Asia is the world’s manufacturing hub. According to McKinsey, the region accounts for more than 40% of the world’s top 3000 technology-related companies’ share of global revenue in four sectors: consumer electronics, industrial electronics, electric vehicles and semiconductors. When it comes to automation, Asia continues to adopt Industry 4.0 advanced technologies such as artificial intelligence (AI) and quantum computing, with applications in renewables, mobility, cloud and bioengineering.

Growth drivers include rising demand for plant-level controls to boost productivity and enhance supply chain operations. These include supervisory control and data acquisition software and programmable logic controllers (or PLC) which provide an interface between industrial equipment and their digital controls. That’s on top of growing adoption of fully-automated production systems which can increase throughput volumes, reduce costs and use less labour.

Automation is expected to grow the fastest in the automotive industry, driven by robotics, machine vision and sensor technologies. Next will be healthcare and food and beverages to digitise operations and improve quality control.

How will these developments affect foreign direct investment (FDI) within Asia? The services sector will take up a bigger share of FDI stock, boosted by the arrival of more Industry 4.0 technologies. More greenfield projects that adopt industrial automation to boost efficiencies will be approved. Hyperscalers and cloud service providers working with the industrial Internet of Things will continue to shine across the most active FDI sectors in Asia.

Automation and machinery equipment manufacturers, plus system integrators, will invest more in system solutions, connectivity structures and control and supervision components. Smart manufacturing means multiple PLCs will be used in a single plant, to create a communication ecosystem between machines. In developing economies like Indonesia, Thailand and Vietnam, increased investment in manufacturing will also spur industrial automation.

However, these changes come at a cost and with challenges. This includes an ageing workforce and a lack of skilled labour to keep abreast of advances in technology and digital transformation, and cyber security risks arising from more connected devices and software. There is also the high capital and maintenance costs of advanced automation systems. But progress always comes with hurdles, and Asia’s automation is no different.

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The writer is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asian market research and investment/trade promotion services

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence