High and Low

intelligent and automatic: Robots took over increasingly complex tasks at high wage locations.

With the advance of manufacturing automation since the 1980s, some industry sectors have approached this theoretical state. Robots took over increasingly complex tasks at high wage locations. But automation has a downside: It requires a major investment at the outset. Moreover, with their high flexibility, humans are far superior to fully automatic machines programmed for a specific activity if the work involves the manufacture of just a few products – or if they are extremely customized. That’s why highly labor-intensive activities have been moved to low-wage locations as globalization has progressed – from the United States to Mexico, from Western to Eastern Europe and more recently from Chinese coastal cities to the hinter- lands. This migration has long seemed unstoppable. No company with competitors could afford to turn its back on the cost advantages that relocation offered.

Back to the Future

Then “Industry 4.0” came along. It was the vision of completely networked and highly flexible manufacturing. It was supposed to make automation profitable all the way down to a single batch from a single tool. Promoted for the first time at the Hannover Messe in 2011, Industry 4.0 was not only designed to improve the competitiveness of German industry – it was supposed to promote “reshoring”, that is, the re-transfer of industrial production back to high wage countries. Nearly a decade later, it’s reasonable to ask whether the concept has worked. Figures from the World Bank are unequivocal: In 2010, the production of goods accounted for a 20 percent share of Germany’s gross domestic product. The figure for 2019 was 19 percent. In the United States, where similar automation concepts were advanced as the “Industrial Internet,” the manufacturing share of its gross domestic product fell from 12 to 11 percent. Fraunhofer researcher Jürgen Jasperneite cites some important reasons for the sobering interim results: “You simply can’t buy this kind of highly adaptable equipment yet. In addition, I have always wondered what products definitely require this capability.” The criticism comes from an authoritative source: Jasperneite launched the Smart Factory OWL in Lemgo in 2016 and is considered a leading expert on industrial automation. He sees the merger of information, communication and production technology as an ongoing process. “There has been no huge leap in productivity due to Industry 4.0 but rather constant improvement as new technologies are systematically implemented.”