NATIONAL PLAN ONINDUSTRY 4.0

I TA LY ’ S I N D U S T R I A L P O L I C Y F O R I N N O VAT I O N

Stefano FirpoItalian Ministry of Economic DevelopmentDG for Industrial Policy, Competitiveness and SMEs

CHALLENGES, POLICY APPROACH AND SCOPE

2

3

Next Production Revolution

FORNITORICLUSTER DEI FORNITORI

CLUSTER DEGLI IMPIANTI PRODUTTIVIIMPIANTO PRODUTTIVO DEL FUTURO B

IMPIANTO PRODUTTIVO DEL FUTURO A

3D PRINTING /ADDITIVE MANUFACTURING

SENSORI

NANOTECNOLOGIE /MATERIALI AVANZATI

> Zero errori / dev iazioni> Reattiv ità> Tracciabilità> Prev edibilità

> Eliminazione degli scarti> Mass customization> Rapid prototy ping

> Prodotti a v alore aggiunto intelligenti> Differenziazione tecnica> Connettiv ità

ROBOT

CLOUD COMPUTING

> Sicurezza per l' "internet basedmanufacturing"

> Allungamento del ciclo vita dei prodotti tecnologici

CYBERSECURITY> Gestione della complessità> Creativ ità> Manufacturing collaborativo

> Cy ber Physical Systems (CPS)> Controllo numerico> Full automation> Sistemi totalmente interconnessi> Comunicazione "Machine to machine"

LOGISTICA 4.0> Catena di fornitura

pienamente integrata> Sistemi interconnessi> Perfetta coordinazione

BIG DATA

SISTEMI DI MANUFACTURING

EVOLUTI

CLIENTI

VEICOLI AUTONOMI

> Vicinanza Cliente - Marketing> Flessibilità> Perfetto incontro tra bisogni del

cliente e efficienza della produzione di massa

> On demand manufacturing

MASSCUSTOMIZATION

INTERNET OF THINGS

> Controllo elettronicodell'oggetto

> Comunicazione internet-oggetto

> Dati in real time> Magazzino ottimizzato> Minori scarti e sprechi

> Real time – Autonomia –Produttiv ità

> Completa trasparenza (contestua-lizzazione, robot collaborativi) sulla reportistica dei dati

> Ottimizzazione dei flussi

> Sicurezza aumentata> Riduzione dei costi

RISORSE DEL FUTURO

EOLICO ALTERNATIVE / NON CONVENZIONALI SOLARE GEOTERMICO

> Energie pulite e rinnov abili ovunque> Stoccaggio di energia> Materiali alternativ i

IMPIANTOPRODUTTIVO 4.0

PresenterPresentation NotesATTENZIONE: manca fonte figura

4

Key enabling technologies for industry 4.0

BIG DATA & DATA ANALYTICS

CLOUD COMPUTING& CYBER SECURITY

SENSOR SYSTEMSAND IOT

HUMAN MACHINEINTERFACE ARTIFICIAL

INTELLIGENCE

COLLABORATIVEAUTOMATION& ROBOTICS

ADDITIVEMANUFACTURINGNEW MATERIALS

5

Expected benefits within and outside the factory: smart factory and supply chain integration

Efficiency

Flexibility

Quality and sustainability

Speed

Higher flexibility: enabling small batches production, strong variety and customisation, all with the economies of scale of mass production

Faster time-to-market: product and process “digitaltwins” allow faster prototyping and factory layout design, saving time and costs

Higher productivity: thanks to lower set-up time and continuous monitoring, errors and downtimes are cutdown

Improved quality and sustainability: scrap reductionthanks to sensors that allow real-time production monitoring, smarter resource management, a more circular and ecological production

New business models

Higher competitiveness of products thanks to additional functionalities enabled by Internet of Things, which open the way for new business models

6

Industry 4.0: growth issues at stake in Italy

Stronger skills

Investments and innovation

Connectivity

Capital allocation and

productivity

Decreasing quantity of fixed industrial investments in the last 15 years: increasing obsolescence in installed equipment, risk aversion, underdeveloped VC market

Low quality of investment allocation: resources going to low-performing firms, misallocation within firms rather than sectors, rent seeking, and poor bank creditors’ discipline

Poor skills in STEM subjects: 25% of graduates in science and tech domains (OECD average: 22%) and low appeal of vocational education: >200,000 students do not go to university nor to tertiary professional education, poor re-placement services

70% of companies do not have adequate connectivity (>30 Mbps) and are located in grey/white areas (where providers experience some degree of market failure)

Digital Competitiveness

Italy ranks 25th out of 28 EU member States in the Digital Economy and Society Scoreboard: only 6.5% of SMEs are selling online. Well positioned in cloud computing, but…

7

90

95

100

105

110

115

120

125

130

135

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 201780

85

90

95

100

105

110

115

120

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

GDP per capita(Index 2010=100)

Total employment(Index 2005=100)

Two lost decades: GDP per capita and employment

Source: Eurostat data

8

90

92

94

96

98

100

102

104

106

108

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Total Factor Productivity(2010=100)

Gross Fixed Investment(2005=100)

Two lost decades: investments and productivity

60

70

80

90

100

110

120

130

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fonte: dati OECD Total Multifactor productivity Fonte: dati Eurostat

9

1. Non-seasonally adjusted dataSource: ISTAT 9

GDP (€ Mln; chain-linked volumes,

ref. year 2010)

Industrial production1

(Average for 2010 = 100)Employment

(in thousands of employees)

Impact of the crisis

2017 upswing

- 9.5%

+ 4.8%

Impact of the crisis

2017 upswing

- 26.1%

+ 8%

Impact of the crisis

2017 upswing

-1,057,000

+ 953,000

Macro-economic trends in the aftermath of the crisis

380.000

385.000

390.000

395.000

400.000

405.000

410.000

415.000

420.000

425.000

430.000

90

95

100

105

110

115

120

125

130

135

22.000

22.200

22.400

22.600

22.800

23.000

23.200

23.400

1

10

Industry 4.0: the Italian approach

Italian industrial sector features

• Few large industrial and ICT private players able to lead the Italian manufacturing transformation

• Limited number of industry champions able to coordinate the evolution/integration of value chains

• Industrial sector largely based on SMEs where productivity gains are more needed

• High quality of research but fragmented network of research/tech-transfer centers

• Strong manufacturing know-how and Made in Italy quality

Government guidelines

• Embrace a technological and sectoralneutrality logic

• Avoid “call for tender” logic; implement fiscal measures and horizontal actions

• Operate on enabling factors: investments, skills, infrastructures

• Steer existing instruments to promote technological leap and productivity

• Coordinate key stakeholders without acting as a controller or decision-maker

11

Industry 4.0: four pillars

SkillsEnabling Infrastructures

Innovative investments

Public instrumentsat support

• Stimulate private investments in new equipment and I4.0 transformation (super/hyper-depreciation, “NuovaSabatini”)

• Increase private expenditure in R&D&I (ad hoc tax credit)

• Patent Box to spur investment in intangible assets

• Spread the I4.0 culture through "ScuolaDigitale"1 and "Alternanza ScuolaLavoro”1 programmes

• Develop I4.0 skills in academic paths and vocational education: ITS2, CIF 4.0

• Financing research, upscaling Clusters and doctoral studies

• Create Competence Centers and a network of Digital Innovation Hubs

• Ensure adequate network infrastructure –Ultra Broadband Plan with a “Fiber to the factory” approach that prioritizes industrial areas

• Cooperate in the definition of IoT open standards and interoperabilitycriteria

• Attract FDI and support large I4.0 investments(Development Contracts, Innovation Agreements)

• Reinforce corporate finance, improve savings allocationtowards productive investments (Individual Saving Loans)

• Strengthen the productivity-salary taxation exchange through lower taxes on “productivity benefits”, negotiated in decentralized bargaining

1. Work-related learning; 2. Italian professional institutes

Core focus Supporting policy streams

12

MAIN SUPPORT MEASURES

12

13

Super- and Hyper-depreciation on capital goods

Innovative investments State-of-the-art after 2018 Budget

Super and Hyper-depreciation

Super

130%

• Hyper-depreciation rate confirmed• Phase out of super-depreciation (130%)• 140% for intangible assets, such as software, IT

systems and digital platforms

Hyper

250%

Deadline of prorogation• Hyper-deprecitation: investment made in 2018

or 2019, provided that by the end of 2018 the order has been accepted by supplier and 20% ofthe amount has been paid

• Super-depreciation: delivery date postponed to30 June 2019

14

Annex A to law 11 december 2016, no. 232

5 mandatory features

1. Instrumental goods whose operations are controlled by computerized systems or managed by dedicated sensors and drives

2. Quality assurance and sustainability systems

3. Devices for human-machine interaction and improvement of ergonomics and workplace security in a "4.0" logic

Items 2 and 3 require that systems/devices areinterconnected.Instrumental goods have to meet 5+2 requirements.

1. Control by CNC (Computer Numerical Control) or PLC (Programmable Logic Controller)

2. Interconnection to factory information systems with remote loading of instructions and/or part programs;

3. Automatic Integration with the logistics system of the factory or with the supply network and/or with other machines of the production cycle

4. Simple and intuitive interface between man and machine5. Fulfillment of the latest parameters of security, health

and hygiene at work

2/3 further requirements

1. Remote maintenance and/or tele-diagnosis systems and/or remote control

2. Continuous monitoring of working conditions and process parameters through appropriate sensor sets and adaptability to process drifts,

3. Characteristics of integration between the physical machine and/or the plant with the modeling and/or cyber-physical system

Super- and Hyper-depreciation: eligibility criteria

15

Super and Hyper-depreciation scheme: an example

Ordinarydepreciation rate

Super-depreciation(+30%)

Hyper-depreciation(+150%)

Deductible amount for corporate tax purposes 1,000,000 1,300,000 2,500,000

Tax saving (24% of deductibleamount) 240,000 312,000 600,000

Net cost of investment(1,000,000 – tax saving) 760,000 688,000 400,000

Increase in saving on net cost ofinvestment

7.2% 36.00%

(760,000 – 688,000)/ 1,000,000

(760,000 – 400,000)/ 1,000,000

The benefit may increase if mixed with interest rate subsidies from the so-called “New Sabatini” tool and financial leasing instruments

16

R&D Tax Credit: how it works

R&D&I expenditure (2017 example)

Average expenditure

R&DExp. 2017

R&DExp

2014

R&DExp 2013

R&DExp.2012

25% 50%

50% 50%

2016 2017

5 €M 20 €M

How to calculate

Rate forintra-murosexpenditures

Rate for extra-muros expenditures

Maximumbenefit

Incrementalexpenditure

compared to 2012-2014 average

Valid until 2020

R&D tax credit

17

Italy’s Patent Box

Optional tax regime: a deduction by 50% of taxable IRES income that demonstrably derives from direct or indirect use (as licensee) of IP, suchas: industrial models, patents, formulas, software protected by copyright, know-how.

It transposes into law OECD guidelines on harmful tax practises, beingonly applicable to the production, development and maintenanceactivities of IP that are based on real research and development(«nexus approach»).

It is a permanent fiscal instrument to reward firms that base theirvalue production on knowledge and IP.

It can be combined with the R&D Tax Credit.

In case of use of internally-developed IP, a ruling agreement with the Italian Revenue Agency is required.

18

Italy: the 2nd most attractive country for digital investment (Digital Tax Index 2017)

Country(Region)

Effective tax rate 2017

Ranking

Ireland -10.32% 1

Italy -8.84% 2

Hungary -6.85% 3

… … …

Switzerland (Zurich) 8.39% 11

United Kingdom 11.11% 16

France 12.39% 18

Spain 12.85% 20

Netherlands 13.61% 22

Germany 22.81% 31

USA (California) 22.82% 32

19

A top-10 country in the world for FDI attractivenessA.T. Kearney Foreign Direct Investment Confidence Index 2018

CountryRanking

2018

Var. 2017-2018

Var.2016-2018

United States 1 - -

Canada 2 +3 +2

Germany 3 -1 +1

United Kingdom4 - +1

China 5 -2 -3

…

Switzerland 9 +3 +2

Italy 10 +3 +6India 11 -3 -2

Singapore 12 -2 -2

Italy ranks 10th in the A.T. KearneyForeign Direct Investment ConfidenceIndex for 2018: a jump of six spots intwo years, more than any othercountry in the top-10.

The National Plan for Industry 4.0 isexplicitly mentioned in the report as alikely strong driver for foreigninvestment, in spite of increasedpolitical risk and middling economicgrowth.

20

FIRST RESULTS

20

2121

The role of incentives in 2017

Incentives considered «highly» or «fairly» relevant for making new investments(% manufacturing firms that invested in 2017, breakdown by size and geographic location)

Source: Istat, «Indagine sul clima di fiducia delle imprese manifatturiere» ad hoc form (November 2017)

22

Relevant I4.0 measures: Iperammortamento, Superammortamento and Nuova Sabatini

ΔDomesticorders ‘17 vs ‘16

~ 80 Mld €(100%) Machinery and other equipment

Upkeep and installation of machinery

Electric and electronic equipment

n.a.

Main categories

Other categories + 10%

35%

10%

18%

37%

+ 13%

+ 7%

Gross fixedcapital inv

22

+ 11%Totale*

Gross fixed investments: domestic orders trends

* Total manufacturing, excluding I4.0 domains: +3,2%. UCIMU index: +45.9 (2017/2016)

2323

Survey by MiSE-MET

DIFFUSION OF 4.0 TECHNOLOGIES

Detail by class size (%) Type of 4.0 technology used (%)

4.7% 3.9%

9.4%8.2%

2.9%

8.4%6.0%

18.4%

35.5%

47.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total 1-9 10-49 50-249 250 andmore

Traditional businesses with 4.0 investment planned Businesses 4.0

Almost 20% of small firms

48.1% 49.9% 48.8%

37.6%

24.0%

16.0% 17.3% 14.8% 12.5%6.8%

35.9%32.7%

36.4%

50.0%

69.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Total 1-9 10-49 50-249 250 andmore

Only data technologyOnly production technologyBoth data and production technology

2424

Purpose of using 4.0 technology

Make production more flexible 25.3%

Increase productivity

New markets/business models

Decrease employees

Reduce errors/quality

Security

46.3%

21.9%

6.3%

63.4%

20.9%

Survey by MiSE-MET

2525

Tax creditamount

No. ofrecipients

Naturalpersons

3,841,968 185

Limitedcompanies

1,256,061,655 15,520

Partnerships 15,600,636 475

Other 7,350,900 95

546,863

1,282,855

0

400,000

800,000

1,200,000

1,600,000

2016 2017

Tax credit amount (.000)

8,096

16,262

03,0006,0009,000

12,00015,00018,000

2016 2017

Number of companies

2017

Use of R&D tax credit and R&D expenditure by surveyed companies

26

R&D expenditure (Istat report, 10 September 2018)

1.27 1.31 1.34 1.341.38

0.69 0.71 0.76 0.780.84

0.0

0.5

1.0

1.5

2012 2013 2014 2015 2016

Total Companies

R&D expenditure as % of GDP

• In-house research grows significantly (+9.3%)

• Personnel employed in R&D: +11.7% in total and +16.4% in companies.Highly-qualified personnel (researchers) grow only by 6.6%

• Applied research constitutes 43.3% of overall R&D; growth in 2016 regardsmostly experimental research

2016

2017 Foreseen increase in R&D expenditure by 1.8% (private and public sectors)

27

Venture Capital investmentsRelevant I4.0 measures : incentives to equity investments, possibility to sell startup losses to «sponsor companies», equity crowdfunding

• In the first 7 months of 2018, Italy ranks 7th in Europe + Israel area by number of VC rounds >€2M (104).

• The Italian VC market therefore exceeds €200M in the first 7 months of 2018, without considering €2M (+175%).

27

28

Largest deals in 2018

€46MFormerinnovative startup

€13MInnovative SME», former innovative startup

€10MInnovative startup

€10MInnovative startup

The growth of the Italian VC market

Source: estimates of Osservatorio Startup Hi-Tech, PoliMi

Venture Capital investmentsRelevant I4.0 measures : incentives to equity investments, possibility to sell startup losses to «sponsor companies», equity crowdfunding

Formal (VC)

28

Grafico1

2014201420142014

2015201520152015

2016201620162016

2017201720172017

Informal (i.a. BA, EC…)

Internationals

Totale

formali (VC)

informali (BA, EC, etc.)

internazionali

Total120

Total147

Total217

Total261

120

63

57

0

147

76

71

0

217

101

81

35

261

80

89

92

Foglio1

Totaleformali (VC)informali (BA, EC, etc.)internazionali

201412063570

201514776710

20162171018135

2017261808992

29

Ultra Broadband Plan

National coverage of Ultrabroadband(public consultation forecast, %)

Fonte: Dati Infratel su 32 milioni di civici (stanziamenti pubblici http://www.camera.it/temiap/documentazione/temi/pdf/1104721.pdf29

52.4%

71.2%

86.5%

5%

100%

http://www.camera.it/temiap/documentazione/temi/pdf/1104721.pdfGrafico1

20172017

20182018

20192019

20202020

30 Mbps

100 Mbps

47.1

53.6

46.7

49.3

5.3

17.5

39.8

50.7

47.1

5.3

53.6

17.5

46.7

39.8

49.3

50.7

Foglio1

30 Mbps100 Mbps

201747.15.3

201853.617.5

201946.739.8

202049.350.7

Per ridimensionare l'intervallo di dati del grafico, trascinare l'angolo inferiore destro dell'intervallo.

30

MEASURES TO ENHANCECOMPETENCES

30

31

Fill the knowledge gap of the labour force

Source: Eurostat

Digital skills gap to cover% high digital skills in the labour force

(employed and unemployed; 2016)

Total workforce taking part in training courses, 24-65 years old

% %

Grafico1

UKUKUK

GERGERGER

Ø EUØ EUØ EU

SPASPASPA

FRAFRAFRA

ITAITAITA

0 (l'azienda non ha speso in ricerca e sviluppo)

Fino a 50.000

Da 50.001 euro a 250.000 euro

50

39

37

37

33

29

Foglio1

0 (l'azienda non ha speso in ricerca e sviluppo)Fino a 50.000Da 50.001 euro a 250.000 euro

UK50

GER39

Ø EU37

SPA37

FRA33

ITA29

Per ridimensionare l'intervallo di dati del grafico, trascinare l'angolo inferiore destro dell'intervallo.

Grafico1

FRAFRAFRA

UKUKUK

Ø EUØ EUØ EU

SPASPASPA

GERGERGER

ITAITAITA

0 (l'azienda non ha speso in ricerca e sviluppo)

Fino a 50.000

Da 50.001 euro a 250.000 euro

18.8

14.4

10.8

9.4

8.5

8,3

18.8

14.4

10.8

9.4

8.5

8.3

Foglio1

0 (l'azienda non ha speso in ricerca e sviluppo)Fino a 50.000Da 50.001 euro a 250.000 euro

FRA18.8

UK14.4

Ø EU10.8

SPA9.4

GER8.5

ITA8.3

Per ridimensionare l'intervallo di dati del grafico, trascinare l'angolo inferiore destro dell'intervallo.

32

Incentivise 4.0 training to protect and strengthenemployment

Tax Credit for 4.0 training

• A 40% tax credit on the cost of personnel employed in training courses for the acquisition and consolidation of skills in 4.0 technologies

• Maximum contribution per company of 300,000 € / year

• Validity: on an experimental basis for the year 2018

• Legal basis: Regulation (EU) No 651/2014

• Applicable regardless of hyper-depreciation

• The costs incurred for internal teaching or tutoring staff are also eligible.

33

Strengthen the ITS system

€95m between 2018 and 2020 to increase the number of students enrolled in the ITS system, from current 9,000 to about 20,000

Number of students enrolled

In thousands

Plan to reinforce resources to ITS

€ mln11 16 ≈20

Thousandsof students ≈9

Grafico1

GERGERGER

FRAFRAFRA

SPASPASPA

ITAITAITA

0 (l'azienda non ha speso in ricerca e sviluppo)

Fino a 50.000

Da 50.001 euro a 250.000 euro

≈9

760

529

400

9

Foglio1

0 (l'azienda non ha speso in ricerca e sviluppo)Fino a 50.000Da 50.001 euro a 250.000 euro

GER760

FRA529

SPA400

ITA9

Per ridimensionare l'intervallo di dati del grafico, trascinare l'angolo inferiore destro dell'intervallo.

Grafico1

201720172017

201820182018

201920192019

202020202020

Colonna1

Serie 2

Colonna2

65

65

10

65

35

65

50

Foglio1

Colonna1Serie 2Colonna2

201765

2018651075

20196535100

2020655033%

Per ridimensionare l'intervallo di dati del grafico, trascinare l'angolo inferiore destro dell'intervallo.

686942509693790

1033021767912098129%

877285315614088416%

68.69425.09693.79

103.30217.679120.981

87.72853.156140.884

34

Digital Innovation Hubs

Features:

• Point of contact and information for companies on I4.0

• Selected DIH located at Confindustria's and R.E.TE. Imprese Italia's branches

Mission:

• Awareness creation on I4.0 opportunities

• Digital maturity assesment• Support in innovative

investment planning

• Orientation to Competence Centers and I4.0 network

• Support in accessing public and private financing solutions/investors

• Mentoring services

Gov. and Public

Institutions

Startups

Universities

ClustersAssociations

Player industriali

SMEsIncubators

Investors

I4.0 Competence Center

Features:

• Few and selected national Competence Centers, putting together the best practices

• Strong involvement of leading Italian universities and private players (PPPs)

• Ad hoc governance and adequate managerial skills

Mission:

• Live demos on new technologies and access to I4.0 best practices

• Technical advisory on I4.0 for SMEs • Launch and acceleration of

technological development and innovative projects with high TRL

• Trial support and "on-site" development of new I4.0 technologies

• On-site I4.0 advanced training• Coordination with European CCs

Research Centers

CC

CC CC

Digital Innovation Hubsand I4.0 Competence Centers

35

Public resources The tender process: milestones

Create a national network of centers of excellence, to support technology transfer to Italian SME and be more competitive in view of FP9

• €70m to support the start-up costs of the centers and to finance the demand for projects by companies

• Each centre may receive a public contribution up to a maximum of::- €7.5m to cover up to 50% of the costs

incurred for establishment and start-up of the CC

- €200,000 for each project submitted bycustomer firms

29/1 30/4

Tender opens

Tender closes

24/5

Provisionalranking

8 projects selected

31/12

Allocation ofresources

35

Competence Centers: timetable

36

Lead partner Name of Competence Center

1 Politecnico di Torino Manufacturing 4.0

2 Politecnico di Milano Made in Italy 4.0

3 Alma Mater Studiorum Università di Bologna BI-REX

4 Scuola Superiore Sant’Anna di Pisa ARTES 4.0

5 Università degli Studi di Padova SMACT

6 Università degli Studi di Napoli “Federico II” Industry 4.0

7 Consiglio Nazionale delle Ricerche START 4.0

8 Università degli Studi di Roma “La Sapienza” Cyber 4.0

Competence Centers: selection results

Slide Number 1Slide Number 2Next Production RevolutionKey enabling technologies for industry 4.0Expected benefits within and outside the factory: �smart factory and supply chain integrationIndustry 4.0: growth issues at stake in ItalySlide Number 7Slide Number 8Slide Number 9Industry 4.0: the Italian approachIndustry 4.0: four pillarsSlide Number 12Super- and Hyper-depreciation on capital goodsSlide Number 14Super and Hyper-depreciation scheme: an exampleR&D Tax Credit: how it worksItaly’s Patent BoxItaly: the 2nd most attractive country �for digital investment (Digital Tax Index 2017)Slide Number 19Slide Number 20The role of incentives in 2017Gross fixed investments: domestic orders trendsSurvey by MiSE-METSlide Number 24Slide Number 25R&D expenditure (Istat report, 10 September 2018)Slide Number 27Slide Number 28Slide Number 29Slide Number 30Fill the knowledge gap of the labour forceIncentivise 4.0 training to protect and strengthen employmentStrengthen the ITS systemDigital Innovation Hubs�and I4.0 Competence CentersSlide Number 35Slide Number 36