1 May 2015

Accelerating the journey to productivity and growth

The use of IT and electronics to further automate production has led to a fourth industrial revolution.
Industry 4.0 is not only characterised by cost savings but also by increased efficiency of the processes allowed by the digitalization of the value chain. Faster productivity growth could lead to an increase of the EU’s growth rate by as much a 2% per annum. Gains in productivity could be the key to returning to a sustainable growth path provided that it is combined with job creation supported by innovation.
Industry 4.0 is characterized by the use of digitally-enabling technologies (robotics, 3-D printings, cyber-physical systems) improving the manufacturing process. It is also known for the production of smart and personalised products based on the Internet of Things and Services as well as for its new innovative digital business models. Data tools and advanced software enabling real time monitoring and analysis across the entire value chain also play an important role. The collection of data and their increased connection makes it possible to unleash the EU’s potential for competitiveness gains thanks to the optimization (costs, availability, and resource consumption) of the processes and products. In Germany, the precursor of Industry 4.0, the embedded system market already generates €20Bn annually (€40Bn expected by 2020). Applied to the European level, this would account for €140 Bn per annum. Companies could expect a productivity increase of more than 18% by 2020 thanks to the digitisation of their value chain.
In 2013, an EU taskforce for advanced manufacturing technologies for clean production was established to reach the 20 % manufacturing share target of EU GDP by 2020.  The Commission adopted a EU2020 Communication on Industrial policy “For a European Industrial Renaissance” in 2014 calling on Member states to recognise the central importance of industry for creating jobs and growth. However, the EU still lacks a comprehensive approach toward the promotion of Industry 4.0.
The main challenge for the EU is to create a vivid ecosystem to allow the fourth revolution to take place and to capitalize on the potential competitiveness gains to foster growth. The private sector is calling for an EU framework programme and the introduction of legislation which take into account industry’s needs in the field of data protection, privacy, intellectual property rights and cyber security, etc. Ensuring interoperability of the data exchanged via common standards and reference architectures at the European Level is also of crucial importance to allow the information to flow across the entire value chain. As Industry 4.0 represents high investment costs and the cost/benefits remains unclear in many cases, it is also essential to support investment in the sector as well as entrepreneurship. Finally, Industry 4.0 relies extensively on human capital at all stages of the value chain. It is therefore of the utmost importance to develop a long term policy to train skilled workers to obtain either a sufficient background in or a grasp of mathematics, computing, information technology, in order to match the needs of the industrial industry.
Europe should not miss the fourth industrial revolution train. Major investment in the sector is needed, especially on the regulatory side. Private financial investments will follow naturally once a steady and business friendly environment is created. The development of Industry 4.0 could then shortly become a new driver of productivity and growth for Europe. 
This topic will be debated at the European Business Summit on 7th of May.

Related contacts :

Marie Eichholtzer
Account Executive, EU Public Affairs

email: marie.eichholtzer@hkstrategies.com