What exactly is 'Industry 4.0,' and what does it imply for developing countries?

We are living at the beginning of a new technological revolution around Industry 4.0 technologies such as artificial intelligence (AI), robotics, and the Internet of Things (IoT).

Industry 4.0 refers to "smart" and connected production systems that sense, predict, and interact with the physical world to make real-time decisions that support production.

Developing countries must diversify their manufacturing into more technologically advanced sectors.

Rapid technological change has the potential to accelerate progress while also leaving many people behind. Since the Industrial Revolution, every wave of technological progress has been associated with more significant inequalities between countries. There was a slight income disparity between countries before the 1800s; today, the average gap in per capita income between developed and developing countries is more than $40,000.

What impact would Industry 4.0 have? Would it help or hinder developing countries' industrialization? Would it lessen or exacerbate inequalities?

What exactly is Industry 4.0?

Industry 4.0 refers to "smart" and connected production systems designed to sense, predict, and interact with the physical world to make real-time production decisions. It can boost productivity, energy efficiency, and sustainability in manufacturing. It increases productivity by lowering downtime and maintenance expenses.

According to estimates, production line availability will increase by 5 to 15%. Through optimization, it can also provide opportunities for energy savings and sustainability. In one case study of a multinational in the plastics sector, Industry 4.0, using energy sensors reduced power consumption in one of its plants by around 40%, saving over $200,000 in energy per year. Only a few countries, however, develop and trade Industry 4.0 technologies.

So far, the United States and China have the most publications and patents. They also have the world's largest digital platforms, half of the world's hyper-scale data centres, the highest rates of 5G adoption, 94% of all AI start-up funding in the last five years, and 70% of the world's top AI researchers.

Another critical component of Industry 4.0 is high-tech manufacturing and research and development capacity, increasing opportunities for firms in developed countries to gain a competitive advantage. European firms, for example, have made significant investments in IoT. They account for roughly three-quarters of all IoT spending, along with China and the United States.

What impact would Industry 4.0 have on inequalities?

Jobs, wages, and profits are all affected by technological change. New technology, in the case of Industry 4.0, primarily increases productivity.

Companies become more competitive and more likely to hire higher-skilled workers in better jobs as they become more productive. Countries implementing Industry 4.0 may increase productivity, competitiveness, and wages.

At the same time, Industry 4.0 presents some unique challenges. Many studies, for example, predict that AI and automation will significantly lose jobs in the economy. However, they fail to recognize that not all tasks are automated and that, more importantly, new products, charges, and professions are created across the economy. Industry 4.0 in manufacturing has the potential to increase productivity significantly, but most firms in developing countries are still a long way from implementing it.

The international community should unite to assist countries in harnessing this new technological wave. The risk is that the gaps in previous technological revolutions will be repeated.

Five critical areas in this regard are:

1. Exchanging knowledge and information, as well as conducting research
2. Assisting in the development of policies, strategies, and initiatives;
3. Assisting in the capacity building of all actors in the national innovation system for Industry 4.0;
4. Promoting technology transfer through new innovative partnership approaches that address market, innovation, and capability failures;
5. Assist in developing legal frameworks, guidelines, norms, and standards.

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