Facilitated by a broad economic policy vision informed by the Manufacturing Industry Innovation 3.0 strategy, the concept of a smart factory in Korea has a collective meaning embracing automatization, data exchange and enhanced manufacturing technologies. The Manufacturing Industry Innovation 3.0 strategy is a component of the Creative Economy Industry Engine project, a flagship economic policy of the Park Geun-hye administration that aims to tackle many challenges surrounding the Korean manufacturing industry. It generally refers to the computerization of manufacturing. Broad in focus, the strategy in general and smart factories in particular tend to miss out on the technological challenges faced by Korean manufacturing companies. In order to effectively address the technological and economic issues surrounding the manufacturing industry in Korea, the policy needs a more technologically and economically focused approach.
Officially launched in June 2014, the Manufacturing Industry Innovation 3.0 strategy is part of the Park Geun-hye administration’s flagship policy of the Creative Economy that aims to introduce innovation to the manufacturing process, including expanding the use of smart factories and developing core technologies related to the Internet of Things (IoT), 3-D printing and Big Data. Big Data refers to data processing, data collecting and data sharing that can be used for data analysis and prediction.
The policy also aims at dealing with many associated economic and social challenges surrounding the Korean manufacturing industry.
Externally, Korea’s major manufacturing sectors of shipbuilding, automotive, electronics, chemicals and steel have been faced with challenges such as the rise of China as a manufacturing powerhouse and the weakening of the Japanese yen.
Internally, many local Korean manufacturing companies have suffered from low productivity and efficiency.
For such reasons, according to a recent survey released by British financial information provider Markit, the purchase of manufacturing index (PMI) of the Korean manufacturing industry ranks 24 out of the 28 countries surveyed, posting PMI scores of 47.6.
In fact, the growth rate of the manufacturing sector during Q2 2015 was reduced to 0.4 percent, and the size of exports has decreased by 14.8 percent compared to the same period last year, recording US$3.933 million in value. This marks the lowest point after the global financial crisis of August 2008. Products are stacked on the shelves with the in-stock rate standing at 129.2 percent, the highest in the 2000s.
Facing these challenges, the government introduced the Manufacturing Industry Innovation 3.0 strategy that has a broad reach. The strategy largely consists of three sub-strategies that include the creation of new manufacturing featuring industrial convergence, enhancement of the major segments, and advancement of industrial infrastructure for innovation. The policy also aims to raise 1 trillion won (US$972 million) and set up 10,000 smart factories by 2020 to facilitate convergence between software and hardware technologies.
At the same time, the government plans to foster the growth of those segments combining manufacturing with information technology, examples of which include the incorporation of information technology into the energy management and industrial safety sectors. Also, the core material and component development, engineering, design and software segments receive concentrated policy support.
Given the discrepancy in wealth and technological development between large companies and their secondary and tertiary subcontractors, the Manufacturing Industry Innovation 3.0 strategy puts special emphasis on the growth of the latter to spread wealth, going beyond a mere focus on the enhanced automatization of manufacturing.
The Manufacturing Industry Innovation 3.0 strategy is also a response to the global trend of government-level initiatives to support upgrading and transforming traditional manufacturing.
In the aftermath of the global financial crisis of 2008, governments around the world put a renewed emphasis on manufacturing as a way out of the financial crisis. Most notably, governments in Germany, the U.S., and China launched a policy focusing on transforming and upgrading the manufacturing industry.
As part of the German government’s High-Tech Strategy 2020 Action Plan, the Germen government launched a policy in 2012 named Industry 4.0, which promotes the computerization of manufacturing. The policy specifically focuses on the technological advancement of Cyber-Physical Systems (CPS), or well-developed systems of collaborating computational software that controls physical entities, the Internet of Things and the Internet of Services.
In September 2013, U.S. President Obama introduced the Advanced Manufacturing Partnership (AMP 2.0) to secure U.S. leadership in emerging technologies that will create high-quality manufacturing jobs and enhance the global competitiveness of U.S. manufacturers.
In May this year, China’s State Council unveiled a 10 year plan to upgrade the nation’s manufacturing capacity so that it can catch up with production powerhouses like Germany and the U.S., and fend off competition from other developing countries. The Ministry of Industry and Telecommunication Technology (MIIT) in China took charge of leading the creation of the “Made in China 2025” plan, which put the focus on 10 sectors, including high-end computerized machinery and robotics, aerospace equipment, renewable-energy cars and medicine.
To be clear, smart factories aren’t just the automatization of the manufacturing process. Rather, it refers to a factory where all components are organically connected to each other with an intelligent operating system based on the Internet of Things. The concept of a smart factory basically refers to a future model of factories, which is expected to kick into high gear by 2020, with 30 percent higher productivity than in current factories.
Globally, multinational companies like Siemens and GE enjoy the most technologically sophisticated levels of smart factory systems in the world. Domestically, LS Industrial System (LSIS) and POSCO enjoy the most sophisticated levels of smart factory technologies.
With rapidly advancing ICT, manufacturing environments are changing from old, rigid centralized systems to module-based flexible, decentralized and automatically controlled systems. This change is also looking for ways to build highly efficient and intelligent factories that can connect machines and people through Internet services in convenient and safe workplaces.
As such, developing a highly sophisticated smart factory is possible with CPS. Today, a precursor to a CPS can be found in areas like aerospace, automotive, energy, healthcare, manufacturing, transportation, entertainment and consumer appliances.
Although the level of technological development varies across sectors and companies, most SMEs in Korea are in their infant stage and require further technological development to reach higher technological sophistication, especially, the Internet of Things and Big Data. Given the much-needed initial investment for SMEs with low technological competencies and low budgets to be more effective, the current government policy and large corporate efforts to help SMEs need a more focused approach and a specific direction.