Amid the backdrop of dynamic shifts in global trade patterns and technological advancement, Industry 4.0 and artificial intelligence (AI) are substantially reshaping manufacturing landscapes in emerging markets. Although challenges exist for full implementation, including infrastructure and skill gaps, rapid urbanisation and a burgeoning young workforce in these countries drive demand for automation and smart technologies, in tandem with highly connected global supply chains. As such, many emerging markets have seen substantial progress in this area, and industry leaders are likely to further adopt such technologies going forwards, benefitting many of these markets, whose central goal is to add more value and sophistication to their industrial and manufacturing sectors.
Industrial Revolution
Industry 4.0 has emerged following the merging of the physical and digital spheres within the industrial sector as a result of recent technological advancement. This specifically involves the proliferation of AI, blockchain, robotics, additive manufacturing, the use of the internet of things in industrial processes and nanotechnology. Much of Industry 4.0’s appeal is its association with the incorporation of highadded-value industrial activities in countries that have historically been home to manufacturing sectors that generate lower-value products.
For instance, in the mid-to-late 20th century northern Mexico was associated with maquiladoras ( manufacturing plants that assembled low-cost goods at a competitive price for export to the US). As of 2024 Monterrey and the surrounding Nuevo León state are leading the push in Latin America for Industry 4.0. Notably, Nuevo León and other northern states in Mexico are well placed geographically to leverage Industry 4.0, bordering the world’s largest consumer market and with Mexico the largest trading partner for the US – meaning supply chains are already highly interconnected.
Part of the groundwork needed for Industry 4.0 to succeed is the interlocking of three different elements of the foundational ecosystem, known as the triple helix. This consists of the industry itself, academia and government. The Nuevo León 4.0 initiative and Industry 4.0 more broadly have now evolved into a so-called penta-helix with the addition of entrepreneurs and risk capital as fourth and fifth elements.
Human Capital
With entrepreneurs acting as one strand of the penta-helix, another trend is the need for upskilling and reskilling countries’ existing workforces to align with the demands of Industry 4.0 and AI-driven manufacturing processes. In Kenya, one of Africa’s most digitally literate countries, it is estimated that 50-55% of jobs will depend on digital skills by 2030. Kenya already has several vocational training programmes to equip workers with digital literacy, albeit with a wider ICT focus. Uganda’s Vision 2040, however, specifically addresses the need for technical competencies required for the country’s Industry 4.0 journey.
Despite these efforts, however, challenges persist. One is the mismatch between the skills demanded by emerging technologies and those possessed by the workforce. In Africa, where manufacturing industries are experiencing growth spurred by technological advancement, there remains a shortage of skilled workers proficient in digital technologies. This gap underscores the need for targeted education and training interventions to ensure that AI and technology more broadly complement rather than replace labour.
In this vein, Industry 4.0 and AI present opportunities for workforce augmentation and productivity enhancement through human-machine cooperation. Collaborative robots are increasingly integrated into manufacturing operations across emerging markets to assist human workers in repetitive or hazardous tasks, improving efficiency and safety standards. Rather than replacing humans’ jobs, these symbiotic relationships between humans and machines enhance productivity while offering opportunities for skills diversification as well as career advancement in the digital sphere.
Supply & Value Chains
Beyond local and national initiatives to foster Industry 4.0 and AI, the most wide-ranging macro implication could involve shifts in supply chains as well as global value chains across emerging markets, with implications for advanced markets as well. While the underlying principles of technological integration remain consistent globally, the context of emerging markets fosters unique challenges and opportunities that shape the trajectory of Industry 4.0 and AI adoption in manufacturing.
In advanced markets, such as those in North America and Western Europe, Industry 4.0 and AI have already gained significant traction, driven by mature digital infrastructure, robust regulatory frameworks and a highly skilled workforce. Consequently, the focus often shifts toward enhancing operational efficiency, driving innovation and maintaining competitiveness through continuous technological advancement. Conversely, in emerging markets, the adoption of Industry 4.0 and AI is characterised by an emphasis on bypassing traditional manufacturing practices, overcoming infrastructural limitations and improving digital capabilities.
One trend across the board is the rise of smart manufacturing systems, powered by AI and internet-of-things technologies, which enable real-time monitoring and control of production operations. Manufacturers are now leveraging AI-driven predictive maintenance solutions to minimise downtime, reduce maintenance costs, and prolong the lifespan of machinery and equipment. By identifying potential equipment failures before they occur, companies can ensure uninterrupted production and maintain high levels of operational efficiency.
AI-powered predictive analytics are revolutionising demand forecasting and inventory optimisation in manufacturing industries. By analysing vast datasets and identifying patterns and trends, AI algorithms can anticipate customer demand, optimise production schedules and minimise inventory holding costs. This predictive capability is particularly beneficial for companies operating in volatile markets where demand variability poses significant challenges to traditional supply chain management practices.
However, the transformation of value chain dynamics in emerging markets also presents challenges, including the need for investment in digital infrastructure and workforce development. One such initiative designed to boost this is Saudi Arabia’s National Industrial Strategy (NIS) which aims to leverage additive manufacturing, or 3D printing, in its goal to enhance industrial competitiveness and increase manufacturing GDP and exports to rise through global value chains. By digitalising physical assets and utilising advanced technologies such as 3D scanning and printing, the Kingdom’s manufacturing segment aims to optimise production processes, reduce overstocking and tap into new investment opportunities. In particular, the NIS looks to maximise existing digital manufacturing equipment while pinpointing opportunities for future advancement. This approach streamlines production processes while also paving the way for the integration of cloud computing, the internet of things and machine-learning technologies.
One important example in Asia is Indonesia’s Industry 4.0 roadmap, Making Indonesia 4.0. The archipelago’s export-to-GDP ratio was under 1% in 2016 but the government has targeted it to reach 10% by 2030 specifically as a result of its Industry 4.0 strategy. Along with food and beverage, textiles, chemicals and electronics, one area of focus for the strategy could be the automotive segment, as Indonesia is already South-east Asia’s second-largest automotive exporter.
Indonesia’s production of electric vehicle (EV) components, however, could be a disrupting force in global supply chains in the automotive industry, given its plans to consolidate much of the supply chain for EV batteries within its borders. Nickel is a key component for EV batteries, and Indonesia has ramped up production in recent years. The country produced 130,000 tonnes of nickel in 2015, or 5% of global supply. Output then rose to 600,000 tonnes in 2018 before reaching 1.8m tonnes in 2023. As of September 2024 Indonesia produced roughly 40% of the world’s nickel and held 20% of global reserves. As of July 2023 the country had 43 operational nickel smelters, with a further 28 under construction and 24 in the planning stage. However, to consolidate more of the chain within its own territory, Indonesia’s Industry 4.0 strategy will likely be key to attract investment for EV and EV auto parts producers.
Prospects
As Industry 4.0 and AI continue to reshape manufacturing landscapes in emerging markets, they are presented with unique opportunities to bypass traditional practices and overcome infrastructural hurdles. With a focus on optimising production processes and enhancing supply chain efficiency, in tandem with academia and supported by government initiatives, key industries in strategically located emerging markets are set to benefit substantially from this shift. As this occurs, the potential emergence of Industry 5.0 stands to be the next iteration of industrial development, leading to further integration of advanced technologies with human-centric approaches going forwards.
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