June 4, 2015
Digitization has transformed services over the past decade. The Internet has reshaped banking, while e-commerce has rendered yesterday’s retail sector all but unrecognizable. Yet even as services continue to evolve, the focus will soon shift to manufacturing and the unprecedented changes being created by the Internet of Things (IoT).
It sounds obvious, but bears repeating: the IoT is all about manufactured objects. That’s good for Europe, where industry accounts for about 15% of economic performance. Europe’s strong foundation in manufacturing provides a competitive advantage and creates huge opportunities for European companies. Enabled by the data-driven manufacturing of Industry 4.0, Europe’s strong industrial sector should seize its chance to assume a leadership role in tomorrow’s digital economy.
What can European companies do to claim this role, and what should governments do to help them? While many approaches are possible, Europe should focus on the three layers at which Industry 4.0 will develop: devices, infrastructure, and applications.
First, the continent must accelerate efforts to make its devices smart. This means designing sensors into industrial machinery and household appliances, equipping them with operating systems and software, and connecting them to networks. This will generate enormous commercial value: a research report from BI Intelligence projects that efficiencies resulting from the IoT will add US$1.7 trillion to the global economy by 2019.
It will also produce collateral benefits. For example, smart equipment in a chemical factory could detect, in real time, the presence of polluted water, dust, exhaust gas, and other hazards, protecting employees’ health while preventing accidents and reducing waste. On smart power grids, equipment will analyse supply and demand, identifying imbalances and reporting them immediately to avert power failures.
Second, Europe must lead the development of global next-generation communications standards to create the digital infrastructure for Industry 4.0. Today, the 4G standards advocated by Europe are popular around the world. Yet as new communications connect people to things and things to each other, Europe will need to meet a surging demand for capacity and connections, many of them mobile.
Existing technologies simply are not up to the job. For that reason, Europe will begin moving towards adoption of 5G, a standard that can support 100 billion connections, user data rates as high as 10 Gbit/s, and an ultra-low latency of 1 millisecond.
That Europe should lead in developing 5G standards is only natural. It led the world in developing standards for 2G, 3G, and 4G mobile technologies. By forming organizations to drive 5G development, such as METIS and 5GPPP, it has taken the first steps toward establishing 5G leadership.
Huawei has invested heavily in 5G, and has actively participated in the EU’s 5G initiatives. Not long ago, we established the 5GVIA testbed in Munich, and in May announced the opening a new European Research Institute. Located in Leuven, Belgium, the Institute will coordinate the work of Huawei’s 18 R&D sites in eight European countries and will contribute to expanding 5G research and Horizon 2020 research objectives.
Third, European companies must collaborate at the application layer, where the real value of Industry 4.0 resides. They must hone their capability to create applications in automotive, energy, industrial machinery and equipment, and other verticals. The challenges are considerable, however, as user demand is constantly changing. Today, for example, most drivers trust the quality of European cars, but in the future will want to know if innovations such as assisted driving and adjustable insurance can make them even safer.
Such solutions can be created if, in its next round of development, Europe integrates innovative ideas and resources from a broader industry ecosystem. Auto manufacturers, for example, can work with ICT companies such as SAP to analyse the data transmitted to and from vehicles. Insurance carriers can apply statistical models to reduce the likelihood of accidents and ensure that drivers pay fair premiums. These cross-industry alliances should become the norm, and should include equipment manufacturers, ICT solutions providers, research institutes, and governments.
Once applications are developed, they can be brought to market globally. Many small and mid-sized European enterprises have exceptional technology but remain mostly local. By leveraging the right platforms and partners, they could acquire global scale.
Together, Industry 4.0 and the IoT will form a huge, complex ecosystem that relies on information made available in real time through broadband networks. Europe has the potential to bring that ecosystem one step closer by leading the next round of development. Realizing this potential will require unprecedented collaboration and openness, but the payoff will be worth the effort, both for the new Digital Europe and for all the countries that do business with it.