Industry 4.0: the change is here

Industry 4.0, also known as the Fourth Industrial Revolution, stands to change the face of manufacturing as we know it – and could provide some attractive investment opportunities along the way.

Industry 4.0: the change is here

Technology is at the heart of global advancement. First came the steam engine, hailing the first Industrial Revolution. This was followed by assembly lines and factory automation. Now, the Fourth Industrial Revolution is in full swing, driven by intelligent, connected computing.

What is Industry 4.0?

Industry 4.0 is spurred by the creation of computer systems that require little input from human operators. This revolution represents manufacturing's move towards combining traditional production methods with these automated robots. To some, these robots sound like science fiction. In reality, though, they are part of the force that marks the beginning of the 'smart factory'.

Rather than replace humans, these robots – known as 'cobots' – are meant to collaborate with their human counterparts. Cobots can process information and make decisions alongside humans. They may also have autonomous decision-making capabilities if the work is too difficult or unsafe for humans.

Industry 4.0 defined

Technology risks

As Industry 4.0 is cemented in technology like Big Data and artificial intelligence, it's expected to bring a significant increase in interconnectivity and systems integration. Because of this, there's a large risk associated with it. Data and IT security will be paramount, especially as cybercrime is already exploiting flaws in security.

Despite this risk, by 2020 investment in and support for digitisation is expected to increase 118 per cent by 2020 in support of Industry 4.01. In turn, productivity is expected to grow under the helm of automation.

Investment in systems maintenance and support is becoming ever more critical. In such a connected world where machines are vital to productivity, technical problems could lead to extended or expensive production disruptions.

Industry 4.0 infographic

Considering the impact

While Industry 4.0 may raise productivity, reduce costs and grow margins, it's also likely to spark social change and disruption. Loss of lower-skilled jobs is anticipated, and wages may come under downward pressure.

This could, in turn, create market volatility. Furthermore, greater automation could cause job growth to slow, and it is possible that inflation, as well as interest rates, could stay low for even longer.

As such, investors looking to benefit from Industry 4.0 must evaluate how any given company is impacted by – and ready to react to – these changes. After all, when it comes to investing, considering the potential winners is just as important as avoiding the losers.

To learn more about the investment opportunities Industry 4.0 has to offer, speak to your Relationship Manager or Investment Counsellor.

1 Sprinting to value in industry 4.0, December 2016

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