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September/October 2017
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September /October 2017
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10 FOCUS
Why China could lead the next phase of globalisation.
INDUSTRY 4.0
How to make robots we can trust.
24 THE INTERVIEW
Nick Beckett, Managing Partner, CMS Beijing
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EDITORIAL ASIA
MANUFACTURING NEWS
CAN WE TRUST
JEZ Media
A ROBOT?
The International Renewable Energy Agency (IRENA_ says that India can raise its renewable energy use to meet a quarter of the country’s energy demand by 2030.
Managing Editor Doug Green Art Direction Kim Alves Advertising Enquiries Please visit
Doug Green
India has the opportunity, for example, to use solar energy in a big way of renewable energy use. Biofuels – used for transport, electricity generation and heating – and the country is taking a leading role in energy transformation by regionally and globally. Read the full article on Page 5.
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Can we trust a robot? That’s a fair question. Examples of autonomous systems include cleaning robots, smart homes and self-driving cars.
bi-monthly and offers the reader the
However, trust is an issue. To enable trust, developers need to consider other requirements including the capacity to explain decisions and to have recourse options when things go wrong.
Asia Manufacturing News welcomes
We can get carried away with all the great technology we are using in manufacturing plants and businesses and believe they have all the answers to our success. But the technology of the mind is still the greatest technology.
latest in business and manufacturing news across ASEAN region. articles and contributions and encourages readers to share their development stories and opinions with fellow readers. Asia Manufacturing News uses information in good faith. We give no guarantee of the accuracy of information provided. No liability is accepted for the result of any actions taken or not taken on the basis of this information. Those acting
And we need to be aware of not getting too excited about technology because it is part of the globalisation ‘push’ and risks leaving people on the scrap heap of life.
on the information do so entirely at their own risk.
Enjoy the read and if you have a story to tell please contact me. ASIA
MANUFACTURING NEWS
For a copy of the Media Kit 2017 please email publisher@xtra.co.nz
Smart Manufacturing SM✓ Information, Technology and Human Ingenuity
CONTENTS 5 DEVELOPMENTS A quarter of India’s energy demand can be renewable.
6 MANUFACTURING TECHNOLOGY This is where robots will start beating humans at every task.
7 BUSINESS NEWS Representing the drivers of economic growth.
7 GLOBALISATION
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Why China could lead the next phase of globalisation.
10 INDUSTRY 4.0 How to make robots that we can trust.
12 THE INTERVIEW Poul Lorentzen, General Manager, Consoveyo Singapore.
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14 DEVELOPMENTS Car security.
15 DEVELOPMENTS
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Consoveyo builds strong partnership with JYSK in Bulgaria.
16 ANALYSIS 4 ways Africa can achieve a manufacturing renaissance.
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18 DEVELOPMENTS Making better batteries.
19 THE SMART FACTORY BOGE shapes the future of Industry 4.0.
PAGE 22 ANALYSIS
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4 ways Africa can achieve a manufacturing renaissance (continued).
23 DEVELOPMENTS International collaboration develops new approach to advanced sensor and energy harvesting devices.
24 THE INTERVIEW
16
Nick Beckett, Managing Partner, CMS Beijing.
27 ANALYSIS Made in China and what it means for your supply chain.
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DEVELOPMENTS
Asia Manufacturing News
September/October 2017
A QUARTER OF INDIA’S ENERGY DEMAND
CAN BE MET WITH RENEWABLE ENERGY Increasing India’s renewables would save 12 times more than it costs Abu Dhabi, U.A.E. — India can raise its renewable energy use to meet a quarter of the country’s total final energy demand by 2030, according to the findings of a report presented by the International Renewable Energy Agency (IRENA). Renewable energy prospects for India, a study from IRENA’s REmap programme, outlines action areas that can unlock India’s vast renewable energy potential, ensure clean and sustainable energy for generations to come, and enable the country to fulfill its pledges under the Paris Climate Agreement. Renewable energy prospects for India describes how solar energy will play a vital role representing the second largest source of renewable energy use with 16 per cent, followed by wind at 14 per cent, and hydropower at 7 per cent of the country’s total final renewable energy use by 2030. Biofuels — which can be used across the end demand spectrum, such as for transport, electricity generation and heating — would account for 62 per cent. The country could potentially increase its share of renewable power generation to over one-third by 2030. “With one of the world’s largest and most ambitious renewable energy programmes, India is taking a leading role in the energy transformation both regionally and globally,” said IRENA Director-General Adnan Z. Amin. “India possesses a wealth of renewable resources, particularly for solar and bioenergy development, which can help meet growing energy demand, power economic growth and improve energy access, as well as boost overall energy security.” Increasing renewable energy deployment could save the economy twelve times more than its costs by the year 2030, creating jobs, reducing carbon dioxide emissions, and ensuring cleaner air and water, with savings on health-related costs. Furthermore, the renewable energy technologies identified in the report would lower the demand for coal and oil products between 17 per cent and 23 per cent by 2030, compared to a business as usual scenario. “Balancing economic growth and development, environmental protection, and energy security is a real
challenge in India that can be tackled by enabling more renewable energy deployment,” said Dolf Gielen, Director of Innovation and Technology at IRENA. “Through this report we have attained a better understanding of India’s renewable energy potential, that can assist in guiding the country’s energy policy in a way that is both economically and envionrmentally attractive,” Gielen added at the World Renewable Energy Technology Congress in New Delhi today, where he presented the main findings. Meeting India’s electricity demand, which has grown by 10 per cent a year over the past decade, and attaining the country’s economic growth targets will require significant investments in power-generation capacity and related infrastructure, and in transport, buildings and industry sectors, creating important opportunities for renewable energy deployment. IRENA’s report shows that investments in renewable energy capacity must more than double to make the most of India’s potential. Mobilising affordable financing and adapting new business models will be essential to achieve this. India will also need to accelerate the transformation of its power system to integrate higher shares of renewables by strengthening transmission grids, reducing grid losses, and in general improving the resilience of the power system by investing in more flexible system that values demand-response, interconnectors and storage, as well as greater transport and power-sector synergies. India’s population and economic growth, combined with accelerating urbanisation, is expected to increase the number of people living in cities and towns from approximately 435 million in 2015 to 600 million by 2030. In addition, estimates suggest that 80 million households — roughly 300 million people — have limited or no access to electricity. Renewables can improve energy access for poor communities and bolster energy security through diversified, and largely indigenous, sources of supply.
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MANUFACTURING TECHNOLOGY
THIS IS WHEN ROBOTS WILL START BEATING HUMANS AT EVERY TASK Don’t expect to see a human behind the wheel of an 18-wheeler by 2027. Or a set of human hands performing a delicate surgery by 2053.
Image: Business Insider
According to a new study from Oxford and Yale University researchers, those are the years artificial intelligence is slated to take over each of those tasks. And so it will go for millions of other jobs over the next 50 years, researchers find. The study relied on survey responses of 352 AI researchers who gave their opinions on when in the future machines would replace humans for various tasks. Lead investigator Katja Grace and her colleagues found the tasks most likely to get automated within the next 10 years were rote, mechanical tasks. Language translation could outpace human performance by 2024, responses indicated, and robots may be able to write better high-school-level essays than humans in 2026. More complex and creative tasks, like writing books and performing high-level math, will take longer. Ultimately, the researchers found AI could automate all human tasks by the year 2051 and all human jobs by 2136. “Advances in artificial intelligence ... will transform modern life by reshaping transportation, health, science, finance, and the military,” the researchers wrote. “These results will inform discussion amongst researchers and policymakers about anticipating and managing trends in AI.”
TAIGER CLOSES S$8 MIL SERIES A ROUND LED BY TEMBUSU AND SGINNOVATE Taiger, a Singapore-based company specialising in applied Artificial Intelligence (AI) solutions, has successfully closed its Series A round. The S$8 million funding was led by Tembusu ICT Fund I and included SGInnovate, in a boon to Singapore’s efforts to become a leader in AI. Taiger specialises in information access and knowledge extraction, with technology which applies a hybrid between the symbolic and probabilistic disciplines of AI. Taiger’s AI solutions are taught to read and understand information as a human worker does, transforming completely unstructured information to valuable knowledge for businesses and their customers. The funding comes from Tembusu ICT Fund I, the only software-focused venture capital fund in Singapore and one of the six funds selected by the National Research Foundation of Singapore (NRF) as part of the Early Stage Venture Fund II scheme. SGInnovate, a government-owned entity which operates under the NRF, has also participated in this round. AI has taken the world by storm - organisations, from the big players in technology to governments, are aggressively pumping up R&D efforts and investments in this area.
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Yet most of the companies in the increasingly crowded AI space come from a pure Machine Learning-based approach. Taiger takes a “humanistic” approach to AI, and is now set to further solidify its lead in this field. Taiger’s iMatch solution is capable of automatically extracting, validating and interpreting information from documents, replicating the intelligence of a human worker. A large European bank has automated their corporate client on-boarding process with iMatch, translating into an 85% drop in cost and a reduced processing time from weeks to a matter of minutes. “We’re talking about drastic reduction in cost, huge productivity gains, and of course, allowing workers to focus on higher-value work,” said Dr. Sinuhe Arroyo, CEO and founder of Taiger. Mr. Brijesh Pande, Managing Partner of Tembusu ICT Fund I, said: “Taiger integrates the latest technologies in AI and semantic computing, enabling them to create innovative, contextually relevant and highly scalable deep learning solutions in areas such as information extraction, virtual assistants and enterprise search. We are proud to partner with Taiger to support the next phase of their exciting journey.”
BUSINESS NEWS
Asia Manufacturing News
September/October 2017
REPRESENTING THE DRIVERS OF
ECONOMIC GROWTH
ALAN ADCOCK, PARTNER, DEPUTY DIRECTOR, IP AND RA, TILLEKE & GIBBINS, MEMBER, LIFESCIENCES ASIA PACIFIC NETWORK (LAN). What does your company do? Tilleke & Gibbins is a leading regional law firm in Southeast Asia. With 150 lawyers and consultants in Bangkok, Hanoi, Ho Chi Minh City, Jakarta, Phnom Penh, Vientiane, and Yangon, we represent the top investors and the high-growth companies that drive economic expansion in Asia in the key areas of commercial transactions and M&A, dispute resolution and litigation, and intellectual property. One of our important practice areas is regulatory affairs, where we assist companies in the pharmaceutical, cosmetics, consumer products, food and beverages, biotech, medical devices, veterinary products, and other life sciences sectors to enter and excel in markets throughout Southeast Asia. From research and development and clinical trials to registration and market entry to commercialization and technology transfer, we assist leading and soon-to-be-leading companies through every stage of a product’s life cycle. How far is your company’s reach and how far across ASEAN are you connected? We have offices in six ASEAN countries: Thailand, Vietnam, Indonesia, Myanmar, Cambodia, and Laos. We serve clients from 112 countries around the world. How has your company’s business and the market evolved over the last few years? Please elaborate. Many clients encouraged us to expand our legal and regulatory services to other jurisdictions in Southeast Asia which we did in 2013 by opening our own fully independent law offices in Indonesia, Laos and Myanmar and subsequently in 2015 in Cambodia. We find that more and more of our clients are looking for a “one-stop shop” that can, for example, handle registration of their highly regulated products in multiple jurisdictions, something we can do efficiently with our cross-office Regulatory Affairs practice. We are also seeing more foreign clients pursuing patent litigation cases as local laws get tougher. What are your thoughts about the current business conditions of the nutraceuticals industry? Food supplements and nutraceuticals are becoming more prevalent in Southeast Asian markets. Interestingly, there is a growing number of local and foreign collaborative R&D projects focusing on indigenous flora for possible food and cosmetic applications.
Our law firm has seen a marked increase in the number of these projects across our offices here in Southeast Asia and we advise on the agreements, benefit-sharing assessments with local communities, plant variety and patent assessment and registration and, of course, manufacturing and distribution. What is the value of Vitafoods Asia 2017 to your company? Having participated as an invited speaker at Vitafoods Asia 1026 in Hong Kong, we observed interesting market analysis and legal/regulatory needs. Hence, our participation again this year – also as an invited speaker. When it comes to business, do you feel that more assistance by the government is required for growth? For example, tax incentives, staff employment subsidies. Tax incentives are always helpful, but in the developing economies of Southeast Asia, one of the most important things the government can do is strictly protect and enforce intellectual property rights. This helps build business confidence and leads to long-term investment. Where are some of the future areas of growth for your company? Within the regulatory affairs space, we’re moving beyond the traditional areas of pharmaceuticals, food, and cosmetics, and into other less publicized life sciences areas like nutraceuticals, plant protection products, animal feed, and medical devices. I understand that your primary focus is on regulations? What does this involve? Our Regulatory Affairs practice spans the following disciplines: • Clinical Trials and Consumer Testing • Food and Drug Administration (FDA) Registration • FDA Import, Export, and Manufacturing Licenses • Ministry of Agriculture (MOA) Crop Care Registration • MOA Animal, Aquatic, and Hazardous Substance Registration • MOA Import, Export, and Manufacturing Licenses • Holding Licenses • Regulatory Compliance and Maintenance • Labeling and Advertising Clearance • Intellectual Property continued on Page 22
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WHY CHINA COULD LEAD
THE NEXT PHASE OF GLOBALISATION Donald Trump is the 45th president of the United States. Among his promises are a 45% import tax on Chinese products, the cancellation of the Paris climate agreement and the end of the Trans-Pacific Partnership trade deal. If he doesn’t go back on his plans for global trade and international affairs, Trump will give room to other nations to take the lead in shaping globalisation. While the US might be taking a step back from the world – a world it helped to create, to a large extent – China in particular can be expected to take on a more prominent role. While the US is currently the world’s largest economy, in purchasing-power terms, according to the International Monetary Fund, China has benefited significantly from globalisation. Over decades, it has invested in enhancing its capabilities and built economic links with many countries. It has become viewed as an important overseas partner and investor. Something China understands very well is the importance of connectivity – and hence transport infrastructure – for economic growth and development. Its major development framework is the One Belt One Road initiative with its two
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pillars, the Silk Road Economic Belt and the 21st Century Maritime Silk Road. This development project involves a territory equal to 55% of global GDP, 70% of the global population and 75% of its known energy reserves. “The investments will involve about 300 projects extending from Singapore to Turkmenistan,” reports Reuters. One building block of One Belt One Road – also known as OBOR – is the Regional Comprehensive Economic Partnership (RCEP). This China-driven alliance will comprise Australia, New Zealand, China, India, Japan and South Korea – as well as the ASEAN region. In 2014, ASEAN was the seventh-largest economic power in the world. It was also the third-largest economy in Asia, with a combined GDP of US$2.6 trillion – higher than all of India.
China on the world stage On the African continent, China is lending billions towards large-scale infrastructure investments, again part of OBOR, and particularly in transportation. One of its flagship projects is the Standard Gauge Railway in Kenya.
Asia Manufacturing News
There’s also the development of deepwater ports in cities such as Dakar, Dar es Salaam and Djibouti. These are likely to become industrial hubs, following the model of China’s development of the new Cameroonian deepwater port of Kribi. The Russian Trans-Siberian Railway (TSR) is at the origin of rail transportation between Europe and Asia. Recently, Anthony Cuthbertson wrote in Newsweekthat Vladimir Putin may be envisaging a Hyperloop Silk Road. This could present an alternative to the planned construction of 64,000 kilometres of rail tracks that are intended to strengthen existing pathways between the east and west. CRRC Corp, China’s largest maker of railway equipment, was in talks for a potential investment in Hyperloop One, the company behind the idea, Bloomberg reported earlier this year. Meanwhile, China is launching an $11 billion fund for Central and Eastern Europe, targeting investments in infrastructure and high-tech manufacturing, among other things, both in the region and beyond.
September/October 2017
Supply-chain operator DB Schenker started running weekly block trains between China and Germany as long ago as 2011. Four years later, the first train carrying containers from China arrived in the Rail Service Centre freight terminal in the Port of Rotterdam. With the New Development Bank (NDB), the Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB), China has prepared itself for responses to major financing needs – within and beyond the Belt and Road area. This shows some similarity with the Marshall Plan, the US support plan that helped to rebuild western Europe after the end of the Second World War. With the US pulling out of the TPP, China holds an advantage. The binding agreement, which connects Asian countries to North and Latin American nations, has been perceived by many as an obstacle to China’s reach and a way to solidify US alliances with other nations in the Pacific region. Other Asian countries with high export potential, such as Malaysia and Vietnam, are expected to benefit significantly from TPP, while countries that did not sign the agreement, such as the Philippines, risk losing out. This could have a disruptive effect on the region due to trade and investment diversion. So far, China has faced scepticism and criticism for its international activities. Many have questioned its development in Africa, for example. But China could yet regain a level of moral authority; it could lead the global climate adaption effort if the US pulls away, for instance. It has already warned Trump against backing away from the Paris climate deal. What’s in store for relations between the US and China? For a start, there may be tough negotiations over the US import tax on Chinese goods. If both nations find the right balance, they will not only avoid a global trade war, as in the 1930s when the implementation of the Smoot-Hawley tariff act intensified nationalism around the world, but they could also move their bilateral relations to new grounds. Whatever happens, if the US pulls away from globalisation, China stands ready to fill the gap.
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INDUSTRY 4.0
HOW TO MAKE ROBOTS THAT WE CAN TRUST Can we trust a robot that makes decisions with real-world consequences? Michael Winikoff Professor in Information Science, University of Otago Self-driving cars, personal assistants, cleaning robots, smart homes - these are just some examples of autonomous systems. With many such systems already in use or under development, a key question concerns trust. My central argument is that having trustworthy, well-working systems is not enough. To enable trust, the design of autonomous systems also needs to consider other requirements, including a capacity to explain decisions and to have recourse options when things go wrong. When doing a good job is not enough The past few years have seen dramatic advances in the deployment of autonomous systems. These are essentially software systems that make decisions and act on them, with real-world consequences. Examples include physical systems such as self-driving cars and robots, and software-only applications such as personal assistants. However, it is not enough to engineer autonomous systems that function well. We also need to consider what additional features people need to trust such systems. For example, consider a personal assistant. Suppose the personal assistant functions well. Would you trust it, even if it could not explain its decisions? To make a system trustable we need to identify the key prerequisites to trust. Then, we need to ensure that the system is designed to incorporate these features.
A trustworthy robot may need to be able to explain its decisions. What makes us trust? Ideally, we would answer this question using experiments. We could ask people whether they would be willing to trust an autonomous system. And we could explore how this depends on various factors. For instance, is providing guarantees about the system’s behaviour important? Is providing explanations important?
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Suppose the system makes decisions that are critical to get right, for example, self-driving cars avoiding accidents. To what extent are we more cautious in trusting a system that makes such critical decisions? These experiments have not yet been performed. The prerequisites discussed below are therefore effectively educated guesses. Please explain Firstly, a system should be able to explain why it made certain decisions. Explanations are especially important if the system’s behaviour can be non-obvious, but still correct. For example, imagine software that coordinates disaster relief operations by assigning tasks and locations to rescuers. Such a system may propose task allocations that appear odd to an individual rescuer, but are correct from the perspective of the overall rescue operation. Without explanations, such task allocations are unlikely to be trusted. Providing explanations allows people to understand the systems and can support trust in unpredictable systems and unexpected decisions. These explanations need to be comprehensible and accessible, perhaps using natural language. They could be interactive, taking the form of a conversation. If things go wrong A second prerequisite for trust is recourse. This means having a way to be compensated, if you are adversely affected by an autonomous system. This is a necessary prerequisite because it allows us to trust a system that isn’t 100% perfect. And in practice, no system is perfect. The recourse mechanism could be legal, or a form of insurance, perhaps modelled on New Zealand’s approach to accident compensation. However, relying on a legal mechanism has problems. At least some autonomous systems will be manufactured by large multinationals. A legal mechanism could turn into a David versus Goliath situation, since it involves individuals, or resource-limited organisations, taking multinational companies to court. More broadly, trustability also requires social structures for regulation and governance. For example, what (inter)national laws should be enacted to regulate autonomous system development and deployment? What certification should be required before a self-driving car is allowed on the road? It has been argued that certification, and trust, require verification. Specifically, this means using mathematical techniques to provide guarantees regarding the decision making of autonomous systems. For example, guaranteeing that a car will never accelerate when it knows another car is directly ahead.
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INDUSTRY 4.0 Incorporating human values For some domains the system’s decision making process should take into account relevant human values. These may include privacy, human autonomy and safety. Imagine a system that takes care of an aged person with dementia. The elderly person wants to go for a walk. However, for safety reasons they should not be permitted to leave the house alone. Should the system allow them to leave? Prevent them from leaving? Inform someone? Deciding how best to respond may require consideration of relevant underlying human values. Perhaps in this scenario safety overrides autonomy, but informing a human carer or relative is possible. Although the choice of who to inform may be constrained by privacy. Making autonomous smarter These prerequisites – explanations, recourse and humans values – are needed to build trustable autonomous systems.
They need to be considered as part of the design process. This would allow appropriate functionalities to be engineered into the system. Addressing these prerequisites requires interdisciplinary collaboration. For instance, developing appropriate explanation mechanisms requires not just computer science but human psychology. Similarly, developing software that can take into account human values requires philosophy and sociology. And questions of governance and certification involve law and ethics. Finally, there are broader questions. Firstly, what decisions we are willing to hand over to software? Secondly, how society should prepare and respond to the multitude of consequences that will come with the deployment of automated systems. For instance, considering the impact on employment, should society respond by introducing some form of Universal Basic Income?
THE INTERVIEW WITH POUL LORENTZEN, GENERAL MANAGER, CONSOVEYO SINGAPORE How does Consoveyo support the role of maintenance in the warehouse environment? With any automated machine, regular maintenance is crucial to ensure optimal performance. Maintenance has an impact on the quality of results, lifespan of equipment, and overall costs. At Consoveyo, we believe that automation and maintenance go hand in hand, and we educate customers on the importance of regular maintenance. When equipment is well kept, companies can achieve long-term savings by delaying the need for a replacement, or minimizing the occurrence of equipment fault. Our customers typically take up a maintenance contract for optimum upkeep. Over the last 30 years that Consoveyo has been active, we’ve observed that our customers recognize the benefits that regular servicing provides, as the advantages greatly outweigh the inconveniences incurred due to an
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unscheduled breakdown. To help customers minimize disruptions, we also provide flexible maintenance – a partial servicing of the facility at any one time, and that has been well received by customers with exceptionally demanding schedules. Preventative maintenance is better than the ambulance at the bottom of the cliff. Do you agree with this statement, why? Investing in preventive maintenance is akin to buying insurance or a first-aid kit. Nobody misses it on an ordinary day but it would be too late when the need arises. With maintenance, it is important to be consistent to ensure cost-savings and better productivity in the long run. Consoveyo recently rebranded itself as a company, will this move affect your existing customers? The corporate rebranding is an important milestone for us, and we are working hard to communicate our new corporate identity to existing customers and new markets. Now that Consoveyo is part of the Körber Group, we are ever more committed to the markets we serve in Southeast Asia (SEA). Without a doubt, our customers can continue to expect the same dependable service that they have enjoyed in the past. By leveraging on the Körber Group’s expertise, we can draw upon their technical capabilities to better meet the needs of the markets we support. Additionally, as part of the Logistics Systems Area we now have opportunities to work together with our sister companies – including Aberle, Aberle Software, Inconso, Langhammer, and Riantics – to develop more complementary logistical solutions for our customers. How far is Consoveyo’s reach across Asia? Asia is very significant to Consoveyo as there are plentiful opportunities to pursue in this region. At the moment, we are focused on further growing Consoveyo’s market share across
Asia Manufacturing News
Southeast Asia. Besides being very active in Singapore, we are committed to increasing our presence in Indonesia, Thailand, Malaysia, and Vietnam. With Consoveyo now being part of the Körber Group, we have new owners with a new vision to drive the company forward. We are investing heavily to be more visible and to be an innovative player in the global logistics market. Exciting plans for Consoveyo have been lined up, and we look forward to leveraging our Singapore office as a springboard for the other sister companies under the Group. How are you finding current business conditions? The intralogistics market is growing from strength to strength in Asia, due to market drivers like the rapid growth of the e-commerce business, the increased role of robotics, and automation in the logistics environment. This presents opportunities for Consoveyo as our technologies are suited to support manufacturers in this area. These include our Automatic Storage Retrival Systems (ASRS), Automated Guided Vehicles (AGV), and in-house monitoring solutions like Warehouse Management Systems (WMS) which can be linked to our customers’ Enteprise Resource Planning (ERP) systems. We have observed that regional manufacturers and logistics service providers are slowly integrating more aspects of automation into their logistics operations. In the past, warehousing processes were largely manually run, but sentiments are changing as new ideas continue to influence the industry. In lieu of a shrinking labor force in Asia, government agencies are promoting automated technologies. Previously, it was difficult for companies to justify the high investment outlay of automated technologies when labor was inexpensive. However, companies are now reevaluating their budgets due to a shrinking labor force impacted by factors like declining birth rates. Additionally, with countries changing their labor regulations to protect employees from excessive physical work, companies are leaning towards alternatives, and many are choosing to integrate automated technologies instead of hiring and training manpower. As one of the leading providers of automated conveyor technology and storage systems, Consoveyo is capable of providing manufacturers with the support needed to automate their handling applications. Globally, we’ve had much success in delivering turnkey warehousing solutions to
September/October 2017
our international customers, and we have the experience and expertise to support manufacturers across Southeast Asia. What are your thoughts about Industry 4.0 and the logistics industry? With the onset of Industry 4.0 and concepts that encourage smart integration of production and logistics, we expect to see automation integrated in all aspects of the supply chain - including production, storage, delivery, and transport management. One of the key benefits of automating the warehouse environment is the overall reduction in downtime, which can be attributed to a lower incidence of human error and higher productivity levels with continuous 24/7 warehouse operations. Across industries, technological advancement will ultimately change businesses’ competitiveness. Manufacturers will be increasingly keen to implement solutions such as ‘just-in-time’ (JIT) warehouse maintenance and delivery, so as to support efficient business processes to stay ahead of the game. The JIT warehousing concept will enable companies to leverage on collected data to reduce storage of excess inventories. As it is, we have observed that many small and medium enterprises have begun to integrate elements of automation in selected warehouse processes, and we believe
the momentum will only continue. To help us get to know you better, what’s your favorite book? I enjoy reading non-fiction business related books and I do recommend “Who says elephants cant’t dance” by Louis V. Gerstner, who was the former Chief Executive Officer at IBM. It is a fascinating read about how IBM was transformed and the strategies that were applied. On the subject of strategy, I can also recommend the HBR readings of Michael Porter, an Americal business professor that helped shaped my thinking on strategy as a businessman. Through him, I learnt that while strategy is very much about what to do, it is as much about what not to do. In other words, Dr. Porter is emphasizing focus. In our context, we apply this principle at Consoveyo by promoting our core strengths within our key markets.
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high-precision 3D measurement and comparison of parts and DEVELOPMENTS compound structures within production and quality assurance processes.
CYBER SECURE CAR 2017
The devices are used for inspecting components and assemblies, production planning, inventory documentation, as Cyber Secure Car, the leading automotive cyber well TOKYO as for -investigation and security conference, is set to come reconstruction of accident sitesto Tokyo. Now in its third year, the annual meeting will host prominent or crime scenes. They are also automotive and transportation cyber security experts from 26 employed to generate digital 27 September, 2017 at Kogakuin University located in the heart scans of historic sites. of Tokyo’s Shinjuku District.
COMES TO JAPAN
vehicles become increasingly digital, connected and WithAs FARO, 3D measurement autonomous, the security and integrity of on-board systems is anda documentation needs can be top priority for the automotive industry. fulfilled Asconference a pioneer Overconfidently. the two days, the will feature presentations andfrom market leader in portable leading global automotive and security specialists computer-aided measurement, covering issues including: hacker motivation & methodology; semiconductor integrity; on-board FARO consistently applies thevehicle network security; OTA updates; cyber-physical systems latest advances in technology to & functional safety; connected infotainment; lightweight cryptography; V2X make its industry-leading product communications; secure embedded software development; offerings more accurate, reliable, data protection; privacy legislation and more. and easy to use. The aim of the conference is to give engineers and OEMs, suppliers and service providers the Theexecutives focus isfrom on simplifying knowledge and contacts they need to stay ahead in this workflow with tools that fast-moving area and ensure that their customers, products and empower customers, thereby reputations stay protected. dramatically reducing the on-site “Exciting new connected services and the promise of measuring time and vehicle automation arelowering turning the car into an attractive overall targetcosts. for hackers, fraudsters and other sophisticated cyber criminals. And with today’s vehicles incorporating up to 100
Secretary Vehicle Active Safety. Francois is the ITS / Automated Driving focal point of the United Nations (UNECE) whose responsibilities include management of the UN Task Force on Cyber Security and OTA issues. Additional speakers include: • Dr. Chandu Potluri, Senior Functional Safety Controls Specialist, Daimler (USA) • Dr. Daisuke Inoue, Director, Cybersecurity Laboratory, NICT (Japan) • Asaf Atzmon, Director, Automotive Cyber Security, HARMAN International (Israel) • Fabrice Poulard, Security System Architect, NXP
Worldwide, approximately Semiconductors (France) ECUs connected to a range of external networks including 15,000 customers are operating Wi-Fi, cellular and the internet, the challenge of protecting • Ryan Wu, Business Development Director, OnBoard Security more than 30,000 installations of product lifecycle these complex systems throughout the Inc. (China) FARO’s systems. said TheIan company’s is considerable,” Dickie, Managing Director of • Tom Lysemose Hansen, Chief Technical Officer, Promon Automotive Knowledgeare Associates, global headquarters locatedthe organisers of the (Norway) conference. in Lake Mary, Florida, with its “Attendees expectin to Stuttgart, hear from some of the world’s • Prof. Tsutomu Matsumoto, Institute of Advanced Sciences European headcanoffice leading automotive security minds who will deliver deep Information and Physical Security Germany and its Asia-Pacific insights and practical guidance on how to harden the defences • Yokohama National University (Japan) head office in Singapore. FARO of today’s production vehicles, and how to design security into hasthe branch locations in Japan, next generation of highly connected, automated cars and • Prof. Gernot Heiser, Chief Research Scientist, John Lyons China, India, South mobility services,” he Korea, added. Chair, Trustworthy Systems, University of New South Wales Thailand, Malaysia, Vietnam, Notable keynote speakers include Yasuhiko Taniwaki, Direc(Australia) tor-General, GlobalUnited ICT Strategy Bureau, Ministry of Internal The conference is organised in partnership with NICT: Canada, Mexico, Affairs & Communications a leading architect of Japan’s the National Institute of Information and Communications Kingdom, France, Spain,(MIC) Italy, national cybersecurity strategy; and Francois Guichard, UN Technology. Poland, and The Netherlands. u Joseph Arezone, Senior Vice-President, Managing Director for FARO Asia Pacific
Community Planning, Sustainable Business and Waste Minimisation Strategies www.envision-nz.com
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Asia Manufacturing News
September/October 2017
CONSOVEYO BUILDS STRONG PARTNERSHIP WITH JYSK IN BULGARIA Porto - Consoveyo S.A. has announced a new project in Eastern Europe, with JYSK, the largest Danish global retailer of household goods. For its first project with the international retail chain, Consoveyo will customise its Automated Storage and Handling System (ASRS) technology, apply its Rail Guided Vehicle (RGVs) system, and integrate Inconso’s Warehouse Management System by SAP Extended Warehouse Management (EWM) to the client’s new automated distribution centre in Bozhuristhe, Bulgaria. After executing the Sofia Airport Baggage Handling System, this project will be Consoveyo’s next largest achievement in Bulgaria. Jorge Couto, Marketing & Sales Director at Consoveyo, shared, “JYSK’s new automated warehouse is a significant addition to Consoveyo’s growing list of references, and is also a positive step in our expansion plans for the Eastern European market. “This is a key project that will enable Consoveyo to demonstrate its capabilities in tailoring its first-in-class automated warehousing and distribution solutions for a major retail supplier.” In addition to delivering two high-bay ASRS warehouses, Consoveyo will provide JYSK with 14 high-rise stacker cranes that can reach heights of 40 m and 120,000 pallet locations. Both high-bay warehouses will be connected to the inbound, picking, and the shipping areas by Consoveyo’s RGVs. Efficient and fast, the RGV system can travel up to 450 m, and is ideal for complex sorting applications or for connecting very distant points within a facility smoothly. Several lifts and conveyors will also be integrated to connect different floors and facilitate the buffering of goods during the inbound and outbound processes. Furthermore, inconso, a sister company under Körber’s Business Area Logistics Systems, will apply its comprehensive
experience of SAP-based software implementation on this project. inconso will integrate a warehouse management system, SAP Extended Warehouse Management (EWM) 9.4, with a material flow system, SAP EWM MFS, and two SAP-based inconso add-ons – inconsoSIM and inconsoS/Line. The latter improves communication between SAP logistics systems and subordinate control levels, while inconsoSIM performs emulations to ensure all warehouse procedures are thoroughly tested before the distribution center switches to full-load operations. Covering 300,000 m2, JYSK’s new distribution center will possess a storage capacity of around 150,000 m3, which is nearly as large as the retail giant’s main distribution center in Uldum, Denmark. Upon completion, once finished in 2019, the centre will bring several benefits – such as a reduced lead time between order and delivery, lower distribution costs, and better customer service – to JYSK’s stores in Eastern Europe, particularly in the Balkan region. JYSK’s 100-million-euro investment is part of the retail chain’s efforts to expand its global footprint, and to create employment and economic development in the Sofia province in Bulgaria
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ANALYSIS
4 WAYS AFRICA CAN ACHIEVE
A MANUFACTURING RENAISSANCE
Manufacturing production in Africa more than doubled over the past decade. For the 50th anniversary of the creation of the Organisation of African Unity (now the African Union), African leaders adopted the Agenda 2063: The Africa We Want– a vision for a prosperous Africa based on inclusive growth and sustainable development. One of the defining features of this agenda is the structural transformation of African economies towards achieving shared growth, decent jobs and economic opportunities for all. So far, the structural transformation that shifts productive resources from agriculture and mining to manufacturing – which has helped many countries achieve greater prosperity – has bypassed most African countries. According to a recent International Monetary Fund report, the limited structural transformation in Africa has not translated into more jobs, because the manufacturing sector itself requires extensive reform. Therefore, what Africa needs is a manufacturing renaissance, with more local value-addition that would create more and better-paid jobs, and contribute to fulfilling the aspirations of the Agenda 2063. It could make African countries become more resilient to economic shocks and less dependent on natural resource exports. Africa can achieve this ambitious goal if it taps into available opportunities, while mitigating the challenges it faces. There are already several positive signs. Overseas Development Institute datashow that African manufacturing production, exports and Foreign Direct Investment (FDI) have developed positively over the last decade. Between 2005 and 2014, manufacturing production within Africa more than doubled from $73 billion to $157 billion, growing 3.5% annually in real terms. Some countries, such as Uganda, Tanzania and Zambia, have achieved more than 5% annual growth in the recent past. Overall, sub-Saharan African manufacturing exports almost tripled between 2005 and 2015 to more than $140 billion. A reduced reliance on the traditional OECD market is also clearly
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visible, with China and India now absorbing a major portion of African exports. In addition, intra-African trade is rising much faster than in the past. FDI in African manufacturing is increasing. Moreover, investment from other parts of Africa is now a significant source of FDI – representing a quarter of all FDI in Mozambique and Tanzania and more than 40% in Rwanda. However, despite the overall increase in manufacturing, its share of GDP has remained subdued, hovering consistently around 10% in the past decade. Investment in infrastructure, from public, private, domestic and foreign sources, remains too low. There has been a significant effort to bridge the infrastructure gap, but annual investment needs in these sectors amount to approximately $90 billion per year for a decade. Africa is enjoying a so-called demographic dividend – whereby fertility rates are falling, so the workforce is growing more rapidly than the population dependent on it, freeing up resources. This has the potential to transform African manufacturing. According to The Economist, more than 80 million jobs are likely to relocate out of China due to growing wages. However, several Asian countries, where wages are still lower than in many African countries (for example in Bangladesh, Cambodia, Lao PDR, Nepal and Vietnam), can compete to bring these jobs to their countries. At present, market access policies appear to favour African countries. Many benefit from preferential market access, such as the Everything but Arms Initiative of the European Union and the African Growth and Opportunity Act of the US. However, countries have to start taking full advantage of these opportunities, since they might not be extended for an unlimited time. But many African producers still struggle to meet the regulatory requirements and standards necessary to enter overseas markets. Countries might benefit from tariff-free continued on Page 22
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DEVELOPMENTS
MAKING BETTER BATTERIES South Korea’s Ulsan National Institute of Science and Technology (UNIST) has made a surprising discovery: Making better batteries via real-time TEM observation. Lithium-sulfur (Li-S) batteries, which employ sulphur as cathode and metallic lithium as anode materials, have been widely nominated as one of the most promising next-generation electrochemical storage systems due to its low cost and high theoretical capacity. However, dissolution of its lithiated product (lithium polysulfides) into the electrolyte limits the practical application of lithium sulphur batteries, eventually resulting in poor cycle performance and other drawbacks, such as rapid capacity fading. A recent study, affiliated with UNIST has made a surprising discovery that could fix this problem. In the study, published in the July 27th issue of the Journal of the American Chemical Society (JACS), the research team demonstrated that sulphur particles can be hermetically encapsulated by leveraging on the unique properties of two-dimensional materials, such as molybdenum disuphide (MoS). This breakthrough has been led by Professor Hyun-Wook Lee in the School of Energy and Chemical Engineering at UNIST in collaboration with a research team, based in Singapore. The MoS coating helps prevent the leakage and sublimation of sulphur under high vacuum environment, but there has been little in situ transmission electron microscopy (TEM) observation and understanding of this new material within the batteries in Singapore. To evaluate the volume expansion of MoS2-encapsulated hollow sulfur spheres, Professor Lee and his team carried out in situ TEM study of the sulphur lithiation process in the study. “Singapore currently lacks in situ TEM specialists,” says
Professor Lee, one of very few in situ TEM specialists in the world. “Our results provide valuable insight into the lithiation chemistry of sulphur at the nanoscale.” Transmission electron microscopy (TEM) is an imaging technique that permits direct investigation of the intimate structural details of a wide variety of nanomaterials, especially carbon based nanomaterials, including graphene. They are costly, large, cumbersome instruments that require a significant amount of training and specialized skill. This hinders the real-time in situ observation of the charge-discharge cycle of Li-S batteries. Professor Lee became an expert in this field after the first exposure to TEM during his time at KAIST. At Stanford University, as a postdoctoral fellow, he worked night and day, wrestling with TEM. Those experiences have enabled him to successfully work with and meet demands of lithium-ion battery market for building better batteries “TEM is an impressively powerful microscopic tool that exists today, capable of producing high-resolution, detailed images one nanometer in size,” says Professor Lee. “My experience in dealing with TEM at both KAIST and Stanford University have guided and nourished me to become an in situ TEM expert.” In 2016, Professor Hyun-Wook Lee joined the faculty of UNIST as an Assistant Professor in the School of Energy and Chemical Engineering with research and teaching focus on better materials for electrochemical energy storage and in situ transmission electron microscopy studies on battery electrodes. Professor Lee received his B.S. in Advanced Materials Engineering from Sejong University in 2007. He received his Masters of Science and Ph. D. in Materials Science and Engineering from Korea Advanced Institute of Science and Technology (KAIST) in 2009 and 2012. Prior to joining UNIST, he was a Postdoctoral Research fellow at Stanford Unviersity, California, United States from 2012 to 2015. His research interests include rechargeable batteries, synthesis of nanosised materials, and in situ/ operando TEM studies. Professor Hyun-Wook Lee in the School of Energy and Chemical Engineering at UNIST.
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THE SMART FACTORY
Asia Manufacturing News
September/October 2017
BOGE SHAPES THE FUTURE OF INDUSTRY 4.0 BOGE Compressors has made it a development task to pave the way for the fourth industrial revolution in compressed air technology. In the Smart Factory of the future, compressed air technologies automatically communicate with connected peripheral equipment. The foundation for this is laid down in the self-describing communication protocol OPC Unified Architectures. In cooperation with users, the Bielefeld family company is developing standards for intelligent component networking. The goal is to ensure that the system adapts itself to the requirements and operates with maximum energy efficiency. New components should also simply be able to integrate into the system by “Plug-and-Pressure”. “The intelligent networking of compressed air generators and consumers of compressed air opens up a wide range of opportunities to monitor, control and optimize the entire system topology”, says Peter Boldt, Head of Development at BOGE. As one of the first manufacturers of compressed air solutions, BOGE is working on an integrated networking approach which takes the process technologies connected to compressed air into consideration. “The communication protocol from OPC Unified Architectures (OPC UA) is, as an open standard interface for Industry 4.0 applications, one of the most promising solutions in Europe”, says Peter Boldt. In contrast to the usual market and manufacturer-specific bus protocols, OPC UA offers the possibility of establishing a vendor-neutral standard. The plant technology automatically undertakes the technical configuration to adjust the defined parameters to the demand-oriented design for the production of compressed air. An easy commissioning of complex compressed air systems and flexible reconfiguration are benefits of the Smart Factory. This is opening up new potential for users and plant designers to save energy. BOGE has laid the technological foundation for intelligent system networking with the top cluster ‘it’s OWL’ of the German Federal Ministry of Education and Research (BMBF). Since 2016, BOGE developers, together with manufacturers and users of consumables, have been working on the development of a future-oriented networking standard.
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SUBHEADING
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September/October 2017
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ANALYSIS continued from Page 16
4 WAYS AFRICA CAN ACHIEVE A MANUFACTURING RENAISSANCE market access, but non-tariff barriers – such as health, safety and environment related standards – stop producers from these countries from entering new markets. Improvements in the business environment – as measured by the World Bank’s Doing Business Report – are clearly visible in several African countries. This includes least developed countries (LDCs), such as Malawi, Rwanda and Tanzania, with others such as Ethiopia and Uganda following suit. But since countries are competing to attract investment, African countries can be overtaken by faster-moving reformers. Only one African country, Kenya, featured in the top 10 countries for improving their business environment, according to the 2017 Doing Business Report. These challenges can be overcome and an African manufacturing renaissance is within reach. But more needs to be done to embrace an agenda of enhancing its global competitiveness. Institutions, infrastructure, human capital and technology all need to be addressed. Most African countries tend to rank below the global average on the Worldwide Governance Indicators. Indicators such as political stability, governance effectiveness, rule of law and regulatory quality are important prerequisites to developing a sustainable manufacturing sector. While institutional improvement takes time, African countries have to act quickly by using the available international support. The Enhanced Integrated Framework for the LDCs, for example, contributes to enhancing trade and investment-related institutional capacities. However, a transformative shift requires both political will and the ability to leverage the existing support. Better infrastructure is key, not least because a reduction in trade costs would help African manufacturers integrate into global and regional value chains. Infrastructure deficits – both
within the continent and within individual countries – are too wide to be met only through public funding, although funding is not the only issue here. Many emerging economies have successfully used “blended finance” for their infrastructure needs, where investments are often lumpy and the gestation period is high. Africa can consider using this type of finance to close the gap. Investment in human capital, particularly in higher education and training, not only helps African countries excel in manufacturing production, but also to move up the value chain. The production of fairly low-tech processing of agriculture goods, textile and leather goods may help towards poverty alleviation but will not create a permanent dent on poverty. Therefore, the efforts made so far in this area need to be redoubled. Finally, technology is a key driver of competitiveness, where African countries lag far behind their South Asian counterparts. Data is limited but suggest African countries spend less than 0.4% of GDP on research and development; compared with the south and west Asian average of 0.7%; and a global average of 1.7%. It is not a new argument that these four pillars of institutions, infrastructure, human capital and technology, will drive manufacturing-led growth in Africa. On the contrary, these elements have been included by the World Economic Forum in its competitiveness analyses and are well embedded in the Agenda 2063 – which was carefully drafted, adopted and owned by the Heads of States of the African Union as a blueprint for accelerated development and technological progress of Africa. The only missing piece of the puzzle to realise these aspirations is the political will to deliver.
According to The Economist, more than 80 million jobs are likely to relocate out of China due to growing wages.
continued from Page 7
REPRESENTING THE DRIVERS OF ECONOMIC GROWTH In your opinion, is regulations hard to monitor? Why? Non-English language regulations require constant monitoring and vetting for importance to clients. We offer regular FDA Watch services to a number of global food, pharmaceutical and animal health companies. Our regular involvement in local domestic industry associations also gives us opportunity to participate in regulatory drafting, consultation and bringing client perspectives and international best practice to the attention of the regulators.
The importing company must have an import license as well as product registration with the FDA, and the FDA will not accept an application for a product with a trademark that is identical to other products on the Thai market unless those products have the same manufacturer, and the manufacturer has authorized the importer to use and sell the product. Non-FDA-registered products are thus, logically, IP-infringing products, which our firm helps to combat through a variety of enforcement tactics.
Are there products which go under the radar, so to speak? Where do these products come from? In the food and pharmaceutical sectors, parallel imports from other parts of Asia are common, though they are technically not permitted.
What is the consequence for companies who break the rules? Across our jurisdictions in Southeast Asia, regulatory non-compliance can result in fines and/or imprisonment depending on the violation and the type of product involved.
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DEVELOPMENTS
Asia Manufacturing News
September/October 2017
INTERNATIONAL COLLABORATION DEVELOPS
NEW APPROACH TO ADVANCED SENSOR AND ENERGY HARVESTING DEVICES Nagoya, Japan － Many next-generation electronic and electro-mechanical device technologies hinge on the development of ferroelectric materials. The unusual crystal structures of these materials have regions in their lattice, or domains, that behave like molecular switches. The alignment of a domain can be toggled by an electric field, which changes the position of atoms in the crystal and switches the polarisation direction. These crystals are typically grown on supporting substrates that help to define and organize the behaviour of domains. Control over the switching of domains when making crystals of ferroelectric materials is essential for any future applications. Now an international team by Nagoya University has developed a new way of controlling the domain structure of ferroelectric materials, which could accelerate development of future electronic and electro-mechanical devices. “We grew lead zirconate titanate films on different substrate types to induce different kinds of physical strain, and then selectively etched parts of the films to create nanorods,” says lead author Tomoaki Yamada. “The domain structure of the nanorods was almost completely flipped compared with [that of] the thin film.” Lead zirconate titanate is a common type of ferroelectric material, which switches based on the movement of trapped lead atoms between two stable positions in the crystal lattice. Parts of the film were deliberately removed to leave freestanding rods on the substrates. The team then used synchrotron X-ray radiation to probe the domain structure of
individual rods. The contact area of the rods with the substrate was greatly reduced and the domain properties were influenced more by the surrounding environment, which mixed up the domain structure. The team found that coating the rods with a metal could screen the effects of the air and they tended to recover the original domain structure, as determined by the substrate.
Charge screening in ferroelectric Pb(Zr,Ti)O3 nanorods was used to control their domain pattern. The c-domain fraction markedly increased with as the rod width decreased, while the a-domain formation prevailed by metallization of their sidewall. All the observed results could be explained by the depolarizing field, arising from the imperfect charge screening. This approach could be expanded to other low-dimensional nanoscale ferroelectric systems.
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THE INTERVIEW
THE INTERVIEW Nick Beckett Managing Partner, CMS Beijing Please give an overview of what your company does. Founded in 1999, with 71 offices in 40 countries, CMS is ranked third most global firm in the AmLaw 2016 Global Top 100. More than 4,500 legal professionals across the world work in sector-based teams and are trained in project management. CMS offers specialist, business-focused advice in law and tax matters to clients operating in complex business and constantly changing regulatory environments. CMS lawyers focus on their clients and on providing the best possible service. From major multinationals and mid-caps to enterprising start-ups, CMS provides the technical rigour, strategic excellence and long-term partnership to keep each client ahead whatever its chosen markets. CMS offers a wide range of expertise through its 19 practice area and sector groups, providing advice on local, national and international issues. Main areas of practice include: banking and finance; commercial; competition and EU; consumer products; corporate; dispute resolution; employment and pensions; energy; hotels and leisure; infrastructure and project finance; insurance and funds; intellectual property; life sciences and healthcare; private equity; public procurement; real estate and construction; tax; technology, media and telecommunications.
How far is your company’s reach and how far across ASEAN are you connected? In Asia, we have four offices in Beijing, Shanghai, Hong Kong and Singapore. Our team of 15 partners and 85 legal professionals provide a full service offering on the ground, with international expertise, in English, French, German and other European languages, as well as Mandarin, Cantonese, Japanese, Korean, Malay, Sinhalese and Tamil. We are also one of only a few law firms in the region providing both civil and common law advice with qualified lawyers from the UK, Germany, China, Hong Kong, Singapore, US, Australia, New Zealand and Malaysia. Through our established collaborations and associations in China, Hong Kong and Singapore, including the Lifesciences Asia-Pacific Network (LAN), we are able to work alongside local law firms to deliver both international and local capability. The Lifesciences Asia-Pacific Network (LAN) understands that Asia-Pacific is a strategically important region with a wealth of opportunities for clients. Through LAN, we help clients navigate the regulatory hurdles, capitalise on investments and manage risk. LAN brings together seven leading law firms, including Corrs Chambers Westgarth in Australia, CMS in China, Khaitan & Co in India, Assegaf Hamzah & Partners in Indonesia, Yulchon in
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Korea, Atsumi & Sakai in Japan, Rajah & Tann in Singapore and Tilleke & Gibbins in Thailand and Vietnam. The network, which has been highly commended by the FT Asia-Pacific Innovative Lawyers Report, also works closely with other local law firms in countries including Malaysia and the Philippines. Together, we provide high-quality legal services to meet the needs of companies in this sector while delivering commercially valuable local insights. This is because we have: • Coverage: more Lifesciences focused experts across key jurisdictions than any one firm, with more than 2000 lawyers operating from 23 offices in Australia, China, India, Indonesia, Japan, Korea, Singapore, Thailand and Vietnam who understand the local culture and can provide local knowledge. • Technical experts: our team members have technical qualifications in chemistry, pharmacology, biotechnology and biomedical science and are also supported by numerous
Asia Manufacturing News
scientists, pharmacists and food technicians to provide specialist understanding. • Value for money: an ability to deliver expert and commercially focused advice at local and competitive rates. • Cross-border coordination: providing a ‘one-stop shop’ for all clients legal needs.
How has your company’s business and the market evolved over the last few years? Please elaborate. CMS has significantly evolved over the last few years with us becoming the first international law firm in 2016 to open an office in Iran and also this year successfully completing the largest ever UK merger in the legal sector with Nabarro and Olswang. The merger has had a significant impact on our presence in Asia with the welcome addition of CMS Singapore to our existing offering in Beijing, Shanghai and Hong Kong. In addition to our expansion in Europe and Asia, we have also expanded in LATAM, specifically Chile, Colombia and Peru, enhancing our established offices in Brazil and Mexico.
What are your thoughts about the current business conditions of the nutraceuticals industry? In general, business conditions for the nutraceuticals industry are good because China has a sizeable market with increasing demand for health products and its regulatory regime is maturing. However, entities should also be aware of the strict regulatory regime in this industry.
In general, business conditions for the nutraceuticals industry are good because China has a sizeable market with increasing demand for health products and its regulatory regime is maturing. The nutraceuticals market is developing fast in China. The value of sales in the nutraceuticals market is estimated to be around 200 billion RMB each year and this is likely to increase even further in line with China’s rapidly growing economy, as Chinese consumers are becoming more aware of health foods and they have the disposable income to spend. Meanwhile, the regulatory regime for nutraceuticals has
September/October 2017
been greatly improved in recent years. The Food Safety Law was revised in 2015 which implements a clearer and stricter regulatory regime for the whole food industry, including the nutraceutical industry. Several reforms have also been implemented to improve the regulatory environment of nutraceutical food, especially reform of the registration regime of new nutraceutical products. The registration regime is now more scientific and efficient which allows new products to be marketed in a shorter period. In addition to the promising market and improved regulations, China is also implementing a strict administrative regime on food safety with serious punishments. Parties involved in nutraceuticals in China, especially the manufacturers and suppliers, should take care to comply with all applicable laws and regulations. For example, nutraceutical advertisement is subject to tight control – the claims that are allowed to be made are limited as well as the manner in which it is made.
What is the value of Vitafoods Asia 2017 to your company? Vitafoods Asia is an opportunity for CMS to further strengthen its relationships with the key players in the nutraceutical’s industry in Asia. It is also an opportunity to better become educated and informed on the key issues affecting the industry our clients are operating in and to discuss these issues with them in an open forum. In addition, it is an opportunity for CMS to raise awareness of its global services, particularly in Asia.
Where are some of the future areas of growth for your company? As a global law firm, we are always looking to grow into new markets where our clients are operating and for us to help make a difference to their business. CMS professionals act as trusted partners, managing global projects and transactions wherever clients need us. We are also focused on further growing our position as a leading global law firm investing in technology that will help us improve our operational efficiency and client service.
I understand that your primary focus is on regulations? What does this involve? As a full service law firm, we support clients on all their legal and commercial needs, including regulation. Many of our lawyers have worked in-house providing them with richer experience and understanding of the sectors our clients do business in. We are also active members of many of the key industry bodies enabling us to not only share news and developments impacting the industry and business of our clients in a timely manner, but a place where we can also take a role in shaping and drafting policies to ensure our client’s needs are met, as they operate in highly regulated and governed sectors.
In your opinion, are regulations hard to monitor? Why? Following developments in the regulatory regime is not simple in China.
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THE INTERVIEW A key reason which makes monitoring regulations hard is that in China, authorities on different levels have the right to issue regulations. Beside the laws and regulations issued by the national central authorities, such as the Standing Committee of the National People’s Congress which issued the Food Safety Law, specific administrative authorities (such as the governing authorities for food, agricultural products etc.) also have the right to issue its own regulations for the affairs within its administrative competency. For example, the China Food and Drug Administration issued the Administrative Measures for the Registration and Recording of Dietary Supplements. In addition, local provincial government and administrative authorities may also issue their local regulations. Meanwhile, different authorities at the same level may also issue regulations on the same issue from different administrative perspectives. For example, several authorities oversee the labelling of imported GMO food, including the Ministry of Agriculture which issued the Labelling of Agricultural Genetically Modified Organisms. The State Administration of Quality Supervision, Inspection & Quarantine has also issued the Measures on the Supervision and Administration of Inspection of Labels for Import and Export Prepacked Food.
Much time and effort is required to ensure important changes do not go under the radar. What is more, new rules may take shape in many other forms including notices, opinions and even instructions in the authorities’ internal meetings or external meetings with enterprises. Sometimes, the speech given by an official of the authorities may also have governing power. Currently, there is no centralised system to monitor the regulations issued by all of above authorities in all its forms. This means much time and effort is required to ensure important changes do not go under the radar. It is easy to see that closely monitoring regulations is a daunting task but once one becomes familiar with the competency of numerous authorities in China and become accustomed to their way of promulgating new rules, it becomes a much more manageable task.
What is the consequence for companies who break the rules? The liability incurred by companies for non-compliance will differ depending on what particular rule was violated and the seriousness of violation. Generally speaking, the revision of the Food Safety Law in
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It is possible that the regulatory regime on certain issues such as new business models or products is vague or even missing. 2015 has set the tone for more serious consequences. Where safety of the consumer is at risk, the food producer or trader will be expected to immediately take measures to rectify the situation such as food recall. The authorities also have the power to confiscate illegal proceeds, illegally produced food and its equipment, fines are issued as a multiple of the value of the food, the relevant licences may be revoked and production ordered to stop. For very grave violations, there may be criminal liability.
Any other insights to share with readers? China is a quickly developing country where new business models or products may be introduced and developed everyday but the regulatory regime of Chinese authorities may lag behind these developments. It is possible that the regulatory regime on certain issues such as new business models or products is vague or even missing. This doesn’t mean that the potential regulations can be side-lined. One topical issue in China is the prevalent use of cross-border e-commerce in food distribution processes, a relatively new type of business model. On the one hand, it brings great economic development in China and on the other hand, such channels may be used to bypass regulatory requirements on food, such as the registration requirement for imported health food and infant milk powder. The Chinese authorities appear to be indecisive as to the balance to strike between developing the economy and strengthening administration. For now, businesses can still enjoy low tariffs and exemption from registration requirements but this is expected to be temporary. Considering the Chinese government’s determination to build a safe food environment for Chinese citizens, if there is any safety issue caused by the food imported via cross-border e-commerce, liabilities as set out in the current regulatory regime may be incurred. Overall, the waves of new measures and regulations show that the Chinese authorities are determined to improve food safety which has created a labyrinth of rules. If your business is concerned with complex regulatory regimes, engaging a local expert will be worthwhile and we will be pleased to provide practical advice for your case.
ANALYSIS
Asia Manufacturing News
September/October 2017
MADE IN CHINA 2025
AND WHAT IT MEANS FOR YOUR SUPPLY CHAIN A tidal wave of evolution is tumbling toward the world’s largest manufacturing hub. Some supply chain professionals who choose to saddle up and ride the wave may hope to take advantage of the changes. While others who fail to adapt may find themselves underwater. What is this colossal force that promises to be so disruptive? The answer is Made in China 2025, a national Chinese government initiative to transform China into a world competitor in advanced manufacturing. But you might be thinking, isn’t China already known as the “factory of the world”? But factories aren’t the same as they used to be 20 years ago—or even 5 years ago. China’s factories will need to implement and invent new technologies to remain competitive on the world stage. For importers manufacturing in China, it can be hard to pinpoint what effect such developments will have on their supply chains. And because of China’s economic might, every consumer has a stake in China’s economic decisions as well. More than ever, it’s time to let go of misconceptions that China’s factories can only produce low quality goods (related: 5 Misconceptions of QC in China [eBook]). Let’s dive into the specifics of China’s goals, the visible developments that are already taking shape and what it means for your supply chain.
Why China needs Made in China 2025 Many importers source in Asia to take advantage of low labour costs and improve their profit margins. Low labour costs were certainly a driving factor in China’s manufacturing boom over the past few decades. But new factors are changing the nature of China’s manufacturing sector today, including: • Rising manufacturing wages: wages in China’s manufacturing sector increased at an average annual rate of 13.3 percent from 2000 to 2015 • Insufficient productivity growth: average 8.6 percent growth from 1996 to 2015 • Slowing growth of migrant workers: declining since 2010 from 5.4 percent to only 1.5 percent growth in 2016
The biggest change in China has been its steady rise in labour costs in comparison to developing countries in Southeast Asia. Developing countries in Southeast Asia with low labour costs are increasingly poaching manufacturing activity from China, just as China did from the developed world years before. This is most true of highly labour-intensive industries like garment manufacturing, since labour costs can cut into a more sizable portion of these importers’ margins. China can’t turn back time and re-join countries with competitive labour costs like Bangladesh, Cambodia or Vietnam. As China’s working age population has already started to shrink, there’s no longer a surplus of workers willing to accept lower wages. Previously, if a worker was unhappy with their job, there were probably 10 more migrant workers waiting to take their place. But growth of migrant workers in China has been steadily declining since 2010. China’s citizens increasingly expect wages that reflect a higher standard of living than those offered in less-developed countries.
China caught between the developing and developed world In moving up the value chain, China will need to compete with developed countries, rather than just developing countries. Economically advanced countries are already substantially more productive than China, and with automation, are becoming even more productive. Many Chinese companies have yet to fully implement industrial robots in production and aren’t ready to adopt smart manufacturing technology. Meanwhile, developed countries are already optimizing automated production through Industry 4.0 technologies, the Industrial Internet of Things (IIoT) and artificial intelligence.
• Shrinking labour force: working age population expected to shrink by one third or 212 million, by 2050
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ANALYSIS GDP per capita essentially measures total goods and services output per each member of the workforce. Though China’s average productivity growth of 8.6 percent from 1996 to 2015 is much higher than the annual 1-2 percent productivity growth of most developed countries, China has a lot more ground to catch up.
have yet to develop or patent such technology.
But by 2025, China hopes to raise the overall domestic content of core components and materials to 70 percent. Some notable targets for control of the Chinese market include domestic production by 2025 of: • 80 percent of renewable energy equipment Essentially, China’s workers on average are providing less economic value than their counterparts in the developed world. Productivity can improve with better equipment, training and education of workers. Previously, China’s wages were low enough to offset the longer time it might require workers to complete production. And this might still be the case for some products (related: 3 Reasons China Remains Competitive for Importers). But if China wants to be a direct competitor in advanced manufacturing, productivity will need to improve.
The Made in China 2025 Goals Made in China 2025 was announced in 2015 as a ten-year initiative, but it’s only stage one of a larger three-part strategy. Given the amount of technological catch-up and economic development required, China doesn’t expect to be a true leader in advanced manufacturing until 2049. In order to increase value-added manufacturing, Made in China 2025 will focus on promoting breakthroughs in 10 “targeted key sectors”, including: 1. Aviation 2. Agricultural machinery 3. Numerical control tools and robotics 4. High-tech maritime equipment 5. Railway transportation equipment 6. Energy-saving and new energy vehicles 7. Medical devices 8. Information technology 9. Power equipment 10. New materials More than anything, the success of these industries and Made in China 2025 in general relies on technological advances, acquisition and innovation.
Reducing reliance on foreign technology While China is already manufacturing in all of the key sectors, one of the main goals of Made in China 2025 is to minimise dependence on foreign markets and technology. Increasing the domestic production of core components and materials decreases the number of foreign inputs needed for production and adds value to China’s manufacturing. In the short-term, China will likely have to rely on foreign technologies in order to advance, since its own companies
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• 70 percent of industrial robots • 40 percent of mobile phone chips Part of improving domestic production involves encouraging original equipment manufacturers (OEMs) to design and market their own products and brands. China’s domestic brands have largely failed to make a global splash up until now. Of Forbes’ World’s Best Brands list of 2017, only the Chinese smartphone maker Huawei made the top 100, ranking modestly at 88th place. It’s not a coincidence that Huawei was also the first Chinese company to develop their own semiconductor chip. Smartphones provide a helpful case study of component supply chains. In 2011, China produced 70 percent of the world’s smartphones. But as of 2014, 91 percent of China’s demand for semiconductors, a core component of smartphones, was met by foreign imports. And your iPhone’s labelling probably states it was “Designed by Apple in California” and “Assembled in China”. In the future, rather than assembling the products of Western brands with components sourced from multiple locations, China is aiming to develop these products from the ground-up.
Implementation of Made in China 2025 Like much of China’s government and economy, Made in China 2025 is an initiative planned and controlled by the state. And like most government initiatives, funds must be allocated to drive implementation.
Funding sources While the United States’ own Smart Manufacturing Innovation Institute receives equal funding from government and private sources, investment for Made in China 2025 largely comes from the public sector. Chinese media reports estimate Made in China 2025 benefits from nearly 800 state-guided funds with a total value of RMB 2.2 trillion (329.7 billion USD).
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Some notable funds include: • 300 billion RMB (44.8 billion USD) for the Made in China 2025 Strategic Cooperation Agreement • 139 billion RMB (20.2 billion USD) for the National Integrated Circuit Fund • 40 billion RMB (6 billion USD) for the National Emerging Industries Investment Guiding Fund Where is this money going to? Funding goes towards providing access to cheap capital for domestic companies, developing 40 manufacturing innovation centres and supporting research and development.
Mergers and acquisitions To jumpstart its technological catch-up with advanced countries, China has also encouraged mergers and acquisitions (M&A) in targeted sectors. In 2016, M&A in the industrials sector made up 51 percent of all outbound M&A, up from an average of 26 percent from 2005-2010. Some notable mergers and acquisitions in 2016 include: • HNA Group bought Ingram Micro, an American IT distributor, for $6 billion • Haier Group bought General Electric’s home appliance division for $5.4 billion • ChemChina bought KraussMaffei Group, a German industrial machinery maker, for $1 billion To develop new equipment and technologies, many Chinese companies would need to start from scratch. But Chinese companies have been able to jump ahead by acquiring already established high-end technologies through M&A. They can also gain access to customer bases and distribution networks that might otherwise take decades to build organically. Haier Group, for instance, has only a 1.1 percent market share in the U.S. after almost two decades since it first set up an American factory in 1999.
Addressing the skills gap For large, sophisticated Chinese manufacturing firms, mergers and acquisitions provide an avenue to acquire technical knowledge and capabilities. But it will be a tougher challenge for smaller firms to make advancements in technology and productivity.
Unlike low-skilled industries that require little previous knowledge and training, high-tech and smart manufacturing requires advanced skills. The share of tertiary educated workers in China’s manufacturing sector is expected to double from 10 percent
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in 2010 to more than 20 percent in 2030. But it’s also predicted that by 2020, China will require 24 million more vocational and tertiary educated workers than the country is projected to supply. To solve the skills gap, companies might have to fill high-skilled jobs with lower-skilled workers, which could reduce productivity and result in lower quality products. Or they might have to delay plans to expand or innovate if they don’t have the workforce to support advancements. Both factors could limit the success of smaller firms in China.
What does Made in China 2025 mean for importers? Will Made in China 2025 have an effect on your importing business? Is this initiative all talk and no action? If you’re manufacturing in one of the targeted key sectors, you’ll probably see the most sizable changes in your industry. But as the largest exporter of manufactured goods in the world, developments in China’s manufacturing sector will likely have a trickle-down effect on most importers.
Improved manufacturing capabilities and quality for Chinese manufacturers Improving the quality of manufactured products is undoubtedly part of China’s move up the value chain. Made in China 2025 targets mention reaching “advanced international levels of quality” for a number of products, including new energy vehicles (NEVs), aviation equipment, advanced rail transit equipment, computers and servers. China’s growing middle class will also drive quality improvements in China’s manufacturing sector. Economists estimate that China’s middle class will make up more than a third of its population by 2030. With increased disposable income and purchasing power, they’ll increasingly demand high-end, quality products. To meet this demand, Chinese producers will need to improve their quality standards in order to compete with internationally renowned brands recognized for their quality.
Increased competition in key sectors There will be a continued shift in manufactured products for export as new competitors enter high technology markets. As of 2014, China’s high technology exports had already surpassed low technology exports as a share of total manufactured goods exported. This doesn’t mean that China’s industries in other manufacturing sectors will disappear. With well-developed supply chains for a number of lower-tech products, China will still likely retain a sizable share of production in coming years. After all, as of 2013, China was still producing 60 percent of the world’s footwear and 43 percent of its clothing. But these sectors will likely receive less government funding and shrink relative to others over time. If you’re an importer manufacturing in one of the key sectors of Made in China 2025, you’ll likely face increased competition in domestic markets as Chinese brands globalise. There are valid concerns that overcapacity in the key sectors will lead to artificially low prices on the global market. Many Western observers fear may come when Western companies aren’t able to compete with state-subsidised Chinese companies in China, let alone globally.
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ANALYSIS Opportunities for cooperation That’s not to say that there isn’t room for cooperation with Chinese factories. Notable private partnerships between Chinese and foreign companies can help advance Chinese factories.
Tool & Tool Group (QCMT&T) has built a complete Industry 4.0 production line with the help of Bosch Rexroth, a German engineering firm. Especially in the short term, as China needs to gain expertise and knowledge in smart manufacturing techniques, there will be room for Western companies to partner with Chinese factories. By engaging in the early stages of Made in China 2025, Western companies can help ensure implementation of international standards and improve market access.
Conclusion
For example, Huawei has partnered with General Electric and KUKA Robotics to develop IIoT solutions to enhance productivity. Wasion, an advanced energy metering product supplier, is collaborating with Rethink Robotics, a U.S. company, to implement robots on its assembly line. And Qinchuan Machine
Chinese manufacturers are certainly already capable of producing a range of both high and low-quality products (related: You’re Wrong: Chinese Factories Don’t Only Make Poor Quality Products). There’s a stark contrast between the targeted key sectors of Made in China 2025 and lower-cost consumer products like garments or children’s toys. No matter your product, you’ll need to set realistic quality and price expectations to successfully import from China. Many importers found a way to adjust to and benefit from the challenges and opportunities of the first wave of China’s manufacturing boom. As manufacturing capabilities advance in China with Made in China 2025, make sure you’re also prepared for China’s move up the value chain.
PHOTOSENSITIVE PEROVSKITES CHANGES SHAPE WHEN EXPOSED TO LIGHT A crystalline material that changes shape in response to light could form the heart of novel light-activated devices. Perovskite crystals have received a lot of attention for their efficiency at converting sunlight into electricity, but new work by scientists at King Abdullah University of Science and Technology (KAUST), Saudi Arabia, shows their potential uses extend far beyond the light-harvesting layer of solar panels. Photostriction is the property of certain materials to undergo a change in internal strain, and therefore shape, with exposure to light.
Organic photostrictive materials offer the greatest shape change so far reported in response to light—a parameter known as their photostrictive coefficient—but their response is slow and unstable under ambient conditions. KAUST electrical engineer Jr-Hau He and his colleagues have looked for photostriction in a new family of materials, the perovskites. To extensively test the material’s photostriction capabilities, the team developed a new method. They used Raman spectroscopy, which probes the molecular vibrations within the structure. When bathed in light, photostriction alters the internal strain in the material, which then shifts the internal pattern of vibrations. By measuring the shift in the Raman signal when the material was placed under mechanical pressure, the team could calibrate the technique and so use it to quantify the effect of photostriction. The perovskite material proved to have a significant photostriction coefficient of 1.25%. The researchers also showed that the perovskite’s photostriction was partly due to the photovoltaic effect—the phenomenon at the heart of most solar cell operation. The spontaneous generation of positive and negative charges when the perovskite is bathed in light polarises the material, which induces a movement in the ions the material is made from.
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ASIA MANUFACTURING NEWS • FEBRUARY 2014
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