Smart Manufacturing Gaining Interest in Southeast Asia, with 5G on the Horizon

Industrial Transformation ASIA-PACIFIC (ITAP) 2019 was a Hannover Messe trade show held in Singapore in October of this year that featured Industry 4.0 applications for the logistics and manufacturing sectors. Compared to the Hannover Messe Conference, which spanned 24 halls, ITAP 2019 was a much smaller trade show, spanning just 3 halls at Singapore Expo. Most showcases and discussions at ITAP 2019 revolved around cyber security, edge computing, industrial Artificial Intelligence (AI), and robotics.

The Hannover Messe conference in Germany in April was brimming with discussions about 5G applications on the factory floor, as explained in the ABI Insight Industrial 5G at Hannover Messe (IN-5467). It included an entire hall dedicated to showcasing 5G applications with a private 5G network. Some of the discussions included utilizing 5G to reduce the time taken to download software to the car at the factory (for Wi-Fi this takes up to 20 minutes, whereas for 5G it can theoretically be reduced to 10 seconds), remotely controlling Autonomous Guided Vehicles (AGVs), and replacing fieldbus technologies with deterministic 5G networking.

While Southeast Asia may fall behind Western Europe in terms of the number of 5G-enabled connections in the smart factory, the largest Asian country, China, paints quite a different picture. China is set to have almost twice the number of 5G-enabled connections in smart factories than Western Europe by 2030, according to ABI Research’s Digital Factory Data (MD-IICT-105). In terms of manufacturing, China is a juggernaut and the largest exporter of the world. However, rising labor costs in China (each factory worker earns an average of US$27.50 per day) and the 25% U.S. trade war tariffs slapped on US$34 billion worth of Chinese goods are shifting manufacturing production to neighboring Southeast Asian countries, where average daily factory worker wages are between US$5.50 and US$8.60. Evidently, the much more developed supply base—as well as the advanced manufacturing capabilities of China—is a strong foundation for 5G-based smart factory solutions. With China keen to compete in the so-called 5G race against the United States, it has just switched on 5G in the beginning of November and is already pursuing enterprise and industrial applications. Recent announcements include ZTE and China Telecom’s partnership to help Bluetron build a new 5G smart factory, with ZTE already having 35 commercial 5G contracts and the launch of retailer JD.com’s 5G-powered smart logistics park in Beijing, China as of October.

Indeed, Southeast Asia continues to be a laggard for industrial 5G due to lower business model maturity and confidence for operators to roll it out in the region. Vietnam and the Philippines are still utilizing 2G and 3G technology (80% and 92% of total subscribers, respectively), and are therefore unlikely to adopt 5G as rapidly as there is headroom for 4G which would be able to meet the needs of majority of cases. For Southeast Asian manufacturers and logistics providers, digitalization in the factory is still falling behind the rest of the world.

The geographical differences displayed by companies’ attitudes toward 5G are in line with ABI Research’s Digital Factory Data (MD-IICT-105), which forecast the total number of 5G-enabled smart factory connections would reach 47.5 million in Western Europe, 88.3 million in China, and 27 million in Southeast Asia by 2030. These include 5G connections for smart manufacturing tools and applications such as industrial robots, smart glasses, and machine tools. The market data also shows that Western Europe and China will start adoption of 5G-enabled connections in 2022, a year earlier than Southeast Asia, with Western Europe having eight times more connections than Southeast Asia by 2023.

In order to unlock the value of Industry 4.0, manufacturers need to carefully evaluate wireless cellular connectivity and optimize deployments of private cellular networks. This is because connectivity is crucial for the smart factory and downtimes can lead to severe losses. For example, one minute of downtime in an automotive plant can incur losses of up to US$30,000. While the factory floor is connected largely through Industrial Ethernet (IE) or Wi-Fi, cabling is a large obstacle to the wireless vision of an Industry 4.0 factory. Furthermore, device density is a limitation of Wi-Fi and other connectivity solutions that rely on unlicensed spectrum. Cellular-based modules and chipsets are being produced at a lower price point than Wi-Fi and are interoperable, unlike Low-Powered Wide-Area Network (LPWAN) solutions such as Narrowband-Internet of Things (NB-IoT) and LTE-M. With cellular connectivity, manufacturers can optimize the deployment of additional Access Points (APs) in relation to the gateways to boost coverage in an area of the factory. Furthermore, LTE is now able to enable several use cases, ranging from Augmented Reality (AR) glasses and Automated Guided Vehicles (AGVs) to high-bandwidth security cameras and predictive maintenance. It also has more secure End-to-End (E2E) Over-the-Air (OTA) encryption compared to Wi-Fi. With private LTE deployments, manufacturers can take the first step toward 5G, ensuring that the infrastructure and enterprise experience for cellular networks is in place before 5G arrives in the industrial space. These solutions lay the foundations for a successful Industry 4.0 transformation.