After China’s new five-year plan listed the development of seven key “frontier technologies” as the nation’s top policy priority, it is now home to the most cutting-edge advanced manufacturing facilities, ahead of the likes of the European Union, the United States and Japan.
The World Economic Forum has added five Chinese sites to its Global Lighthouse Network list of the world’s most advanced factories that have successfully adopted new technologies to transform business models and value chains.
Bosch Automotive Products Suzhou, Foxconn Technology Group’s Chengdu campus, electrical appliance manufacturer Midea Shunde in Guangdong province, Tsingtao Brewery in Qingdao and Wistron InfoComm Manufacturing in Kunshan are among 15 sites added to the list after an assessment of over 1,000 companies globally from a range of diverse industries ranging from electronics to pharmaceuticals and automotive.
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Of the 69 factories around the world now viewed as leaders using Fourth Industrial Revolution technologies, China is now home to 20, followed by 19 in the European Union, seven in the US and five in Japan, according to the “Global Lighthouse Network: Reimagining Operations for Growth” whitepaper published by the World Economic Forum in collaboration with consultancy firm McKinsey. In 2020, China and the European Union had 15 each, with the US and Japan also tied on five each.
China has reached the stage where its firms can challenge their peers in the developed world, in many sectors … such as smartphones and electric cars
The Fourth Industrial Revolution, also known as Industry 4.0, is the ongoing automation of traditional manufacturing and upgrading of industrial practices and the use of modern smart technology to achieve more efficient and profitable growth.
“China has reached the stage where its firms can challenge their peers in the developed world, in many sectors … such as smartphones and electric cars,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Both [China and the US] recognise that these technological breakthroughs can lead to a change in the landscape of the global economy.”
Zhang predicted that the main competition in Fourth Industrial Revolution technologies would be between China and the US as Europe and Japan may develop expertise in specific areas, but may not have the scale to compete on a broad range of technologies.
China’s new five-year plan listed seven key development areas, known as “frontier technologies”, as the nation’s top policy priority, with artificial intelligence, quantum information and semiconductors ranked as the top three.
While the World Economic Forum whitepaper argued the global manufacturing community is as a whole lagging behind in its adoption of Fourth Industrial Revolution technologies, China’s top manufacturers have made progress in a variety of areas.
These include smart digital technologies used in value chains to reduce manufacturing costs and new product development lead times; adoption of a digital transformation strategy with flexible automation technologies; smart logistics and digital sales to improve productivity and supplier management; as well as artificial intelligence and internet of things technologies used to increase labour efficiency.
Overall, more than 70 per cent of global manufacturing firms are still stuck in “pilot purgatory”, with only a select few able to deploy advanced manufacturing at scale, generating new value and customer experiences within the factory or across value chains, the report added.
The explosion of computing power, combined with connectivity that has led to unprecedented technological change, is taking place amid the unfolding competition between the US and China.
While the developed world has been on the top of the global value chain in the past, China is expected to challenge in the coming years as it believes it is well positioned due to superior industrial policies and incentives coupled with its central place in most global supply chains, analysts said.
Stephen Olson, research fellow at the Hinrich Foundation think tank, noted the Biden administration has made it clear its intent to invest heavily in improving the competitiveness of US workers through improved infrastructure and education. This will be combined with tax and other incentives for production in the US.
Advanced manufacturing is an unavoidable phase of growth for China since it has developed rapidly and needs to move up the value chain
“The trade/tech war makes it even more vital given American pressure on its acquisition of technology and key components,” said Manu Bhaskaran, CEO of Centennial Asia Advisors.
“Advanced manufacturing is an unavoidable phase of growth for China since it has developed rapidly and needs to move up the value chain. As its costs rise, it has to focus on higher value-added per worker activities in both manufacturing and services.
“Now the US government is also beginning to resort to some form of industrial policy as well and that could make the US quite formidable again.”
But challenges exists for the US bid to revive its national industrial sector and in reshoring or diversifying supply chains presently based in China, as well as in sustaining its technology leadership.
US President Joe Biden pledged during the presidential campaign to address vulnerabilities in the US supply chain that had become glaringly evident during the coronavirus and has embarked on a 100-day review of supply chain vulnerabilities in four key areas: semiconductors, pharmaceuticals, car batteries and rare earth elements.
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