and China, as well as the overall decline in manufacturing in South Korea, Taiwan and Malaysia.

In fact, Singapore’s overall Purchasing Managers’ Index (PMI), dipped 0.4 points in December 2018, reaching 51.1. This is barely above a reading of 50 which indicates that growth has occurred. Similarly, the electronics sector, which saw its first contraction after 27 consecutive months of growth in November 2018, dropped 0.1 points to 49.8 in December 2018 according to the Singapore Institute of Purchasing and Materials Management (SIPMM).

Meanwhile, China’s official manufacturing PMI that was released on January 2019 indicated that the country’s manufacturing sector has sank into the contraction territory for the first time since July 2016, while the Caixin manufacturing PMI also contracted to 49.7, which is the lowest figure that the index has dropped to since May 2017. This was a decrement that stands below analyst expectations.

Regarding this, the SIPMM has commented that the lower overall PMI reading can be attributed to slower growth in new orders and new exports, factory output, inventory, as well as employment level. Additionally, it can be taken into account that the indexes of finished goods, imports, input prices and supplier deliveries also expanded at a lower rate, while the order backlog index has continued to contract for three consecutive months. Alvin Liew, a Senior Economist at UOB has further added that the weaker PMI is most probably linked to a slowdown of China’s growth and the corresponding drop in demand for Singapore’s goods and services that are tied to China’s economy. He also projected that a continued slowdown is likely to occur due to many factors such as a decrease in China’s growth, uncertain trade developments between the US and China, as well as a global electronics cycle downturn.


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US-China Trade War Continues To Negatively Impact Global Manufacturing

US-China Trade War Continues To Negatively Impact Global Manufacturing

The Trade War is continuing to impact the global manufacturing sector as Malaysian manufacturing slowed to its weakest pace of expansion since the IHS Markit survey began in 2012, and Taiwan’s manufacturing sector fell to its lowest growth since September 2015. While South Korea’s industry, which is heavily focused on tech production, also witnessed a shrinkage in manufacturing activities due to the impact of the US-China Trade War on chip and smartphone orders. Meanwhile, official economic data from Singapore showed that the country’s gross domestic product grew more slowly than forecast in the fourth quarter as the city-state’s manufacturing contracted on a quarterly basis.

In China, the Caixin/IHS Markit PMI slipped into the contraction territory for the first time in 19 months and manufacturing activity in Europe witnessed a stagnating growth towards the end of 2018, with Italy, France, Germany, Spain and Britain experiencing contractions. For Britain, factories are ramping up on stockpiling as possible border delays may occur following Britain’s exit from the EU in three months time. Although the US has experienced a decreased growth, the manufacturing sector is still expanding and this signals that China is suffering more from the Trade War than the US.

Overall, 2019 saw world shares start on a downbeat note with oil prices and bond yields experiencing a downturn as the factory survey data confirmed the picture of a global economic slowdown. In a key annual conference last December, China’s top leaders have mentioned that the government will support the Chinese economy in 2019 through cutting taxes and keeping liquidity ample, as they continue with their negotiations with Washington.


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Top Three Challenges For Taiwan’s Economy In 2019

Top Three Challenges For Taiwan’s Economy In 2019

According to the Yuanta-Polaris Research Institute and the Taiwan Institute of Economic Research (TIER), Taiwan’s biggest economic challenges in 2019 are the US-China Trade War, financial market volatility, and geopolitical risks. And these would be the three factors that could trigger a possible economic downturn following the slowing down of Taiwan’s economy based on findings from various analysts.

Currently, depending on the source of analysis, growth forecasts for Taiwan are variable and rising global uncertainty has resulted in weaker growth forecasts from organisations such as the Cabinet-level Directorate General of Budget, Accounting and Statistics. Adding to this, Liang Kuo-Yuan, president of Yuanta-Polaris has commented that although the US economy seems to be performing well, political risks are rising in Europe, and the slowdown of China’s economy will deepen in 2019. Thus, he believes that Taiwan is in the final stages of an expansion phase and a period of tightening will follow and this will be impacted by external factors such as the ongoing Trade War which is projected to impact Taiwanese exports.

Similarly, Director of TIER’s Economic Forecasting Center, Gordon Sun, concurs with the analysis that Taiwan’s economy is entering a downward phase and that this phase will be impacted by a series of external influences such as the Trade War, financial instability in the US, Europe, and emerging markets, and geopolitical risks.

However, despite the projected downturn, Deputy Head of the National Development Council, Chen Cheng-Mount has stated that Taiwan’s domestic economic progress will be aided by increases in government investment, new policies, growth of the private sector, wage rises as well as the return of businesses from China to Taiwan.


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Business Expectations Of Singapore’s Manufacturing Sector (Oct 2018 To Mar 2019)

Business Expectations Of Singapore’s Manufacturing Sector (Oct 2018 to Mar 2019)

A majority of firms (a weighted 81 percent) in the manufacturing sector expects the business situation in the next six months to remain similar to a quarter ago. A weighted nine percent of manufacturers expects business conditions to improve while a weighted 10 percent foresees a softer business outlook. Overall, a net weighted balance of one percent of manufacturers anticipates a less favourable business situation for the period October 2018 – March 2019, compared to the third quarter of 2018.

Within the manufacturing sector, the transport engineering cluster is the most optimistic about business conditions, with a net weighted balance of 21 percent of firms expecting improvement, compared to a quarter ago. In the marine & offshore engineering segment, the oil & gas field equipment manufacturers anticipate more orders on the back of firmer oil prices. The shipyards foresee more ship repairing work while offshore rig orders remain subdued. Additionally, in the aerospace segment, firms continue to expect strong demand for aircraft engine repair in the next six months.

In the biomedical manufacturing cluster, a net weighted balance of six percent of firms foresee a favourable operating environment in the next six months. This positive sentiment is largely due to the medical technology segment which expects export orders to remain strong.

The rest of the manufacturing clusters are less optimistic about business prospects compared to a quarter ago. In particular, the machinery & systems segment in the precision engineering cluster and the infocomms & consumer electronics segment in the electronic cluster anticipate weaker orders, given growing concerns over the global trade tensions.

Output Forecast for October – December 2018

Compared to the third quarter of 2018, a net weighted balance of two percent of manufacturers expects output to increase in the fourth quarter of 2018.

The biomedical manufacturing cluster is the most optimistic, with a net weighted balance of 27 per cent of firms projecting a higher level of production in the fourth quarter of 2018, compared to a quarter ago. The medical technology segment projects increased output to meet export demand for medical devices. In addition, the pharmaceuticals segment forecasts higher production of active pharmaceutical ingredients and biologics in the next three months.

A net weighted balance of 19 per cent of firms in the transport engineering cluster expects a higher level of activity in the next three months. The aerospace segment anticipates more aircraft engine repairs while the marine & offshore engineering segment foresees more ship repairing work.

A net weighted balance of 12 percent of firms in the general manufacturing industries cluster projects increased output in the fourth quarter of 2018, compared to previous quarter. Within the cluster, the food, beverages & tobacco segment anticipates higher production due in part to the year-end festive demand. In addition, the miscellaneous industries segment expects higher output of batteries as export demand from Europe and the US remains strong.

By contrast, the precision engineering cluster is the least upbeat, with a net weighted balance of 23 percent of firms projecting a fall in production level in the fourth quarter of 2018. The weaker production outlook is largely due to the machinery and systems segment, which anticipates lower production due to uncertainties in demand amid global trade tensions.

Employment Forecast For October – December 2018

A majority of firms (a weighted 85 percent) in the manufacturing sector expects the employment level in the next three months ending December 2018 to remain similar to a quarter ago. Overall, a net weighted balance of one percent of manufacturers plans to hire fewer workers in the fourth quarter of 2018, compared to the third quarter. Among the manufacturing clusters, the electronics, precision, transport engineering and general manufacturing industries clusters expect to hire fewer workers for the period October – December 2018.

Factors Affecting Export Orders For October – December 2018

A majority of firms (a weighted 70 percent) in the manufacturing sector reported no limiting factors that would affect their ability to obtain export orders in the fourth quarter of 2018. A weighted 25 percent of firms, on the other hand, indicated price competition from overseas competitors, and economic and political conditions abroad as the top two limiting factors that could affect their export orders.

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Interview With Mr. David Chia, Automation Charter Chair Of The Singapore Industrial Automation Association

Interview With Mr. David Chia, Automation Charter Chair Of The Singapore Industrial Automation Association

Asia Pacific Metalworking Equipment News is pleased to conduct an interview with Mr. David Chia, Automation Charter Chair of the Singapore Industrial Automation Association on his views on the future of manufacturing technologies in Asia and the impact of the current trade war on the industry.

Interview With Mr. David Chia, Automation Charter Chair Of The Singapore Industrial Automation Association

1.Could you provide an overview of the key trends that have shaped the manufacturing industry in Asia in 2018?

We see some key trends emerging this year:

  • Digitalisation in the drive towards more manufacturing productivity, we are witnessing more and more companies (mostly MNCs) develop and execute their digitisation plans. Each sensor data, each module conditions, each machine performance are getting collected and sent to the cloud, where the data engineers and scientists are waiting. Driving business insights from those data is now no longer a dream, but an imperative corporate goal to ensure survival and growth.
  • Adoption of open standards. Digitisation is not possible without the existence of the underlying IoT technologies. Without a common standard, it would’ve been very expensive for individual companies to develop and deploy their own standards, thereby slowing down the whole digitisation process. MQTT seems to gain a very wide acceptance as the communication technology of choice here. It is quickly becoming the de facto standard to communicate with the cloud. Meanwhile OPC UA is becoming the protocol of choice for device and machine intercommunication on the factory floor.
  • Governmental push towards Industry 4.0. Singapore is blessed with a forward looking government who has put out the initiative as early as 2014. However, government in the ASEAN region is quickly catching up. One example is Indonesia, who announced this year their own roadmap to Industry 4.0. Having such a large manufacturing base in the country, it is encouraging that the government has focused on five sectors: Food & Beverage, Chemical, Textile, Automotive, and Electronics industries. We can expect other governments in the region to do the same soon.

2. What has been the top 3 biggest challenges in the digitalisation of manufacturing in Asia?

The biggest challenges are funding, technology standards, and talent.

  • Funding, this is probably the biggest challenge facing SMEs. Digitisation is relatively a new concept in manufacturing space. Very few companies can claim that they have done it successfully. In the absence of such successful case studies, it is quite difficult to get the appropriate funding.
  • Technological standards. While some standards in some areas are quite established, they are not monopolies. For example, when we look into the area of fieldbus, there’s a plethora of options out there: old vs new standards, serial based vs Ethernet based, and a variety of ways that these standards work. This presents a challenge for the implementer of digitisation to get the data from different machines or different part of the plants.
  • Unfortunately for companies embarking on digitisation journey, it is not a one month journey. There is no single off the shelf components or a plug and play software solution to perform digitisation. For many companies, digitisation is a multi-year multi-stage efforts. Getting the right people to perform different functions along this journey is a challenge. Retaining the talents is probably a bigger challenge. Meanwhile the factory floor workers must be re-trained to get up to date with the latest digitisation initiative that the company is embarking on.

3. How do you suggest that the challenges that have been mentioned above be overcome?

It will take some efforts from different stakeholders to overcome those challenges:

  • Companies should collaborate more to create common standards. There are more to gain from standardisation than competition. Germany is leading this effort and they have done quite well. VDMA is leading the machine standardisation for Germany. Countries in the ASEAN region may need to follow on their footsteps.
  • Governments across the region should help in the funding of digitisation initiative. This is very important for SMEs. While big players have easy access to funding, small SMEs are facing a big challenge here. Governments can come in and fill the funding gap in the short to medium term.
  • Re-training and upskilling the workforce is needed. We are facing shortages in data engineers, data scientists, data analysts in the region. While some manufacturing jobs will eventually disappear as an effect of digitisation, new ones will be created. However, those new jobs creation are on the higher end of the skill spectrum, hence the importance of educational institutes.

4. How has the trade war impacted manufacturing in Asia in 2018 and how will it continue to impact the industry in 2019?

There’s an old saying that goes where one door closes, another opens. This is true in the current trade war situation. It creates uncertainty on one hand, but it creates opportunity on another hand. We are seeing more investment flowing to other regions outside China. Closer to home, the South East Asian region seems to benefit from this trend.

5. For 2019, what will be the emerging markets and focus areas that the metalworking industry in Asia will focus on?

At the mass market stage, enterprise digitisation will penetrate deeper into the manufacturing floor. Enterprise will look to get more data from as many machines and sensors as possible. This has been happening in the past years, and we are expecting this trend to continue.

The need for data collection will force some rethinking in what goes inside the control cabinet. While traditional controllers are well known and well loved, it needs some additional components to do data collection and data sending. Additional components means additional costs and more point of failures, and a potentially bigger control cabinet. Some PC based solutions out there will be more attractive moving forward.

As well as sending data over standardised communication protocol, companies will increasingly looking to get standardised information from each machine type. This so called “information modelling” will make sense when one look into a production line today, there is hardly a “homogenous” production line containing the same machine model from the same manufacturer. In this area, the VDW has announced umati, an open and common language specifically designed for machine tools. With umati, end users can utilise the same interface to get the same data from different model of machine tools from different manufacturers. The good news is, umati is based on OPC UA.

Another focus for metalworking and CNC world will be the use of AR technologies. While still a cutting edge technology today, this technology holds a lot of promise from speeding up operators training, to helping maintenance work.

At the bleeding edge, we increasingly see a trend where suppliers are looking to implement ML directly on premise / machine. While this is on early stages, we feel that this would be the internal focus of many bleeding edge supplier


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Hanoi Striving To Become New Location For Iphone Production

Hanoi Striving To Become New Location For Iphone Production

According to Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), Nguyen Duc Chung, Chairman of Hanoi People’s Committee is currently in discussion with Chinese corporations with the intention of diverting the entire iPhone production line to Hanoi. This is in view that the ongoing trade war has pushed investors from China to Vietnam in order to escape rising tariffs, with Hanoi rising up as the top location for investors as well as a potential production headquarters for global corporations.

Loc has also further elaborated that reasons for Hanoi being an ideal destination includes the positive impacts that the region has gained from administrative reforms, favourable weather conditions and its proximity to the Chinese market.

However, in order to feed rising demands, Hanoi has to continue improving its business environment, especially for the high-technology sector. According to Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM), this includes adopting a more proactive approach in attracting capital flows, speeding up administrative processes as well as utilising its advantages as a regional economic hub to create spill over effects to other provinces

According to Hanoi’s mayor, FDI is an important source of capital for social investment and it attributes to an average of 10 to 15 percent of the total social investment in the region. This has allowed FDI alone to contribute to the city’s high GRDP growth over the past few years which averages at 7.11 percent annually.

Among the 59 cities and provinces that has received foreign investment, Hanoi has also attracted the largest amount of registered capital with US$6.15 billion in the first ten months of 2018. This is equivalent to 22 percent of total investment. Ho Chi Minh City follows behind with US$4.6 billion or 16.5 percent of the total investment, and Ba Ria – Vung Tau with US$2.4 billion, accounting for 8.8 percent of total investment.

The highest grossing projects in the first ten months of 2018 include the smart city project in Dong Anh district, Hanoi with total investment capital worth US$4.138 billion and the US$600 million Lotte Mall Hanoi project that encompasses a hotel, apartment, office, and trade centre complex.


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Taiwanese Companies Shift Production To Taoyuan As Trade War Heats Up

Taiwanese Companies Shift Production To Taoyuan As Trade War Heats Up

TAIPEI, TAIWAN: According to Bloomberg, Taiwanese technology companies are shifting production to Taoyuan from China due to an intensification of the trade war. This indicates a reversal of previous trends whereby manufacturing plants were shifted to China from Taiwan.

As 15 of the 20 largest exporters from China to the U.S. in 2016 were run by Taiwan companies, these companies are highly susceptible to trade war induced tariffs and are working to avoid current and potential future tariffs on technology based products that are made in China. At the same time, the region’s proximity to Taiwan’s largest international airport, the Taiwan Taoyuan International Airport, as well as existing facilities in the surrounding region, have made this an attractive region for manufacturing operations.

Similarly, as per Bloomberg’s report, companies that have shifted to Taoyuan from China include iPhone assembler, Pegatron Corp, laptop maker, Compal Electronics Inc. and Apple Supplier, Inventec. In addition, Barry Lam, Chairman of Quanta Computer Inc. has also released a statement regarding the company’s shift to Taoyuan and in this case, Quanta will not only be shifting its supply chain of high end products back to Taiwan, the company is also looking to shift its focus to the development of new products such as smart medical care, smart manufacturing, and smart household items along with the establishment of a new AI research center.

Angela Hsieh, an economist from Barclays has also commented that, “There are still a lot of uncertainties surrounding a trade war, so companies tend to first add capacities in their existing facilities in Taiwan instead of spending a lot to build new plants.” A view that is echoed by Elton Yang, chief financial officer of Quanta, when he stated that, “The fastest way is to add capacity in existing facilities. Looking for new land and building new facilities elsewhere will be too slow.”

According to findings from Sinyi, a Taiwanese real estate company, from January to September this year, Taoyuan has sold more industrial land and factories than any other city in Taiwan. Michael Wang, a manager at Sinyi has also told Bloomberg that this is because more land is available in Taoyuan and it is easier to acquire land there than in Hsinchu. The land in Taoyuan also has the added bonus of being cheaper than Taipei and the local government is collaborating with real estate companies to facilitate the acquisition of land by manufacturing plants.

Meanwhile, in an interview with the Wall Street Journal, American President Trump has stated that if a deal cannot be brokered with Chinese President Xi Jinping at the G20 summit in Buenos Aires, he will be looking to enforce tariffs on the remaining lot of $267 billion worth of Chinese products imported into the U.S.


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Interview With Mr. Douglas Foo, President, Singapore Manufacturing Federation

Interview with Mr. Douglas Foo, President, Singapore Manufacturing Federation

Asia Pacific Metalworking Equipment News is pleased to conduct an interview with Mr. Douglas Foo, President of the Singapore Manufacturing Federation (SMF) regarding his views on the digitalisation of manufacturing in Singapore and beyond.

1.Could you provide us with an overview of the manufacturing industry in Singapore?

The manufacturing industry in Singapore has always been one of the key pillars of the Singapore economy, contributing 20 percent to Singapore’s GDP. It has a 1.4 multiplier effect on other economic sectors, creating jobs for many supporting industries and services, such as logistics, supply chain, banking, retail, insurance, IT, etc.

Currently, the industry is undergoing a two-part transformation – digitalisation and servitisation.

Due to our relatively high labour cost compared to the region and talent shortage, the industry is now moving up the value chain and is exploring  and implementing the use of AI, IoT, robotics, automation and other digital tools to keep costs low and to increase productivity. Digitalisation itself is expected to quite significantly alter and remake the landscape of the industry.

The industry is also becoming more servitised, as more manufacturers are now offering services such as after sales support, maintenance and repairs, and consultancy. This provides end consumers with better support and in future, may even provide them with more customised and personalised support.

2. With the advancement of Industry 4.0, do you think companies in Asia are ready to take the step towards digitalisation and machine intelligence? Or are companies already beyond the digitalisation stage and ready to advance further?

Currently, most SMEs in Asia are still between operating at a relatively manual mode to Industry 3.0, depending on which country one is looking at. Not many SMEs in Asia have the capability and capacity to advance towards Industry 4.0. Unlike in Germany and other industrialised nations, Asia’s manufacturers are neither brand owners nor niche players. Therefore, it cannot readily adopt Industry 4.0 style in its entirety. Asia is still very much playing the ‘middleman’s’ role. Examples of these are contract manufacturers, traders and product distributors. But Asia has a large pool of young workforce who are increasingly more educated and therefore, digital-savvy and are prepared to embrace digitalisation and make full use of digital tools.

The manufacturing industry in Asia is polarised into three categories – the ‘factories of the world’, the factories supplying to ‘factories of the world’, and the ‘middleman’, where most manufacturers in Asia are a part of. These ‘middleman’ supplies to the first two categories and are part of the value chain. The first two factories, where countries such as China, South Korea, Japan, and Taiwan belong to, have the economies of scale and expertise to move and exploit technologies. But the last category lacks the resources required and is behind in terms of technological know how.

Therefore, with Singapore being the ASEAN Chair this year, the ASEAN Business Advisory Council, where I am its Singapore representative, is pushing the initiative – SGConnect. This stands for Smart Growth Connectivity and aims to develop a network of smart cities across the region which can facilitate better connection of digital infrastructure and services, such as e-payment. Essentially, we want to connect ASEAN’s people and economies to grow symbiotically together in a sustainable and smart way.

3. What are the main challenges regarding the adoption of digitalisation in Asia?

I would say it is the limited capabilities of manpower and funds. You need talent with the appropriate competencies in order to push for digitalisation and the funds to implement them.

That is why SMF has always believed that the youths are our future. We need to educate the youths and grow their passion for manufacturing. The impression the youths have of manufacturing is that it is dirty, requiring one to always soil their hands, and also just about nuts and bolts. But it is much more than just that. The manufacturing sector is evolving into Industry 4.0, where IoT, AI and many digital tools play a huge part in the processes. The youths today are digitally savvy. But they must know how to apply their knowledge and technology savviness into the industry. Therefore in SMF, we are introducing the Transformative Leadership Programme to students in Singapore where they will get to experience first-hand how the manufacturing industry is evolving and use their technology savviness to identify the gaps and conduct feasibility studies in the companies. These will also help companies ease into Industry 4.0 and also provide these youths a sense of purpose and achievement in this programme.

Another challenge is funding. Companies, especially SMEs, need a lot of funds in order to implement the latest, including digital technologies into their work processes. Transformation is not something that comes cheap and happens overnight. It needs time, patience and funds. Therefore, the government has engaged SMF as the first operator of the Digital Project Management Services. Companies that come on board this service will receive funding from the Government to help them implement digital solutions. SMF will also provide Digital Project Managers who will handhold the SMEs during the implementation of the technologies.

4. With the digitalisation of manufacturing, how will supply chains evolve to keep up?

To be digitalised is to implement A to F, among others.

  • A – Additive manufacturing, Artificial Intelligence, Advanced manufacturing
  • B – Blockchain
  • C – Cloud computing
  • D – Big Data
  • E – e-commerce
  • F – Future tech such as Robotics, Advanced Automation, etc

Therefore, for supply chain models to keep up, it must become increasingly digitalised by implementing A to F. According to EDB’s ‘The Singapore Smart Industry Readiness Index’, it states that a digitalised supply chain model will have its processes connected through a sensor network and managed through a central data hub and analytics engine. Decisions on cost, inventory, and operations will also be made from an end-to-end, integrated perspective instead of being in isolation. With this evolution of the supply chain model, it will benefit all players in the value chain, with shorter lead times, increased flexibility through real-time optimisation, increased efficiency, and encourages transparency and personalisation of services.

5. In your opinion, what are the trends that will shape the industry in Asia in 2019?

Due to the looming trade war, there is much fear that demand and investments are expected to shrink. Protectionist attitude and interest rates are also on the rise. In order to brave through the tough times ahead, manufacturers must stay at the top of their sectors to stay relevant. But it is not all doom and gloom. Behind every adversity there are always opportunities to be tapped by the business savvy. Manufacturers can make use of technologies and innovate their business models to improve their productivity, efficiency and competency. With the right technologies, the industry may even disrupt and affect other sectors, causing a ripple effect and accelerate the advancement of businesses towards embracing Industry 4.0 sooner rather than later.


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