Robots, robots, robots. That is probably what you conjure up if you try to imagine the factory of the future.
But robots – or automation – is only one way in which manufacturing is changing, according to a recent meeting of the Thematic Advisory Board for Pictet Asset Management’s SmartCity strategy.
Factories are also becoming modular and scalable, easier to service, troubleshoot and access, and interoperable – designed in such a way that the various tech interfaces can work seamlessly together. They also have to be sustainable, not only to adhere to increasingly stringent demands from governments and consumers, but also to ensure efficiency.
This is similar to the trends observed in smart cities and hence factories could be seen as “canaries in the coal mine” when it comes to the future of urban life. Smart factories also focus on reducing waste and energy consumption, aligning with the sustainability goals of smart cities. Efficient factories contribute to lower emissions and resource use in urban areas. These are all themes close to the heart of our SmartCity thematic strategy.
Companies are embracing the vision. German auto parts maker Schaeffler, for example, has outlined its plans to establish “smart factories”, including using digital tools to create 3D models of future facilities, fully networked operations to enable constant exchange of data, and an adaptable design that can easily be altered to manufacture new parts.https://www.schaeffler.com/en/media/stories/digitalization-stories/smart-factory/
This presents a huge growth opportunity for businesses which can help create such factories. The global industrial software market is forecast to reach USD355 billion by 2030, representing a compound annual growth rate (CAGR) of some 13.5 per cent (see chart).https://iot-analytics.com/industrial-software-market-landscape The operational technology, or hardware, sector is also expected to grow.
Global shifts in production – such as re-shoring to the US, near-shoring, or shifting from China to Vietnam or India – are leading to the creation of new factories, which in turn presents an opportunity for companies to embrace the latest technology.
As well as creating whole new factories, the Thematic Advisory Board also noted growing demand for upgrades of existing facilities – manual production being automated, and existing automated production being upgraded. New sustainability regulations are also prompting companies to install smart sensors and new software platforms to better monitor and manage their sustainability credentials.
Smart factories start with sensors which collect real-time information on temperature, pressure, speed and other parameters. The data is sent to control systems (known as programmable logic controllers, or PLCs, and distributed controlled systems, or DCS), which then use it to communicate with actuators – devices which can adjust machine behaviour, for example by starting a motor or opening a valve. The process links the digital world with the physical manufacturing. Above all that are higher level supervisory systems, software and business planning systems.
In industrial software, Thematic Advisory Board members noted increased market share for cloud vendors, and growing demand for electronic design automation (EDA) – systems which use computer-aided design to develop circuit boards and microprocessors.
The lines between IT, which traditionally focused on data, and operational technology (OT), which covered hardware and software, are becoming increasingly blurred. For example, companies are using python – an IT programming language – to programme PLCs.
The next step will be the development of virtual PLCs. Rather than standalone devices with dedicated hardware to manage industrial automation, this new breed of controllers run on standard computing hardware and emulate PLCs virtually – potentially while located some distance away from the actual factory. They could prove big disruptors for manufacturing and are being embraced by existing major players, such as Siemens.
The new generation of factories bring their own challenges. Cyber security is paramount. A centralised data centre presents one major potential point of failure which companies cannot afford to fail. But it is also harder to penetrate, and easier to update – including with the latest security patches.
From cyber security to semiconductors, from software to the physical robots, the smart factories of the future present a sizeable growth opportunity for many businesses – and thus an attractive thematic investment opportunity.
Our SmartCity strategy is invested in several companies that touch the areas of industrial software and automation, such as PTC, Siemens, Schneider Electric or Dassault Systèmes.
