Recent research by India-based research group Mordor Intelligence found Asia-Pacific (APAC) is navigating a rapid change in its manufacturing landscape, a sector fundamental to the region’s economic growth.
This is due to the nature of an increasingly automated working environment, integrating traditional communications technologies with newer tools powered by AI.
As the world’s largest manufacturing hotspot, Mordor Intelligence forecasts APAC’s connected manufacturing industry will be worth $54 billion in 2025 and more than $80 billion by 2029.
James Prestwood, industry analyst at ABI research, told Mobile World Live (MWL) developing markets in APAC are likely to see the strongest growth in private 5G network revenue from manufacturing between 2022 to 2030, with a CAGR of more than 45 per cent exceeding North America and Europe.
Despite the fragmented landscape of smart manufacturing across the region, hyper-connected industrial superpowers including China, South Korea and Japan have set the stage for Asia’s generally upbeat future, with national incentives encouraging digitalisation in smaller countries.
But what’s really driving the trend in APAC and how do emerging countries keep pace?
The new trailblazers
Prestwood explained developing markets in APAC will be part of the revolution with more greenfield manufacturing facilities being built and Industry 4.0 solutions being an obvious option compared with deployment of older tech.
“As manufacturers look to move their operations out of China for cost savings or geopolitical fears, nearby countries such as Thailand, Vietnam, Malaysia and Indonesia will see strong growth in their manufacturing sectors and Industry 4.0 investment,” the analyst said, adding companies based in the west had already spent hefty sums on brownfield sites using older infrastructure, stunting their ability to upgrade to new solutions.
Luke Pearce, senior analyst for incubation projects at CCS Insight, told MWL a rise in staff costs in Europe and North America, coupled with the need for technological improvements and customisation, is propelling the shift towards smart manufacturing in Asian nations.
Far from lagging in the sector, the presence of industrial economies including India, Japan and China gives the region “a strong base on which to deploy smart manufacturing technologies”, Pearce added.
Foxconn’s billion-dollar investment in India driven by Apple’s bid to reduce its reliance on China further highlights popularity of the former nation as an alternative for high-value added manufacturing.
India has long set sights on smart manufacturing, launching an Industry 4.0 initiative in 2019 and an incentive scheme to promote domestic smartphone production in 2020.
However, Ross O’brien, analyst-in-chief at Delta Analysis, argued the conversation around manufacturing shifts from China are somewhat generalised. “There is an argument that everyone thinks manufacturing is simply moved from China to Vietnam or India. It’s a little bit more complicated than that”.
O’brien opined neither country “is doing exactly what China’s doing”.
“It’s not like swapping production capacity, and there are still manufactured components made in China and then assembled in Vietnam or India.”
O’brien noted India’s claim of being home to some of the biggest IT services providers makes it more “comfortable as an economy in digitising processes and workflows”.
Pearce also pointed to India’s digitalisation strides due to rapid deployments of standalone (SA) 5G, noting it is likely to engage more with Industry 4.0 initiatives within the next couple of years.
While government figures place China as the world’s largest market for intelligent manufacturing with nearly 2,000 5G factories at end-2022, there is a sense the nation is operating in a vacuum.
“The ongoing US tech war has really taken a toll on integrating Chinese digitalisation with the rest of the world, I think China will be a very robust 5G- and 6G-driven manufacturing marketplace that kind of exists in its own industrial space,” O’brien added.
Today, Southeast Asian markets are catching up to factory transformation.
Recently, Kinsus, a supplier for Nvidia and AMD, selected Malaysia for an automotive chip facility, joining a roster of semiconductor giants including Infineon and Intel which have deepened their presence in the country.
The latter built an advanced 3D chip-packaging factory in Penang and pumped $7 billion into the Malaysian island in 2021.
This aligns with the nation’s Industry 4.0 ambition based on growing staff productivity, creating high-skilled jobs and economic contribution through manufacturing.
Prestwood and Pearce also cited neighbouring Singapore as an avid adopter of intelligent manufacturing thanks to the availability of SA 5G, first launched by Singtel to support industry digitalisation.
However, Prestwood believes 5G “is not in any way a prerequisite for many solutions, with the network often seen as over-the-top for services that can be deployed with a range of wired and wireless technologies”, though he noted the ability to unlock real-time use cases including machine vision with AI analysis from the cloud or live analytics of industrial IoT.
Vietnam, a country still in its formative stage of 5G, is a case in point: strong government backing has put it on course with Singapore and Malaysia as emerging adopters of Industry 4.0.
A long-term smart factory project with Samsung made the headlines in 2023, with AI understood to be a big part of this.
“Vietnam has been the country that’s been most like China in Asia, in terms of converting productivity into higher-end manufacturing,” O’brien observed.
He also suggested many APAC players are still testing the water with connected factories and Indonesia or Sri Lanka, for example, are at different stages of transition in traditional manufacturing.
This made the region’s Industry 4.0 ambitions appear disjointed when savvy deals pepper neighbouring countries, including a partnership between Accenture and Singtel to open a 5G-connected warehouse or an automated factory deal between Mitsubishi Electric and Thai operator True Corp.
O’brien also pointed to uneven access to infrastructure as behind the somewhat disproportionate progress, alongside apprehension over workforce automation.
Looking to the future, the analyst believes improved regulations could aid access to services empowering adoption, adding “policies around tariffing and spectrum licensing that aren’t punitive to make sure all the underpinning infrastructure are there, because this is a job for 5G and 6G”.