COVID-19 has brought forth the power of digital transformation. To sustain and quicken the pace of this transformation after the pandemic ends, Industry 4.0 (or the Fourth Industrial Revolution) can be of much help. It has the potential to retool and rebuild economies in the post-pandemic world through smart infrastructure, integrated automation and cloud innovation.

Emerging manufacturing and tech economies like China, South Korea, Taiwan and even India have already been coming out with policies to push Industry 4.0. In South Korea, the government has introduced a legislation to promote IT integration with key sectors like automobiles and shipbuilding and develop Centres of Excellence and Innovation. Not only this, the South Korean government is also working towards its vision of Industry 4.0, betting the country’s future on AI, IoT and smart factories.

Similar work is underway in China under the ‘Made in China 2025’ initiative, which seeks to enhance the country’s global competitiveness by reconfiguring its major industrial sectors, especially semiconductors, AI, robotics and next-generation technologies. Moreover, under its New Generation AI Development Plan, China aims to dominate the AI sector by 2030. The country’s AI targets for the years 2020, 2025 and 2030 are already finalized:

• 2020: To bring China’s AI up to global standards.
• 2025: To establish AI laws for the intelligent manufacturing, medicine, agriculture and urban planning sectors.
• 2030: To become the world’s leading AI developer.

What is interesting to see is that most of these developments took place in emerging economies over the past few decades. Supply of cheap labour, rising demand, new market opportunities, growing middle class and greater access for multinationals created a conducive environment to bring about the change in manufacturing supply chain.

At the same time, international trade and the supply chain ecosystem has been affected by the nationalist stance taken by many governments. Some latest examples include the ‘anti-China’ sentiment due to COVID-19 and the ban on Huawei in the US and some European markets. However, Industry 4.0 not only has the potential to remodel manufacturing ecosystems around the world but also influence the complex macroeconomic and geopolitical pressures surrounding them.

How and what will change?

Statistics suggest that by the year 2025, the emerging economies of China, Brazil, India, Indonesia and South Korea will account for more than half of the global growth. Such a shift is capable of giving rise to a newer stratum of economies driving the manufacturing revolution and Industry 4.0 vision. This is particularly becoming true for economies like China which have managed to prosper through the development of their manufacturing sector.

Today, both Indian and Chinese economies form a mere 5% of the global middle class consumption while Japan, US and Europe take almost 60% share. According to projections, these shares are expected to equalize by 2050. Further, the rise in middle class demand will be the driving force and almost 80% of this demand is expected to come from Asia.

Road ahead

It would be interesting to see who takes the lead in Industry 4.0 era. On the one hand, we have the incumbent powers (developed economies) betting hard on their strength in R&D, smart technology and manufacturing ecosystem, while on the other, we have the rising powers (developing economies) betting hard on their ability to provide low-cost labour and favourable regulatory procedures, along with a growing population that can support demand.

While the West may still hold the reins when it comes to the current technological scenario, this may change in coming years. With significant leads in IoT, AI, robotics and smart tech and manufacturing, along with low-cost labour, new market opportunities and evolving bilateral and multilateral trade pacts, the era of Industry 4.0 does not seem very distant for the developing countries of the East.