Industry 4.0 investments pushes Singapore to favourable global manufacturing rankings

Industry 4.0 investments see Singapore being ranked #5 in terms of a favourable geo-political climate and intellectual property protection.

Global real estate services firm Cushman & Wakefield on April 25 published new research assessing 48 of the most suitable locations for global manufacturers to expand or relocate their operations in EMEA, the Americas and Asia-Pacific. While manufacturers’ individual requirements will vary, China performs strongly thanks to increasing Government investment in the adoption of technology, while the United States is most attractive for those seeking to minimise exposure to economic and political threats.

Cushman & Wakefield’s Manufacturing Risk Index (MRI) scores each country against 20 variables that make up three final weighted rankings which cover conditions, cost and risk. The data underpinning the MRI comes from a variety of reliable sources, including the World Bank, UNCTAD and Oxford Economics.

The report reveals that China is the leading country when viewed from a baseline scenario which gives equal importance to a country’s operating conditions and cost competitiveness. The United States is in second place followed by India, Canada and Czech Republic making the top five. The Czech Republic is the highest ranked European country with Poland, Lithuania and Hungary also featuring highly.

When the data is analysed from a cost scenario – which gives a higher score to countries where operating outlay, including labour costs, is lower – China remains on top with Asian countries dominating the top 10. Only Lithuania and Romania, in seventh and eighth respectively, feature prominently from elsewhere.

The third ranking – the ‘risk’ scenario – takes into account rising geopolitical risk by favouring countries with lower levels of economic and political threat. In this scenario, North America leads the way with the US and Canada first and second respectively and China slipping to fourth. European locations account for more than half the top 10, led by the Czech Republic, which places third in the index, with Germany, Denmark, Finland, Austria and the United Kingdom also featuring in the top 10.

Report author Lisa Graham, Cushman & Wakefield’s EMEA Head of Logistics and Industrial Research & Insight, said: “These rankings provide a critical insight into the rapidly-evolving manufacturing landscape and the decision-making factors behind locations. Global manufacturing has entered a new era, marked by the growing influence of technology in addressing productivity, labour shortages and safety in production and logistics.

“We are seeing formerly low-cost locations such as China and India moving up through the value production chain through country-sponsored support of technological adoption. That is why Asian countries featured so prominently in our rankings. There are still concerns over intellectual property issues in the region which mean, that despite higher costs, countries in North America and Europe will continue to thrive as manufacturing bases.”

Asia Pacific markets in top five locations

Asia Pacific dominates the top five locations globally under the Cost scenario, with emerging Asian markets such as Malaysia, Vietnam and Indonesia offering cost-competitive alternatives. Under the geopolitical risk scenario, Singapore, Japan and Australia offer alternatives in the top 20 global locations.

Christine Li, Head of Research for Singapore and South East Asia said, ““While China remains a global manufacturing powerhouse, the US-China trade tension was a wake-up call for many global companies to seriously consider supply chain diversification into other low-cost alternatives in countries such as Vietnam and Indonesia. The ranking of Vietnam and Indonesia in the Manufacturing Risk Index continues to leapfrog as they both emerged as a clear winner from the trade tension.”

Ms Li added that Singapore will also be a key beneficiary in the transition to Industry 4.0 as the city-state continues to invest heavily in technology and innovation to keep pace with the rapid transformation in manufacturing.

Industry 4.0 refers to innovations such as Big Data, the Internet of Things and 3D Printing. Singapore’s robust regulatory framework offer manufacturers a reasonable level of protection from geopolitical and intellectual property risks, the report said.

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The full integration of cost and production efficiencies which comes with Industry 4.0 will take time, due to the investment required in existing plants, equipment and the training of skilled labour, said the report.

Vietnam moved up 8 spots from 23 in 2018 to 15 in 2019. Ranking of Indonesia also rose by 7 spots from 20 in 2018 to 13 in 2019. This is also evident that the emerging SEA markets such as Malaysia, Vietnam and Indonesia dominated the top 5 locations globally under the Cost scenario.

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The rankings also reflect an element of protectionism and nationalism putting global and regional and supply chains at risk. In Europe, the outcome of the ongoing Brexit negotiations will redefine regional production lines as well as reshape domestic and international flow of goods.

Countries which invest in platforms that facilitate flows in and out of production lines will succeed. China’s seamless supply chain connections have resulted in substantial investment in infrastructure and multi- modal transport, including the New Silk Road rail and maritime projects, in addition to incentives. These factors are off-setting concerns regarding intellectual property.

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