WEF: These 5 sectors lead digital transformation in manufacturing

The industries in the bottom five are all dominated by SMEs

Employees work at a semiconductor production facility for Renesas Electronics during a government-organised tour for journalists in Beijing. AP

Semiconductors, electronics, pharmaceuticals, energy and chemicals, and logistics are the five sectors leading the digital transformation of the manufacturing industry, a report by World Economic Forum showed.

The top three industries are primarily dominated by multinational conglomerates and are ahead of small and medium-sized enterprise-dominated sectors in the pace of digitalisation, the WEF said in its “Manufacturing transformation insights report 2022".

Through this report, we hope to revolutionise the way by which the global manufacturing community approaches digital transformation

Jeremy Jurgens,
WEF’s managing director

The report, which was compiled in collaboration with Singapore’s Economic Development Board (EDB), offers new insights emerging from the WEF’s smart industry readiness index (Siri) initiative that aims to build the world’s largest data sets and benchmarks on the state of manufacturing globally.

However, despite their positions, the top three industries are not insulated from current business challenges such as value-chain disruptions, global chip shortage and industrial decarbonisation, the report found.

“These developments will reshape the global manufacturing landscape and companies from these leading sectors — as long-standing pioneers of innovation and adopters of new concepts and technologies — must confront these [challenges] proactively to redefine them into opportunities for all,” the WEF said.

Employees in protective gear work at the aseptic filling section at a laboratory belonging to pharmaceutical company AstraZeneca in Sweden. AFP

The report, which considered the current state of industrial transformation across different sectors, evaluated data from about 600 manufacturing companies in 30 countries.

Over the past three years, the logistics industry has made progress to claim fifth place on the list. It has evolved significantly due to the Covid-induced growth in online shopping and the emergence of e-commerce players globally as well as regionally.

“The emergence of e-commerce leaders such as Amazon, Alibaba and JD.com has compelled traditional logistics companies to become more agile, flexible and efficient … with Covid-19 further fuelling online shopping globally, digital transformation of the logistics industry is expected to accelerate in the coming years,” the report added.

It also suggested that more tailored approaches are required to better support industry transformation.

One of the key insights is that companies ahead of the digitalisation curve have focused significantly on plant/factory connectivity. It helped them to better leverage data to generate new insights and enable more real-time decision-making.

“Through this report, we hope to revolutionise the way by which the global manufacturing community approaches digital transformation … from one that is anecdote-based to one that relies on a standardised methodology and is supported by quantitative insights,” said Jeremy Jurgens, WEF’s managing director.

The industries in the bottom five have one thing in common — they are all dominated by SMEs, the report revealed.

It was attributed mainly to SMEs’ “intense short-term business pressures, limited expertise and tight resources” that hinder the adoption of new manufacturing processes and advanced technologies.

“The insights and real-life case studies presented in this report will provide public and private sector stakeholders with the ability to develop tailored interventions and uncover new opportunities that digital transformation can offer,” EDB chairman Beh Swan Gin said.

Over the past two years, most manufacturers have taken their first steps towards digitalisation in response to pandemic-related challenges.

Companies that started earlier are now progressing to the next level of integrating their digitised processes, the report said. In today’s digital economy, connectivity is fast joining automation as a key driver of success, it added.

A view of a chip on an electronic device at a shop in Brussels. Reuters

“Top companies acknowledge the importance of connectivity. Many have already established interoperable and secure networks within their production sites, where equipment, machinery and computer-based systems can interact and exchange information with few restrictions.”

A high level of diversity exists across various industry sectors and more tailored approaches are needed to better support industry transformation, the WEF report said.

Governments tend to apply “one-size-fits-all” approaches in supporting manufacturers on their digitalisation journeys, such as state-level subsidies for the adoption of new automation equipment or industry-led forums that study use cases of global companies.

“The impact and efficacy of such blanket interventions have been limited,” the WEF said.

Top five most digitally mature sectors in 2022

• Semiconductors
• Electronics
• Pharmaceuticals
• Energy and chemicals
• Logistics