Facing Industry 4.0 Chinese Manufacturing Enterprises Need to Tailor Development Roadmap

In 2015, after the State Council issued the "China Manufacturing 2025" action plan and proposed a series of goals, the transformation of China's manufacturing industry is receiving worldwide attention. According to statistics, more than 1,000 domestic private equity funds and venture capital funds have entered the industry 4.0 area. The Chinese manufacturing giant is trying to provide sponsorships and investments for local technology suppliers or value-chain participants to gain more integration opportunities. Central and local governments are also investing heavily in the Industry 4.0 project.

In a report entitled “Industry 4.0 Era: How Digital Transformation Can Accomplish China's Manufacturing Upgrading,” the global management consulting company McKinsey surveyed representatives of 130 companies in various industries and found that nearly 80% of surveyed Chinese manufacturing companies expect Industry 4.0 can enhance its competitiveness. In contrast, only 57%, 50%, and 54% of American, German, and Japanese manufacturing companies have similar expectations.

Although Chinese manufacturing companies have great enthusiasm and expectations for Industry 4.0, only 57% of Chinese companies believe that they are ready for Industry 4.0, which is lower than American companies (71%) and German companies (68%).

Digitizing is not just about installing and using automation equipment. Corporate management structures, concepts and capabilities, digital operations, and cooperation with governments, consultants, investors, and research institutions are also the focus of digital transformation.

At present, the lack of a clear division of responsibilities and systematic implementation of the digital transformation plan is the biggest obstacle to the digital transformation of manufacturing companies. “Only 9% of Chinese companies believe that they have a clear distribution of responsibilities, and 6% of companies have a clear roadmap. The United States, Japan, and Germany are better at these two points than Chinese companies.” McKinsey Global Director Partnership Wang Ping, person in charge of China's advanced industry consulting business, introduced the report at a press conference.

According to the McKinsey report, only less than 5% of enterprises in China can independently formulate and implement digital technology solutions. Such enterprises represented by Huawei and Haier have also become leaders in Industry 4.0 in their respective industries. While more than half of the manufacturers, although they have achieved semi-automation through the configuration of automation equipment, they still lacked digital management capabilities. The remaining 34% of companies still remain at the initial stage of relying heavily on human labor.

Taking the development of the machine tool industry as an example, as the world’s largest machine tool producer and consumer country, Chinese machine tool companies have accelerated the research and development of key functional components for mid-to-high-end machine tools with the support of the state and achieved certain results, such as the independent development of Jinan No. 2 Machine Tool. The first full-servo high-speed automatic stamping line made in China has reached the world's leading level in stamping technology. However, Chinese machine tool companies are more concentrated in the low-end market, while the high-end machine tool market is still dominated by the German-Japanese traditional machine tool companies.

“The upgrade direction of the machine tool industry is totally opposite to the long-term inherent advantages of the Chinese machine tool manufacturing industry.” Chen Huiren, executive vice chairman and secretary-general of the China Machine Tool Industry Association, once said that “the Chinese machine tool industry is not lacking in appearance, but depth.”

What Chinese companies need is not the “all-you-can-do” industrial 4.0 solution, but a tailor-made roadmap that includes digital lean transformation for energy optimization and automation, efficient and high-quality digital business models, and innovative product and business model development. Consumer demand-oriented business strategy. The report predicts that these opportunities may increase China's manufacturing capacity growth rate to 6.5% over the next 15 years.

In addition, the report also mentioned that manufacturers should pay attention to the excessive enthusiasm of Industry 4.0 may lead to irrational investment in equipment and tools and waste of resources.

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