China’s Manufacturers need heightened effort and integrated approach for adopting information technology in the Industry 4.0 transformation

Published: 8 September 2015

Chinese manufacturing companies display different levels of maturity in informatization, with only 42 percent of surveyed manufacturing companies claiming to have taken an integrated approach to integrate information technology into their production processes. More needs to be done in order to support the government’s “Made in China 2025” plan, which puts strong emphasis on technology, informatization and innovation, according to the latest Deloitte report released at the World Economic Forum.

Mr. Paul Siu, Managing Partner, Clients, Industries & Markets, Deloitte China said “For many years, Deloitte has been a strategic sponsor for the World Economic Forum. As one of the leading professional services organizations, we always hope to participate in discussions and provide our insights on opportunities and challenges to businesses. Aligned with that, we offer at this year’s World Economic Forum in Dalian a pre-read of our thought leadership report about the transformation of China’s manufacturing industry, which is expected to propel the next wave of growth in the country.”

Together with China Machinery Industry Federation, Deloitte has conducted a survey of over 200 key manufacturing companies of different scales and from various sub-sectors in China, with the purpose of understanding their informatization journey under the “Made in China 2025” plan. There were 133 valid survey responses. In the survey, 46 percent of Chinese manufacturing companies admit that informatization has only covered one of their single businesses, and another 6 percent of companies have not even launched any informatization initiative. According to these companies, the biggest challenge of informatization is related to the comprehensive application of software in the production processes, followed by difficulties in the collection and analysis of system data.

Mr. Zhang Tian Bing, Partner, Strategy & Operation, Deloitte China, said “China has put forward the strategy of invigorating China’s economy through the manufacturing industry. Smart manufacturing is one of the priorities in the 2025 plan and it means that information technology will play a pivotal role in driving the success of Chinese manufacturing industry for the future. To succeed, companies need to deal with the challenges in the application of information technology, and this involves a 360-degree understanding of their own production processes and a detailed execution plan.”

According to the report, the percentage of companies opting for more extensive use of automation equipment increased to 23 percent in 2015, against 11 percent in 2013. Automobile and electrical machinery companies see the highest use of automation equipment in their production processes. Because of the strong potential, many global players have put their eyes on the smart equipment market in China, intensifying competition for domestic smart equipment manufacturers in China.

“Multiple emerging technologies such as 3D printing, robotics and artificial intelligence are driving disruptive innovations and enabling new players to stake a claim in range of industrial sectors including manufacturing,” said Mr. Gary Coleman, Global Industry and Senior Client Advisor for Deloitte Consulting. “For example, technologies like the cloud are allowing new entrants in manufacturing to bypass legacy systems and enable faster communication all along their supply chains. China needs to strongly invest in and embrace these technologies to move from a current manufacturing giant to a global manufacturing power house.” 

“This is only part of the story. Chinese manufacturers are not just using more automation equipment, but they have also intensified their innovation effort and made better use of consumer data to improve their product offerings, which now include many other value-added services. In the past, these companies only sold individual products to consumer, but gradually they have started to provide other side-services as well. Now, many Chinese manufacturers are moving forward to become integrated solution providers and the service element of their offerings has helped them differentiate from competition and create profit,” Mr. Zhang said.

On the positive side, the report concluded with some major opportunities for Chinese manufacturing companies during their transformation journey. First, many Chinese companies are expected to embark on mergers and acquisitions to increase market share, acquire technology and undertake vertical expansion. The rapid digital transformation in China also enables manufacturing companies to use the Internet platform to improve in areas such as brands, marketing, service delivery and innovation. In addition, Chinese manufacturers are also attempting to establish industry platforms for integrating resources and technology, and sharing demand and supply information.

“Another opportunity is related to the emergence of a new industrial system known as the 'makers platform', focusing on tailored designs and productions to cater to the specific needs of consumers. Certainly, challenges will include intellectual property rights and quality control, but market potential in this space is unparalleled. For example, China’s smart home market is expected to reach RMB$43.1 billion in size by 2015¹,” Mr. Zhang noted.

¹ Source: iiMedia Research