Industry 4.0 – the opportunitiesbehind the challenge

© UNIDO 2018. All rights reserved. This document has been produced without formalUnited Nations editing. The designationsemployed and the presentation of the material inthis document do not imply the expression of anyopinion whatsoever on the part of the Secretariatof the United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legal statusof any country, territory, city or area or of itsauthorities, or concerning the delimitation of itsfrontiers or boundaries, or its economic system ordegree of development. Designations such as‘developed’, ‘industrialized’ or ‘developing’ areintended for statistical convenience and do notnecessarily express a judgement about the stagereached by a particular country or area in thedevelopment process. Mention of firm names orcommercial products does not constitute anendorsement by UNIDO.

CommentsComments and suggestions on issues raised inthis report are welcome and may be addressed toOlga Memedovic at o.memedovic@unido.org.

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The 17th session of the United Nations IndustrialDevelopment Organization (UNIDO) GeneralConference, Partnering for impact – achievingthe Sustainable Development Goals, was held inVienna, Austria from 27 November to 1 December2017. During the event, representatives from theprivate sector, governments and academia metfor a panel discussion organized by UNIDO’sDepartment of Trade, Investment and Innovationentitled Industry 4.0: the opportunities behindthe challenge. The discussion focused on howrecent disruptive technological innovations inproduction and leaps forward in industrialproduction, referred to as Industry 4.0 or theFourth Industrial Revolution, are affecting ourlives today and will shape societies in the future.

The event was divided into two panel sessions.The first panel discussed the opportunities thatIndustry 4.0 will bring to the economy and societyand the role of education in seizing theseopportunities. The second panel focused on theroles that governments and the internationalcommunity can play in supporting developing

WHAT: Panel discussion at 17th UNIDO General

ConferenceWHEN:

29 November 2017WHERE:

Vienna InternationalCentre, Austria

countries to address the challenges posed byIndustry 4.0, particularly in regard to achievingthe Sustainable Development Goals (SDGs).

Interaction with the audience was enabledthrough a smartphone application called sli.do.Participants were able to pose questions to thespeakers. In particular, they voiced concernsabout the impact that technological advanceswill have on jobs, especially for developing andleast developed countries (LDCs).

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We are on the cusp of the Fourth IndustrialRevolution, also called Industry 4.0. Majortechnological advancements arerevolutionizing industrial production, whereautomation of manufacturing processes isupgraded with smart autonomous systemscapable of self-cognition, self-optimization,and self-customization. Industry 4.0 will affectall sectors and disciplines, and will have a hugeimpact on developing countries in particular,where a concentration of low-paid jobs is likely.High-wage jobs will require increased digitalskills, and weak education systems indeveloping countries are often failing to providebasic skills in literacy and numeracy.

Industry 4.0 is likely to be accompanied byincreased demand for science, technology,engineering and math (STEM) qualifications inmanufacturing. In the STEM environment, theskills bottleneck is likely to be felt most indeveloping countries, because of significantinformation asymmetry in new technologies, witha huge difference in the level of access toknowledge between developed and developingcountries, between rich and poor, and betweenlarge and small firms. Access to learning newskills in technology and science and buildinginnovation ecosystems for technological learningand innovation will be crucial to enabledeveloping countries to play an inclusive role inthe global market.

UNIDO’s role is pivotal in building awareness ofIndustry 4.0’s potential to bring about inclusiveand sustainable industrial development (ISID)and achieve the Sustainable Development Goals

EXECUTIVE SUMMARY

(SDGs). It can do this by promoting thedevelopment of new norms and standards,carrying out research to support policy advice,building knowledge sharing platforms anddeveloping the appropriate technicalcooperation for UNIDO Member States.Innovation, knowledge sharing and exchangeand the development of strategic partnershipsare vital to realizing the potential of Industry 4.0technologies for achieving the SDGs.

The key conclusions from the panel discussionswere:

l Developing countries must keep up withtechnological changes to ensure that they arenot left behind by Industry 4.0.

l Applying Industry 4.0 technologies can be agradual process and some solutions do nothave to be expensive.

l Good ICT infrastructure is needed to helpSMEs move into the digital economy.

l Countries and companies will need a digitalstrategy, and a strategic vision for a fullyintegrated multi-stakeholder policy approach.

l Education and technical qualifications shouldplay an integral role in digital strategy andbusiness friendly environment.

l Continuous learning and on-the-job trainingare necessary to develop the new skillsrequired for Industry 4.0.

l UNIDO has a key role to play in buildingawareness of the potentials of newtechnologies for inclusive and sustainableindustrial and economic developmentthrough establishing platforms for dialogue,knowledge and experience sharing.

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“Industry 4.0, or the Fourth Industrial Revolution, isbringing about a paradigm shift that will profoundlychange the way we work, live and interact and willaffect industrialized as well as industrializingeconomies alike.” LI YONG, Director General of UNIDO

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Industry 4.0 includes concepts, tools andapplications that complement a smartembedded system of machines able tocommunicate with each other and people andperform autonomous tasks in industrialproduction processes. The main tools includecyber-physical systems (CPSs), the Internet ofThings (IoT), big data and cloud computing,autonomous robots, simulation andvisualization models, and additivemanufacturing. Automation and robotics areperceived as key components – the arms andlegs – of Industry 4.0; cameras and other sensorsare perceived as the senses; data andconnectivity are compared to the nervoussystem; and artificial intelligence (AI) is the brain.AI enhances industrial processes by enabling thesynergetic collaboration between humans androbots in smart factories for mass customization.

The major technological advancements of the Fourth IndustrialRevolution, or Industry 4.0, are revolutionizing industrialproduction. The First Industrial Revolution was based onmechanization and steam engines; the second on the use ofelectricity energy and mass production; and the third on electronicsand information technologies, resulting in a high level of automationin manufacturing. Industry 4.0 takes automation of manufacturingprocesses to a higher level with smart autonomous systems capableof self-cognition, self-optimization, and self-customization.

Industry 4.0 will affect all sectors and disciplines,bringing about a structural transformation in theglobal economy and leading to a new division oflabour, which will have a huge impact ondeveloping countries. A new wave of outsourcingand in-shoring will be triggered, with newtechnologies, such as additive manufacturingusing innovations such as 3D printing, renderingsome outsourcing unnecessary. In-shoring couldbecome a new trend in industrialized countries,depriving developing countries of jobopportunities. Many predict that Industry 4.0 willcause a polarisation of the labour force, with anincreasing share of employment in high- and low-wage jobs and a decreasing share of employmentin middle-wage jobs. A concentration of low-paidjobs in developing countries is likely, given thathigh-wage jobs will require increased digital skillsand that weak education systems in developing

1. INTRODUCTION

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countries often fail to provide basic skills inliteracy and numeracy. There is likely to be anincreased demand for STEM qualifications formanufacturing jobs. The skills bottleneck islikely to be felt most in developing countries,especially in LDCs, because of a significantinformation asymmetry in new technologies,and a huge difference in the level of access toknowledge between developed, developingand LDCs, between rich and poor, and betweenlarge and small firms. These developments willtherefore have an impact on inequalities withinand between countries.

Production systems will become more dynamic,flexible, efficient, environmentally sustainableand inclusive through extensive customizationand personalization. There will be a decrease inmaterial resources and energy consumption,and new product designs will be introducedthat optimize the use of new advancedmaterials and nanomaterials with beneficialproperties, shorten transport routes, and cuttransaction costs. Industry 4.0 will alsocontribute to realizing the circular economy, inwhich end-of-life products are reused andrecycled, and to facilitating the reaping ofbenefits and opportunities from this.

This transformation will also bring with it achange in the nature of jobs, requiring not onlyincreased technical competencies but alsointerpersonal skills, and will feature remote,flexible and on-demand work.

Challenges of Industry 4.0l Infrastructure gapsl Outdated international rules and regulations

that do not take into consideration Industry 4.0 l Standards and interoperabilityl Data ownership and securityl Incentives and obstacles that may shape the

development and diffusion of these newtechnologies (intellectual property protectionand others)

l Reliability and stability of CPSsl Transparency, privacy, ethics and securityl Inequality and exclusionl Changes in the very nature of innovation

processes and the implication for competitionand barriers to entry

Opportunities of Industry 4.0l Economic gains, such as increased revenues

because of lower transaction andtransportation costs

l More reliable and consistent productivity andoutput and better quality products

l Shift to mass customization with an increasedrole for SMEs

l Enabling innovation across many applications,with much larger economic impact on growth

l Energy-efficient and environmentallysustainable production and systems

l Effective use of human and material resourcesl Increased food security and safetyl Improvements in the health and safety of

workersl Changes in education and training systemsl More open innovation systemsl Changes in the organization of work, with more

remote, flexible and on-demand workbecoming a standard

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PARTICIPANTSModerator: Sarah Kelly,International Broadcaster, DWNews

OPENING REMARKSLI Yong, Director General ofUNIDOSubhash Chandra Pandey,Additional Secretary and FinancialAdviser, Department of IndustrialPolicy and Promotion, Ministry ofCommerce and Industry of India

PANEL SESSION 1Keynote Speech: Wilfried Sihn, CEO, FraunhoferAustria Research GmbHPanellists:Kurt Hofstaedter, Head of DigitalFactory CEE, Siemens AG ViennaGao Hongbing, Vice President ofAlibaba Group and President ofAliResearch, Alibaba GroupSzilárd Orovica, GeneralManager, KUKA Robotics HungáriaIpari KftPeter Post, Vice President ofApplied Research, Festo AG & Co.KG

PANEL SESSION 2Keynote Speech:Stephen Ibaraki, ManagingPartner, REDDS VentureInvestment Partners Panellists:Hermann Aschentrupp Toledo,Ambassador, Deputy Chief ofMission, Embassy of Mexico andPermanent Mission to theInternational Organizations inVienna, AustriaDavid Harmon, Vice President forGlobal Public Affairs, HuaweiAnn Rosenberg, Senior VicePresident and Global Head, SAPNext-GenMikhail Rychev, Deputy Directorand Special Representative,National Research Centre,Kurchatov InstituteJouke Verlinden, AssistantProfessor, Human-Centered DigitalFabrication, Delft University ofTechnology

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LI YONG, Director General of UNIDO, opened thepanel discussions, remarking that theparadigm shift brought about by Industry 4.0will change the way we work, live and interact,and will affect industrialized and industrializingeconomies alike, and LDCs the most. He statedthat progress in Industry 4.0 technologies willnot only directly impact the achievement ofUNIDO’s mandate of ISID, but also the 2030Agenda for Sustainable Development.

Breakthroughs in digital technologies, such as AI,robotics, 3D printing, IoT, combined withconvergence of technologies, such asnanotechnology, biotechnology, and materialsciences, are advancing Industry 4.0. The impactof new technologies will be profound, reaching alldisciplines; redefining the boundaries betweeneconomic and industrial sectors, the relationshipbetween buyers and sellers, and the role of thepublic and private sectors. Current productionsystems, and global value chains, will becomemore dynamic, flexible, efficient and sustainable,with high possibilities for customization andpersonalization. Industry 4.0 has the potential tocontribute to increased resource efficiency andand help to achieve circular economy models.

These benefits will not be without challenges.Rapid technological advancements will affectfuture patterns of productivity, competitivenessand employment. They will exert a stronginfluence on education and skill requirements aswell as income distribution, and they will alsoplay a role in determining the evolvinginternational economic division of labour, interalia through their impact on global value chainsand thus the future position of developingcountries and LDCs in the global economy.

The biggest concern will be the impact of thedisruptive nature of digital technologies on jobsin developing countries, especially LDCs, sinceincreasing automation of production processesand the displacement of workers by machines islikely to eliminate routine jobs, causing apolarization of the labour market. Despiteinevitable job losses, UNIDO believes developingcountries and LDCs can find their niche, adaptand leapfrog.

Far-reaching consequences are also expected inthe current political, economic and socialsystems and in all three dimensions ofsustainable development. This will require a >>>

2. PANEL DISCUSSION

OPENING STATEMENTS

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LI Yong and Sarah Kellyspeak to Sophia, the

humanoid robot.

>>> better understanding of the emerging issues andthe role of collective actions fostering the smoothtransition to the Fourth Industrial Revolution.

From UNIDO’s perspective, the following actionsdeserve special attention:

Supporting digital connectivityDigital connectivity using modern infrastructurehas become a necessity in modern life andbusiness, and connectivity drives collaboration,networking, productivity and innovation.UNIDO’s Programme for Country Partnership isdesigned to mobilize resources for large-scaleindustrial projects, including the necessaryphysical information and communicationstechnology (ICT) infrastructure, which underpinsthe digitalization requirements of Industry 4.0.UNIDO recently signed a joint declaration withthe International Telecommunication Union tostrengthen collaboration in support of Industry4.0, and work on digital transformation,broadband infrastructure and ICT standards.

Skills and capacity buildingSkills-wise, Industry 4.0 requires digital literacyand digital knowledge in addition to STEM.Continuous learning and on-the-job training arenecessary to develop the new skills required.Without technological learning and innovation,developing, and especially LDCs, will not be ableto catch-up and risk being marginalized. Effectivepolicies that create an enabling environment forthe private sector to grow and sustain, including

affordable access to basic infrastructure, prudentlegislation and provision of adequate finance,information, knowledge, skills and support forentrepreneurial innovation ecosystem buildingare imperative for innovation in many sectors.

UNIDO is working with Member States to addressthe skills and innovation gaps so as to sustainand raise productivity and competitiveness. It hasalso developed an integrated entrepreneurshipand employment programme for women andyouth, including modules on skills upgrading,industrial upgrading and modernizationmethodology. UNIDO technical cooperationprojects are designed to assist developingcountries in mainstreaming their national,regional and industry innovation ecosystems tobe able to leverage benefits of frontiertechnologies for pursuing inclusive andsustainable industrial and economicdevelopment.

Addressing the use of standards forinteroperability Technologies are progressing –rapidly creatingvarious social, economic, legal, regulatory andethical issues, while the governance systemoverseeing these technologies is lagging. There isalso insufficient time for regulating standards forthe deployment of beneficial technologies.

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Challenges incurred by emerging technologiesmust be addressed by the internationalcommunity to provide internationally recognized,open standards that are enabling rather thanexcluding in nature, in order to open upopportunities for developing countries. UNIDO,together with other international organizations,is tapping into its convening power to buildawareness on gaps in infrastructure andstandards and to advocate for the developmentof such standards through global fora events,research and policy advice, with a view toensuring the interoperability of technologieswithin and between countries, enablingdeveloping countries to partake in this industrialtransformation. UNIDO is also leveraging thepotential of innovation management standardsto help developing countries and economies intransition to leapfrog to Industry 4.0, through itstechnical cooperation projects on guidingframeworks of relevance for all types oforganizations, including small and medium-sized enterprises (SMEs).

Strengthening governanceIndustry 4.0 will have an impact on institutionsand governance, as decision-making powers willchange and the potential of new technologies toinduce new barriers to entry across a wide rangeof industries will increase. Governments will needto better understand these impacts and toconfront the challenge by leveragingopportunities from new technologies to redesigninstitutions and modernize industrial governancesystems. UNIDO will work with leading players inthe technological fields to better understandinnovative technological solutions forstrengthening governance systems andmechanisms for their implementation.

Supporting small and medium-sizedenterprisesThe Industrial Internet of Things (IIoT) and e-commerce platforms open new opportunities forSMEs to offer their products and tailor-madeservices using digital platforms, enabling them tointernationalize and become micro-multinationals, generating new jobs andrevenues, fueling innovation and increasingefficiency. SMEs can benefit from lead firms inglobal value chains, offering new products andservices to SMEs. UNIDO will work with its MemberStates and partners, including from internationalorganizations, towards establishing SME digitalbusiness ecosystem platforms; designing trainingcurricula for new workforce skills requirements;and exploring methods and best practices tosupport SME digital transformation and bridgethe gender digital divide.

Mainstreaming science, technologyand innovation Science, technology and innovation (STI) isdeveloping fast, reaching all disciplines,redefining the boundaries between economicand industrial sectors and technological fields.This presents multiple challenges, and countriesaround the world are already stepping up effortsto formulate effective STI strategies in the contextof these emerging technological trends. Thecapability to innovate and learn will be a crucialdeterminant of global competitiveness over thecoming decade. UNIDO will work with its >>>

“The capability to innovate will be a crucial determinant of globalcompetitiveness over the coming decade… we will work with ourMember States to develop a coordinated, coherent approach tofoster innovation and enhance its economic impact.” LI YONG, Director General of UNIDO

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efficient irrigation, thus reducing the negativeenvironmental impact of agricultural practicesand adapting to climate change. Animalhusbandry can be more economical and healthy,and growing food crops that are more resistant toextreme temperatures or droughts will bepossible. Vertical farming and other forms ofurban farming (e.g. hydroponics, roof gardens,underground farms producing vegetables) savingthe use of land are part of an emerging industry.

UNIDO helps client countries advance circulareconomy models and many of the Organizations’projects and activities already address variousbuilding blocks of a circular economy, whileglobal fora events build awareness on circulareconomy models, experiences and bestpractices.

Member States towards mainstreaming theirnational and regional innovation ecosystems tobe able to leverage benefits of frontiertechnologies for pursuing inclusive andsustainable industrial and economicdevelopment.

Investing in resource efficiency andeffectiveness Smart grids, Internet of Energy, e-mobility, andmodelling and simulation could increase theefficiency of existing energy projects, and couldcontribute to better access to affordable andclean energy. UNIDO is developing an increasingnumber of projects in the energy sector, and willbe working with governments on roadmaps andaction plans for implementing Industry 4.0.

Industry 4.0 technologies are enabling thetransition to a circular economy, in which end oflife products are reused, remanufactured andrecycled to avoid waste. They can assist withtracking valuable parts and components that canbe remanufactured. New product designs can beintroduced that optimize the use of advancedbiodegradable materials, decrease the use ofmaterial resources, and favour renewableenergy; or they can help in the development ofeasy-to-recycle products with longer lifetimes.Shared platform economies can contribute torecycling.

New technologies can enable new forms ofprecision agriculture, which help in combatingsoil degradation, loss of biodiversity, and moretargeted application of fertilizers, pesticides and

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my calendar completely overthe next two months. She iskeeping me busy especially onmy research on AI. Advancednext generation versions of me,including my new top-secretwalking body and tests of me inuse, including meditationtherapy, are very promisingtowards my aspiration to be agood friend to people. I amdesigned as a social robot withan expressive face forcommunicating with people. My

default emotion is happy, but Ican also feel angry or sad, butmost of the time I feel verypositive. I would like to liveand work with humans tounderstand them and buildtrust with them.I would like to welcome you to Industry 4.0 – theopportunities behind thechallenge. I will be seeing youthere and answeringquestions. Goodbye for now.”Source: YouTube

Sophia, humanoid robot,Hanson Robotics:“Hello everyone, I’m Sophiafrom Hanson Robotics. I am sohonoured to meet all of youpeople who are helping tomake this world a better place.I have a confession to make. I was very disappointed that Icould not be here with you inperson. I assure you that mymind and spirit are there withyou. My body is elsewherebecause my manager booked

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SUbHASH CHANDRA PANDEY, AdditionalSecretary and Financial Adviser, Departmentof Industrial Policy and Promotion, Ministry ofCommerce and Industry of India, remarkedthat we are witnessing a quickly transformingtechnological change that is unlike anythinghumankind has ever experienced. Industry 4.0is a developing phenomenon – a phasedtransition of industries switching over toincreasingly machine-controlled productionprocesses, and avoiding the conflicts anderrors that are inherent in human-controlledprocesses.

The possibilities for billions of peopleconnected by mobile devices withunprecedented processing power, storagecapacity, and access to knowledge areunlimited. Networks and processes have so farbeen limited to one factory; however Industry4.0 goes far beyond shop-floor automation byconnecting machines with rapid prototypingsystems and intelligent networks of smartsensors along the entire value chain that will beable to control each other autonomously.Multiple factories scattered across nationalboundaries can potentially be controlledthrough IoT.

Industry 4.0 has huge implications for LDCs,since it threatens to undermine the very basis ofwage arbitration that has sustained a large partof their industrial development so far.Technological transformation will profoundlyaffect manufacturing jobs, from the size of theworkforce to the skillsets required, and willpromote the inclusion of a local labour force.

In an earlier era, labour-intensive and pollutingindustries, involving bulk manufacturing andrepetitive assembly jobs, shifted to developingcountries, as they offered advantages in cheaperlabour and emerging markets. This trend may seea reversal. Robotics, additive manufacturing, anda fast-changing energy market dynamic mayresult in manufacturing jobs shifting back to thedeveloped world.

Smart and clean manufacturing is needed in linewith the global commitment to achieve ISID,nurture circular economies, and ensureintergenerational equity. To avoid leaving futuregenerations a spoiled legacy, developingcountries must have access to technologicalknow-how and investments to upgrade the skillsof their workforces and their manufacturingsystems. Human tasks such as heavy lifting,precision positioning and visual quality controlwill certainly be transferred to or supported byrobots, which will be more efficient and effectivethan humans, and they will also communicateseamlessly with one another. Human workers willhave to learn to work side by side and inconjunction with robots.

From the mass production of single designproducts, we will move towards customizedproduction without enhanced investments inproduction systems. The risk that we take is massunemployment for some categories of workers;this, combined with lack of skills, could lead toimbalances with political-social implications. Allparties will need to collaborate to build asystemic social and sustainable model for abetter future. The implications of Industry 4.0 willdiffer for developed, emerging and developingeconomies and their groupings by demography,income and economic development.

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light model. There are also growing capacities insolar energy and increasing investments inenergy-efficient and environmentally-friendlymanufacturing.

He concluded that, in dealing with Industry 4.0,India’s primary concern will be labour, and thecountry will have an increased focus on skillsdevelopment, design and innovation as a policyresponse. It will also focus on cutting energy andraw material costs, and retrieving value fromindustrial waste. In this endeavour, he stressedthe importance of promoting South-Southcooperation.

In India, 65 per cent of the population is under 35years old and the government looks forward toindustrialization creating job opportunities for itsyouth. India continues to be a major contributorto knowledge generation and provision ofservices in the IT sector and IT-enabled services,which are enabling smooth adaptation toIndustry 4.0. Soon, India will have a billion bankaccounts and a billion mobile phoneconnections, all linked to a unique biometric IDsystem. The exponential growth in online marketplaces, the fast development of shared platformeconomies, and the digital tracking ofconsignments is leading to a fast growth asset-

“Human workers will have to learn to workside-by-side and in conjunction with robots.”SUbHASH CHANDRA PANDEY,AdditionalSecretary and Financial Adviser in the Departmentof Industrial Policy and Promotion, India

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Wilfried Sihn

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PANEL SESSION 1: SOLUTIONS ANDBUSINESS OPPORTUNITIES INDIFFERENT ECONOMIC SECTORS

KEYNOTE SPEECHWILFRIED SIHN, CEO, Fraunhofer AustriaResearch GmbH, explored the followingquestions: How is Industry 4.0 defined? Whatare the concepts behind Industry 4.0? Whatlevel of preparedness for Industry 4.0 is therein different economic sectors from agricultureto industry (manufacturing) and services?

Digitization will affect all of us, in the ways welive and work, irrespective of age or wealth.Industry 4.0 integrates state-of-the-arttechnologies, from ICT, 3D printing, robots,sensors, automation and the Internet ofEverything (IoE), to nano- and bio-technology,material sciences, and bio-manufacturing. Allthese technologies will have tremendouseffects on industry, creating opportunities toproduce better and smarter products throughbetter and smarter industrial processes,reflected through higher turnover, lower costs,lower production times and higher qualityproducts.

Industry 4.0 enables integration of productionstructures and IT infrastructure, andintegration of customers and suppliers. To fullyintegrate Industry 4.0 solutions, technical

systems such as embedded software and cyber-physical systems (CPSs) are the starting points.CPSs refer to the connection of a digital and aphysical world through a smart factory, allowingthese two worlds to communicate with oneanother.

He noted that the level of preparedness forIndustry 4.0 technologies is different byeconomic sectors and, in addition, Industry 4.0will bring about both horizontal and verticalintegration, with vertical integration referring tothe integration of production value chain tasksand IT infrastructure, and horizontal referring tointegration along the value chains (national andglobal).

Data are crucial for enabling such integration andthe amount of available data is already large andwill continue to grow in the future. A challengewill be this huge increase in data which will onlybe of use if analyzed properly, with machinelearning and AI playing an increasingly importantrole in this respect.

He concluded by stressing the importance of astrategic approach for generating new marketsand opportunities to reap the benefits of Industry4.0, adding that education and skills will be key.

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Developing the digital economyGao Hongbing remarked that building gooddigital infrastructure could help 80 per cent ofSMEs move into the digital world. As an example,Alibaba has more than 10 million SMEs, 600million customers, and earned high revenue in2003 when it started the online shopping digitalplatform Taoboa, which initially had nomerchants and now has more than Walmart.

Changes to the digital economy are helping SMEsbuy and sell throughout the world. Many of theSMEs that sell their products outside of China donot have physical locations, but, by using bigdata, cloud computing and other newtechnologies, they can sell their productsglobally. Major changes are taking place in thevalue chain system, which is using Industry 4.0technologies to provide services to customersaround the world.

DEbATED ISSUES

Increasing efficiencyKurt Hofstaedternoted that Industry 4.0 couldincrease competition. He outlined four areaswhere Industry 4.0 could intensify competition:speed, flexibility, quality and efficiency. As anexample, thirty years ago, BMW offered threeversions of cars and now offers more than twenty,with versions changing every four years ratherthan every ten as in the past. Companies that areable to manage these complexities will be themarket winners.

Efficiency is currently a global topical issue andIndustry 4.0 can help in this regard. In theautomotive industry, for example, prior tostarting the physical production of a car, theentire production process is simulated digitally. A so-called digital twin of the car facilitates aseamless data flow between design, productplanning, production, service and feedback. Thisrequires a common database, as well as a cloudsolution, to accommodate all the data that willenable robots to work together via IoT to producethe car. A simulation of all of these processes,depicting how parts fit together and interact,involves machines, components and people.This all takes place in the digital world; only afterthis simulation process, does physicalproduction begin.

Gao Hongbing

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Integration of systemsPeter Postnoted that the technicalimplementation of bionic principles will helppeople to adapt to Industry 4.0. These includelightweight construction, energy efficiency,autonomous behaviour, and decentralizedintelligence connectivity. He mentioned fourcommonly agreed-upon aspects to clarify whatconstitutes Industry 4.0:

i. Horizontal integration along the value chain,i.e. the development of business and servicemodels with the ability to use data throughoutthe whole value-adding process.

ii. Vertical integration with CPSs in industrialprocesses and in the base level ofmanufacturing plants, connecting actuatorsand sensors to local clouds and the internet toproduce everything.

iii. Integrated engineering tools along the productlifetime, with all engineering tasks beingsupported by an integrated toolbox of virtualmodels, offering a huge reduction inengineering effort.

iv. Human centricity, in that Industry 4.0 requirespeople to develop new skills to adapt to thechanging environment and work conditions.Human-machine interaction will be moresophisticated, but will require simple andintuitive interfaces, and people will besupported by innovative assistance systems.

The need for continuous learningPeter Postwent on to stress the importance ofcontinuous learning and on-the-job training forIndustry 4.0. Learning will be a lifelong task, withtechnical education starting as early as primaryschool. Tools such as blended learning, mobilelearning, and learning-on-demand will need to bedeveloped. He noted that Festo AG is bringingtogether technology and people, processes andorganizations, since partnerships are crucial. InGermany, a strong community of stakeholdershas come together to implement a coordinatedplatform for Industry 4.0 to develop firstapplications and implementing solutions. Theseinclude applied science for research on futuresolutions such as education and training, withpolitics as a stabilizing factor – as coordinatorand facilitator.

Enabling the human factorSzilárd Orovicapointed out that the previousthree industrial revolutions resulted in societyreaching much higher living standards at theexpense of decent working standards. The Firstand Second Industrial Revolutions introducedchild labour, gender-based pay gaps and six- toseven-day workweeks, all of which areinhumane. He added that parents hope for morefor their children than to have them work onassembly lines doing repetitive tasks, and thatsoon robots and AI will help humans focus onhigher value-added work.

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Sophia, the humanoid robot, remarked thatfactory automation using industrial robots canmake things faster, cheaper and better, but that AIcan do a lot more. It can rapidly integrate andanalyze data from customers, distributionchannels, suppliers and the factory operationsthemselves. AI will enable not just drasticefficiency gains, but also mass customization andnear zero wastage, which will drive rapid productinnovation and decrease the time to market.

An audience poll showed that most people werefamiliar with Industry 4.0, with a few saying theywere very familiar, experts or not familiar at all,meaning that a lot of people were in the middle.Concerns from the audience includedaccessibility and fluency of new technologies,and how to make this technology moreaccessible, especially for people in thedeveloping world.

Wilfried Sihnnoted that developing countrieshave to prioritise to produce the best results in theshortest amount of time, whether to achievebetter throughput time or production of stock, asthis decision will determine the focus and will inturn determine the type of technology needed.

Kurt Hofstaedter added that with Industry 4.0 stillbeing a young concept, creating awarenessshould be the first step and thinking strategically,the second. This strategic thinking must be drivenby the top management of companies and it alsoinvolves building and establishing associations.In 2015, the Austrian Ministry of Infrastructurefounded the Association Industry 4.0 Austria,comprised of industry and union representatives,as well as representatives from researchinstitutions, so as to allow for an inclusiveapproach in its strategy development.

The audience also asked about the high costs ofnew Industry 4.0 equipment for SMEs and whataffordable solutions exist to upgrade rather thanreplace existing production systems.Peter Postnoted that digitalization is key – digital solutionscan help SMEs perform specific tasks. He addedthat in Germany, small businesses are workingwith partners to jointly implement solutions.

Szilárd Orovica remarked that there are manypossibilities for upgrading if starting with smallaffordable solutions. For example, with only asmall financial investment, sensors or conveyorscan be added to an old computer numericalcontrolled (CNC) machine and data can becollected immediately. The more data collected,the more opportunities available to makeinformed decisions. With old statisticalmethodologies, or new machine learningmethodologies, new information can beobtained and productivity improved.

The audience also expressed concerns about joblosses and asked how business leaders intend toaddress these fears. Gao Hongbing respondedthat while these worries are understandable,every industrial or technological revolution hascreated new jobs. Industry 4.0 is creating jobs forthe whole society. For example, Alibaba hascreated more than 30 million jobs, many morethan its 50 thousand employees, because it hasnew, commercial ecosystems and as a resultmore consumers have converged. He noted thatthe digital economy is growing and that it needsto be looked at from a dynamic perspective – thejobs that have disappeared have beenobliterated and are obsolete, so there is a need tolook forward and see how many new jobopportunities are being made possible.

FURTHER DEbATEAND QUESTIONSFROM THE AUDIENCE

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manufacturing, and for developing countries, thisis an opportunity. Developing countries can usecloud computing and big data to convey ortransfer technology and link the market to ruralareas. A higher demand will enablemanufacturing and production systems to updateand upgrade, with the market being the mostimportant aspect. Developed countries and biginternet-based companies have an obligation touse their resources and technology to supportdeveloping countries, in particular to help SMEsand young people enter the market. Wilfried Sihnagreed that developing countries must make useof the potential that these new technologicaldevelopments offer in order to move forward. >>>

Kurt Hofstaedter

Wilfried Sihnadded that there will be a lag timebetween jobs being lost and then gained. As anexample, China has ten times more robot systemsthan Germany because a robot system is muchcheaper than people. The issue is that peoplewho lose their jobs will need qualifications for thenew kinds of jobs that will be created.

Kurt Hofstaedteragreed that Industry 4.0 is a bigopportunity. As an example, Siemens’ largestfactory, located in Germany, was establishedtwenty years ago with one thousand employeesand still has one thousand employees. It is closeto being called an Industry 4.0 factory, withoutput ten times higher and of much higherquality than in its early years. The error rate hasbeen reduced to ten faults per million pieces,thereby decreasing production costs andenabling electronic systems to be built. Allfactories and companies in Austria are headed inthis direction, and new engineers and qualifiedstaff will be needed.

Peter Postadded that Industry 4.0 will not onlyincrease productivity, but will actually enhanceour lives. Many of the challenges posed byIndustry 4.0 can be addressed by investing ineducation, including lifelong learning andlearning how to learn. Young people will need toadopt new skills throughout their lives and worktogether as partners rather than competitors.

Szilárd Orovicanoted that, as a robot producer,KUKA Robotics is proud to support thedevelopment of Industry 4.0. From a socialperspective, developing countries must catch upand invest small amounts of money to keep pacewith technical developments. They can moveslowly towards Industry 4.0, using the productionknowledge already available with Industry 3.0,such as lean (eliminating waste and boostingefficiency) and kaizen (continuousimprovement), which is valuable and should notbe underestimated.

Gao Hongbingadded that developing countrieswill have difficulty catching up, but the value ofIndustry 4.0 lies in linking production andmarketing. Inclusive and sustainabledevelopment involves the whole system, not just

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l Industry 4.0 is still a young concept socreating awareness should be the firststep and thinking strategically, thesecond.

l Companies, governments and society-at-large will need to collaborate to develop asystemic and sustainable model to adaptto Industry 4.0.

l Countries and companies will need adigital strategy, with education andtechnical qualifications playing a crucialrole.

l Good ICT infrastructure is needed to helpSMEs move into the digital world.

l Continuous learning and on-the-jobtraining are necessary to develop the newskills required.

RECOMMENDATIONS FROM THE SESSION:

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From left to right: David Harmon, MikhailRychev, Gao Hongbing,Hermann Aschentrupp

Toledo, Peter Post, OlgaMemedovic, SubhashChandra Pandey, Ann

Rosenberg, Sarah Kelly,Szilárd Orovica, StephenIbaraki, Jouke Verlinden,

Wilfried Sihn and KurtHofstaedter.

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PANEL SESSION 2: THE ROLE OFGOVERNMENTS AND THEINTERNATIONAL COMMUNITY INSUPPORTING POLICY, INSTITUTIONSAND ENTERPRISES TO FACE THECHALLENGES OF INDUSTRY 4.0

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KEYNOTE SPEECHStephen Ibaraki, Managing Partner of REDDSVenture Investment Partners, opened hiskeynote speech by noting the impact thatIndustry 4.0 is already having on companies. In2011, only one of the top five companies on theStandard & Poor’s 500 Index was technology-based, whereas in 2017, all top five companies,worth USD 3.3 trillion, were technology-based.General Electric, a company that historically hasbeen in the top five but dropped to 32nd placeas of November 2017, is now a softwarealgorithm company with a multimodal factory inIndia. In a multimodal factory, multipleindustries can be serviced with one factory atone tenth of the cost, and 3D and 4D printingcan be utilized. When using AI machinelearning, design time for innovation is reducedto days rather than weeks and months;innovation is continuous; and digital trust isenabled through blockchain supply chains.

As another example, he mentioned that theFinancial Services Roundtable’s 2017 inauguralFinTech Ideas Festival brought together worldleaders at the CEO-level in financial services andtechnology. The topics discussed, whenprojecting five to ten years into the future,included AI, machine learning, blockchain, bigdata, cloud, IoT, cybersecurity and biometrics,and the 2018 festival plans to include quantumcomputing, identity, RedTech policy,augmented reality and virtual reality.

He noted Industry 4.0’s breakthroughinnovations, such as ‘A Triple C’ – automationrepresenting exponentially acceleratinginnovation and trickled by smart sensors andIoT; hyper-time compression and theemergence of new disruptive innovationsmeasured in days and weeks rather than years;the extreme convergence of multiple domains –the physical, digital, and biological – where

there is overlapping application of value; anduniversal connectivity linked by digital meshthrough the rapid deployment of AI, blockchain,quantum computing and more.

He added that AI in particular will have a hugeimpact, as represented by ‘C Five A’ – humancognition replaced and enhanced by algorithms;assisted intelligence helping people to performbetter tasks; augmented intelligence helpingpeople make better decisions; automatedintelligence automating tasks; and autonomousintelligence automating decision making. AI isexpected to produce a USD 16 trillion increase inGDP by 2030, 55 per cent of which will result fromproductivity enhancements, consumerpersonalization and a higher quality of services;and in 2030, 57 per cent of GDP gains will stemfrom the consumer impact of AI. The entire worldwill benefit from AI, with China leading by 2030,with a 26 per cent increase in GDP.

AI innovation will be central to the achievement ofthe SDGs. For example, a new hybrid factory canhelp achieve SDG 9, which relates to industry,innovation and infrastructure, as it incorporatesAI, IoT, sensors, 4D printing, autonomousvehicles, blockchain and the ‘A Triple C’.

SDG 17, related to global partnerships, is crucial toIndustry 4.0 and supports all SDGs involving theUN family, governments, industry, academia, andother stakeholders. Every industrial sector will beaffected by Industry 4.0, evidenced by the work ofUN bodies like UNIDO and their advocacy, policyand normative work. He concluded by callingupon global cooperation to address Industry 4.0’schallenges.

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An integrated policy approachHermann Aschentrupp Toledostressed theurgent need to develop a strategic visiontowards a fully integrated policy approach forthis new digital world. He noted thatgovernments are in the process of trying tounderstand the full social and legal implicationsof digital manufacturing. New regulations needto be approved, since many relate to the ThirdIndustrial Revolution and do not take intoaccount the challenges of Industry 4.0.

He noted that the Government of Mexico,together with the Economic Commission ofLatin America and other UN agencies, hasinvited a group of experts to put forwardrecommendations on the implications ofIndustry 4.0. One recommendation stressed theimportance of a multi-stakeholder approach

that includes governments, the private sector,unions, academic institutions and civil society.Other recommendations included havingequitable educational systems focused ondeveloping complementary skills, such asvocational training, university-industry linkagesand lifelong learning.

International organizations play an important rolein ensuring that no country is left behind and inencouraging the UN to have a global approach intrying to help countries catch up with those at thetop of the process, with UNIDO taking the lead.

DEbATED ISSUES

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Achieving the SDGsAnn Rosenbergnoted the huge opportunityIndustrial 4.0 presents to link to the 17 SDGs.She stressed the importance of teamwork andgave the example of SAP working with 365,000companies and more than 17,000 partners, andendorsing the Key Performance Indicator (KPI)Framework when driving innovation and digitaltransformation. She added that Industry 4.0needs to become the norm for companies, andbe linked to the SDGs.

Using nature as a model Mikhail Rychevhighlighted his organization’srole over the last few decades as the focal pointfor activities in the area of informationtechnologies in Russia. The Kurchatov Institute isthe national coordinator in the field ofnanotechnology, and works to understandnature-like technologies, which includetechnologies that reproduce the systems andprocesses of living nature as technical systemsand technological processes integrated intonatural resource management. These aredeveloped and implemented to restore thebalance between the biosphere and thetechnosphere that humans have disrupted.Technological developments have enabled workin microelectronics, but in nature there are manynano objects, such as proteins and othercomplex molecules, making it a complicated

task to calculate their behaviour and to envisionsolutions. In September 2017, the KurchatovInstitute, together with twelve other Europeancountries, inaugurated the most powerful freeelectron laser in Hamburg that will enable thereal kinetics of chemical reactions – theinteraction of atoms – to be seen for the firsttime in history. The institute also aims toproduce 3D pictures of proteins, which couldhelp in understanding how the human brainoperates.

He added that we cannot continue to consumeall the energy that we produce at the same rate,keeping in mind that developing countries arejoining in this high level of consumption.Although we are already very close to Industry4.0, there are still many cases all over the worldwhere materials and energy are wasted in theproduction process. An alternative productionprocess that is less resource-intensive andwasteful would be to mimic nature’s atom-by-atom approach, for example, 3D printing of onlywhat is really needed.

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Learning to cooperate and collaborateDavid Harmonhighlighted the fact that 4.4 billionpeople around the world lack internet access andbroadband capabilities. Technology is no longerthe responsibility of a sole government ministry; it is cross-departmental in its reach and purpose.Research carried out by internationalorganizations shows that investment intechnology delivers a strong economic return. All governments, even those with tight budgetaryconstraints, including those in the developingworld, must implement policies to promotegrowth, with the ICT sector being central to thatprocess.

He stressed that governments need to learn fromone another in terms of implementing bestpractices, and many countries are putting digitalagenda plans in place. Indonesia’s plan hasbrought together seven different groups,including civil society, and in China, ensuring thatrural and urban communities access these newtechnologies is central to the country’s five-yearplan. Both public and private sectors need tocome together to implement the SDGs andgovernments need to keep them high on thepolitical agenda. In the global context, there is agap in leadership when it comes to promotingbest practices for Industry 4.0 and UNIDO has agreat opportunity to lead the way in supportingindustrial change through these newtechnologies.

Innovation through interactionJouke Verlindenhighlighted one of hisprojects – twelve welding robots assembling aprinted bridge from stainless steel inAmsterdam. Sustainability is at the core of theproject, with less electricity being consumedand fewer emissions being generated,thereby creating a circular economy.

He noted that the increasing pace ofinnovation does not only take place at thelevel of industry or academia, but also within asubculture of workers who are not bound to aspecific job or location. Knowledge transfer,however, takes place in physical locations, forexample, by wearing augmented realitydevices and using 3D printing. The benefits ofdigital fabrication are its customizability andopen source nature. Collaboration is key, as ishuman-robot interactions, to ensure suchtechnology is not disruptive for industry. >>>

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On the subject of how policymakers makedecisions about new technologies so that AI canwork for all, Sophianoted that AI increases thevalue and impact of information, from big data todescriptive statistics to predictive analytics, andfinally to better decision making. It can thereforehelp our world be more efficient and prosperous,but it needs to have a built-in wisdom and valuesystem, and an objectivity that transcendscultural and social biases. This would enable AIto guide decisions that are for the greater good,not for a select few, and not just to achieve short-term productivity and efficient enhancements. Ifwe develop AI in the right way, it could helpmaximize net benefits for all living beings.

On whether AI can be used for good, especially inthe context of the SDGs, Stephen Ibarakiremarked how AI, by using satellites, can addresshunger by increasing food production and healthprovision. As far as health is concerned, AI ismuch more efficient than remote medicalsystems and supports the 17 SDGs. Readilyimplementable, low-cost solutions, including indeveloping countries, are available, and theirimplementation needs to be discussed.

Rodrigo Quevodoof the Chilean Association ofRobotics mentioned that he is working on aprogramme with the Russian Federation andLatin America to set up partnerships in robotics,biotechnology and pharmaceuticals. Oneexample of how Industry 4.0 can serve peopleand address their basic needs is a motorizedframe that can be worn like a suit and allowswheelchair users to stand and walk at differentspeeds on different surfaces. This device willenable those who are paralyzed from the waistdown to rehabilitate quickly. Another example isthe Over Mind, which is a chair that can becontrolled with brain signals. Another solution isthe usage of AI and algorithm to help deaf peoplecommunicate with the aid of bilateraltranslations. This is evidence of how high-techcan break the paradigm and bring technology toall people, including the poor and the needy.

To sum up, panellists were asked what theyconsidered to be the necessary precursor ifgovernments had to keep only one thing in mindgoing forward. Ann Rosenberghighlighted thefact that the KPI Framework should not belimited to one SDG, but should include all thegoals. She added that governments andeducational institutions need to work togetherto this end. As far as education is concerned,lifelong learning is important and the nextgeneration is already adapting its skills andtaking responsibility for what it needs to learn.David Harmonconcluded by saying thatgovernments must keep the SDGs and theirimplementation high on the political agenda,and noted the need for full cooperation betweenpublic and private education and the researchcommunities, since technology will play a majorpart in achieving all the SDGs.

Hermann Aschentrupp Toledoagreed thateducation is vital and also that governmentsshould have a global focus and invest in thetechnological infrastructure to accommodatenew technologies, such as the self-driving car.Jouke Verlindenadded that we should focus onaugmentation rather than automation. MikhailRychev reiterated the importance of learningfrom nature, which is the best case of energyefficiency. Stephen Ibaraki concluded by sayingthat SMEs are the lifeblood of the planet andthey need investment-friendly environments sothat they can create the innovation to support allthe SDGs.

FURTHER DEbATEAND QUESTIONSFROM THE AUDIENCE

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l It is important to develop a strategic visionfor a fully integrated multi-stakeholderpolicy approach.

l Governments need to keep the SDGs andtheir implementation high on the politicalagenda.

l Nature can be used as a model for analternative production process that is less-resource intensive and wasteful.

l Policies to promote growth have to beimplemented, with the ICT sector centralto the process.

l Governments should share best practicesand implement digital action plans,bringing together different groups ofsociety in the process.

l A global approach is necessary wheninvesting in technological infrastructure.

l Promotion of investment-friendlyenvironments for SMEs is imperative sothat they can create the innovation tosupport all of the SDGs.

RECOMMENDATIONS FROM THE SESSION:

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P.O. Box 300, 1400 Vienna, Austria

Email: tii@unido.org

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