Finding the New Manufacturing Normal with Re-industrialization
Global manufacturing is evolving fast. New disruptive technologies and the advent of Internet of Things (IoT) are connecting our physical world with the Internet through sensors, unearthing a range of benefits and opportunities under the new re-industrialization banner.
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Both established players and new entrants are redefining processes and streamlining supply and distribution channels to become more innovative, dynamic and digital. Global manufacturing powers like U.S., China and Germany are seeking to take full advantage of technological advances to give their industries, especially manufacturing, a technological facelift, smart jumpstart and a decided global advantage.
The rewards are huge. According to PwC , industrial companies stand to reap 3.6% in cost reductions every year over the next five years through internal system improvements and working closely with value chains. The ability to digitize products and services and the introduction of new digital service offerings are expected to increase revenues by 2.9%.
Germany, under its Industrie 4.0 initiative, advocates to computerize its entire manufacturing. Introduced in October 2012, the initiative highlights six design principles that defines the future smart factory: interoperability, virtualization, decentralization, real-time capability, service orientation and modularity.
Meanwhile, China, the “world’s factory”, is marching toward re-industrialization by encouraging innovation and high-value manufacturing through its Made in China 2025 (MiC2025) initiative. The Chinese version of Industrie 4.0 takes aim at high-tech industries such as IT, Robotics, Aerospace and New Materials, and looks to encourage a big leap in innovation and manufacturing efficiency by 2025. The nation is expected to compete with developed manufacturing powers and lead global manufacturing by 2049, when it celebrates the 100th anniversary of the New China.
All these efforts underscore the rising importance of IT in manufacturing. By connecting, automating and managing using a single plane of glass, smart manufacturing aims to impact all types of manufacturing, including process, discrete and hybrid.
An opportunity for Hong Kong
MiC2025 offers an ideal opportunity for Hong Kong to play a key role as enabler for re-industrialization. The city has some unique advantages that leverages a mature multi-cultural environment, strong APAC networking & communications infrastructure, a renowned legal framework, and an active entrepreneurial spirit.
The HKSAR Government is taking note and being proactive. It is looking to encourage and support re-industrialization, and acknowledges that it is a potential new area of economic growth for Hong Kong, closely aligning with China’s MiC2025.
To date, the Government has injected vast resources and launched measures to fuel the development of innovation and technology in Hong Kong, and support IoT research already present in Hong Kong universities. From 2001 to 2014, there was an average annual growth of about 7% in total R&D expenditure, reaching almost HK$17 billion in 2014 .
The more important question is how re-industrialization in Hong Kong will look like?
Sizing up the IoT impact
For many, Internet of Things (IoT) essentially provides the glue for re-industrialization in Hong Kong. Properly deployed, it will allow products and processes to govern themselves, self-correcting and conducting quality control autonomously. Manufacturers can remotely monitor the condition of equipment and look for indicators of imminent failures, leading to fewer costly visits, optimizing resource allocation, reducing unplanned downtime and freeing up employee time for more value-added tasks.
Internet of Things (IoT) is also simplifying complex manufacturing processes, enabling better personalization of products. A recent study noted that made-to-order products will soon enter mainstream, with all the required raw materials being assembled and managed by Internet of Things (IoT) devices and automation processes. Customers also have the ability to know where their products in real time anywhere in the world, offering a new level of customer experience. For the smart manufacturer, real-time management of processes and inventory will reduce the need to keep stocks, while preparing for peak periods or emergencies ahead of time.
Eighty-three percent of surveyed manufacturers already have Internet of Things (IoT) implementations in place last year or plans to deploy them in 2016. This presents an ideal opportunity to Hong Kong, if rightly captured.
Hong Kong’s distinct advantages
A strong network and data infrastructure is the lifeblood of re-industrialization, and this is where Hong Kong holds significant advantages. The territory has long been seen as a gateway to China business opportunities, and a financial and logistic hub. However, high cost of labor and land costs has seen traditional manufacturers move across the border or elsewhere.
Re-industrialization offers Hong Kong the ideal opportunity to become a regional IoT hub and major proponent of its adoption in the region. The strong network infrastructure and data center facilities allow instantaneous communication and data exchange that IoT demands. With many logistics and manufacturing expertise already residing in the territory and its strong heritage as a logistics hub backed by a solid legal framework and financial services, Hong Kong can be a perfect location to develop and test new industrial IoT innovations for Smart Manufacturing and other applications.
With the emerging large numbers of applications, software and hardware addressing the MiC2025’s demand, synchronization and orchestration across these components are important. Prove of concept is therefore critical for applying new technologies into the real manufacturing situation step-by-step. Hong Kong can also be an important transformative agent for China-based manufacturers in these areas. As many look to improve production efficiency and quality, the innovations, research and knowledge can be vital for their success.
All of these will offer a strong blueprint for re-industrialization. With the focus on cost-efficiency, strong research facilities and active Internet of Things (IoT)-based innovation, Hong Kong may yet be where the fourth industrial revolution begins.
 PwC Research “Industry 4.0: Building the digital enterprise”
 Speech by the Secretary for Innovation and Technology, Mr Nicholas W Yang, at the Internet of Things Conference of the APAC Innovation Summit 2016 Series today (April 7)
 Online study by Forrester Consulting in October 2014 and commissioned by Zebra Technologies Corp in 2014 involving 593 IT decision-makers from global firms.
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