Southeast Asia is quickly becoming a powerhouse in the global economy, and nowhere is this more evident than in the field of advanced manufacturing.
The industry is on the cusp of a major transformation, as businesses around the world begin to adopt Industry 4.0 technologies.
While it’s no secret that the region offers lower labour costs, the fact that it continues to lag behind in terms of productivity has driven more businesses to move towards the fourth industrial revolution.
In fact, a survey by McKinsey & Co. in 2018 revealed that implementing Industry 4.0 smart technology can supplement $216 billion to $627 billion a year in productivity gains to the region by 2025.
We explore how Southeast Asian countries have progressed with this movement in this article.
Download Free Guide : A SEA of Opportunities: Understanding Southeast Asia »
What is the State of Industry 4.0 Adoption in Southeast Asia?
The state of its implementation in SEA is still in its early stages, but there is a lot of growth potential.
Over the years, countries in the region like Singapore, Malaysia, Vietnam, Indonesia, and Thailand have begun to prioritise Industry 4.0 as the way forward.
They have also continued prioritising the development of their manufacturing sectors even throughout COVID-19 by taking certain processes online.
Several reasons have spurred companies to move towards digital transformation and incorporate these new technologies.
For example, the decreasing costs of implementing these solutions have reduced the barriers to adoption. In addition, many companies view Industry 4.0 as an opportunity to stay competitive in the global marketplace.
The region also features favorable demographics, with a young and growing population that signals a large potential market for related products and services.
Manufacturing sector companies in these countries have bolstered their efforts to evolve and enhance their operating models and value chains.
What Are the Industry 4.0 Initiatives in Southeast Asia?
Countries in Southeast Asia have implemented their Industry 4.0 schemes to varying degrees of success.
Let’s take a look at some of the prominent cases:
Industry 4.0 Initiatives in Singapore
Over the past few years, the government and Singapore firms have launched a few key initiatives and efforts:
- The Industry 4.0 Human Capital Initiative spearheaded by the Singapore Business Federation (SBF) and Workforce Singapore: These programmes help businesses work on adopting tools and using data to get relevant insights required to automate, boost productivity levels, and determine the skills needed for digital transformation
- The Productivity Solutions Grant (PSG) to help fund firms to automate processes and enhance productivity
- The announcement of Manufacturing 2030, a 10-year roadmap with the goal of expanding the manufacturing sector by 50%: One of its primary initiatives is the Jurong Innovation District, an all-inclusive advanced manufacturing hub
- Government agency JTC Corporation’s agreement with Hyundai Motor Group in 2022 to partner on transportation and logistics for the country’s next-generation industrial parks, like the Jurong Innovation District
- Digital efforts like ESG and the Singapore Business Federation’s jointly organised webinar in 2021 to encourage the sharing of Thailand’s key manufacturing figures and trends as well in 2021
- The Singapore Economic Development Board (EDB)’s creation of a dedicated Industry 4.0 business unit providing support and guidance for businesses looking to adopt new technologies
- The EDB’s development of the Smart Industry Readiness Index (SIRI) in 2018 in collaboration with top technology firms, consultancy businesses, and sector experts: SIRI helps manufacturers in the sector begin, scale, and sustain their manufacturing development pathways to incorporate projects that back automation and more
Industry 4.0 Initiatives in Malaysia
Singapore’s neighbour, Malaysia, has also started several initiatives and activities:
- The formation of the Malaysian Industry-Government Group for High Technology (MIGHT) which is working to promote the adoption of Industry 4.0 across Malaysia
- The launch of its national policy in 2018 on Industry 4.0, Industry 4WRD, with the goal of driving Malaysia as the Industry 4.0 hub
- The shifting of mass production from intensive manual labour to the using robotics with the help of SIRIM, the government-owned industrial and research technology business, in partnership with multinational corporations operating in Malaysia to determine inexpensive and suitable information technology solutions.In turn, they collaborate with local firms to update their implementation of advanced technology
- Motorola’s joint product development with local suppliers to work towards lean manufacturing and automation processes: Most of the suppliers have used Industry 4.0 improvements to meet their standards and boost production
Industry 4.0 Initiatives in Thailand
Thailand is the second-largest market for robotics and automation in the Southeast Asian region after Singapore, with the sector valued at more than $20 billion.
It has experienced visible manufacturing advantages for the past few years with its Industry 4.0 movements.
- The launch of its Thailand 4.0 strategy in 2016, an economic model that aims to shift the country away from a few economic problems through innovation and technology
- The opening of German multinational corporation Bosch’s $91 million smart factory and R&D centre for injection technology in 2017
- The approval of government incentives like a 3-year corporate income tax exemption that funds 100% of investments in Industry 4.0 upgrades, and the extension of current special investment promotion measures till end-2022
Industry 4.0 Initiatives in Indonesia
- In 2017, the Indonesian government revealed the ‘Making Indonesia 4.0’ roadmap to use new manufacturing technologies to enhance its economy
- The government’s creation of the Indonesia Industry 4.0 Readiness Index (INDI 4.0) that determines the readiness of industrial firms in digitsing their production processes
- The opening of the flagship digital capability centre (DCC) in Permata Hijau in 2021
- The opening of the first satellite DCC by the Industrial Human Resources Development Agency (BPSDMI) in the Institute of Industrial Management (STMI) Jakarta that helps companies understand and experience Industry 4.0
Industry 4.0 Initiatives in Vietnam
Vietnam is recognised as a robust manufacturing hub in ASEAN. It is essential for the country to embrace Industry 4.0 to solidify their position and remain competitive.
- The Vietnamese government’s launch of a new national industrial policy that runs until 2030 with a vision towards 2045, the Resolution No. 23-NQ/TW
- The government started a programme that incentivises innovative startups with free infrastructure access, tax incentives, and public financing
As more businesses in Southeast Asia begin to embrace Industry 4.0, we will likely see a transformation in the manufacturing landscape.
There are several resources and successful case studies available to help businesses get started.
One such resource is The SME Guide to Industry 4.0, which was published by the Singapore Manufacturing Federation in 2017.
What Does it Take for Companies to Succeed in Industry 4.0?
While companies may agree that the benefits of adopting Industry 4.0 technologies into their operations and processes are clear, not all will be successful.
Some firms get caught up in the ‘pilot trap’, a term that describes companies that never break out of the testing phase.
There are a few reasons why companies get stuck in the pilot trap.
One reason is that companies can become complacent after a successful pilot test and be hesitant to roll out the new technology more broadly.
Additionally, decision-makers may be unwilling to invest in new technology until they are confident that it will be successful in the long term.
Finally, some companies may believe that they need to wait for the perfect time to implement new technology, but this can often lead to delays and lost opportunities.
An ideal way to avoid getting stuck in the pilot trap is to have a clear plan for how to implement the new technology. This plan should include how to properly scale up the new technology and how to train employees on its use.
Additionally, the plan should be reviewed regularly to ensure that it is still relevant and effective. Companies can avoid getting stuck in the pilot trap and can successfully implement new technologies with this plan.
Southeast Asia Offers Plenty of Opportunities for Businesses With Industry 4.0
With an ever-growing population and rising standards of living, businesses in the region are looking for ways to increase efficiency and output.
The growth of Industry 4.0 presents a huge opportunity for companies in Southeast Asia to lead the way in this rapidly changing sector.
If you’re looking to invest or expand your business into this exciting region, InCorp’s professional business solutions can provide expert advice on how to make it happen for your company.
We can help you navigate the complex landscape of doing business in Southeast Asia and set you up for success!
- Examples include:
- Internet of Things (IoT)
- Cloud computing
- Smart factory
- Artificial intelligence (AI)
- Machine learning
- Agritech startups are companies that focus on developing technology-based solutions for the agriculture industry.
- Despite being in its early stages, Singapore has already implemented several initiatives by the government and private sector.