Hitachi launch digital services hub in Thailand to serve ASEAN region

02 October 2018 Consultancy.asia

Japanese conglomerate Hitachi has launched a digital services lab in Thailand to serve manufacturers in Southeast by shining a light on ‘business data to create new value’.

Opened in an industrial park east of Bangkok, Hitachi’s new Lumada Center will offer Industry 4.0 solutions to drive value for regional manufacturers through operational and efficiency gains, with the multinational conglomerate particularly focused on Internet of Things (IoT) technologies. The new tech centre is the company’s first outside of Japan and marks an increasing push into Thailand and the rest of Southeast Asia.

Previously one of the world’s very largest conglomerates, the nearly 110 year-old company has lost ground in recent years to a number of modern business behemoths – including many in the tech sector – slipping from as high as 38 on the Forbes Global 500 list in 2012 to around the 150 mark today. The company, which is highly diversified, is however hitting back, keen to leverage its own tech and digital know-how.

The opening of the Lumada digital services hub in Thailand, which will enable simulation models and data insights for manufactures and other industry clients, now pits Hitachi up against not only the likes of Seimens – which last year opened a similar hub in Singapore – but a range of increasingly digitally-geared global consulting firms which have ventured into the market, such as with McKinsey’s Digital Capabilities Centre, a model factory setting likewise established in Singapore last year.Hitachi launch digital services hub in Thailand to serve ASEAN regionIn a recent report, McKinsey contended a potential $1.2 trillion and $3.7 trillion per year in global productivity gains by 2025 through industry 4.0 technologies, with manufacturers in Southeast Asia scoring a possible $627 billion slice. As it stands, ASEAN manufacturers contributed around $570 billion in value add to the global economy last year, with the sector accounting for nearly a quarter of the region’s combined GDP.

“The Asean market has a higher growth rate compared to the rest of the world, and is rapidly advancing towards both digitalisation and urbanisation, Hitachi President and CEO Toshiaki Higashihara said. “We recognise Thailand as a key focal market in this region. Presently, Thailand takes up the bulk of our group sales in Asean, accounting for 35 per cent. We are looking to expand this number. Hitachi will continue to contribute to Thailand’s development towards realising the 4.0 vision.”

And according to Higashihara, the more than Bt50 million investment into the Lumada Centre is just the beginning. “The Amata City industrial estate has industrial parks not only in Thailand but also in Vietnam. We will expand this connection to Asean countries. We will connect not just factory to factory, but industrial park to industrial park and global factory to global factory. Also we will connect factory to logistics centre and data centre, which are also important.”

Earlier this year, US-based Hitachi subsidiary Hitachi Consulting was selected for IoT and design work on One Bangkok’s Smart City development, the first smart city in Thailand.

Global trade shifts as developing market dynamics take hold

17 April 2019 Consultancy.asia

Global trade intensity is on the decline, according to an analysis from McKinsey, with shifts in trade goods and supply hinting at increased maturity in emerging economies.

As global trade becomes increasingly fraught, wider market changes may be missed. According to a McKinsey & Company study, global trade intensity is declining as developing economies, particularly China, increasingly consume domestically produced products. As more demand shifts to developing economies, this trend is expected to continue. Meanwhile, ‘intangibles’ are taking up an increasingly large share of global trade, shifting the trade dynamics away from manufactured goods.

Global trade has seen a massive increase in demand for goods and services produced in far flung parts of the world. Globalisation saw decades of expansion to global trade, with various countries becoming breadbaskets or producers of specific goods. Yet, now the form of trade is changing, with intangibles increasingly becoming part of the trade value chain. The share of services trade is increasing at a rate more than double that of goods.Global value chains becoming more knowledge-intensiveThe past decades have seen increased shift to intangibles in global value chains, with spending on brands, software, and intellectual property (IP) growing as a share of revenue. The shift is part of a wider shift to a knowledge economy. Pharma and medical devices companies as well as machinery and equipment companies, for instance, have the highest share of intangibles, at 66.3% and 29.3% of their capitalised spending in 2016.

This is largely reflective of their patents and other IP. Meanwhile, labour intensive goods such as food and beverages, rubber and plastics and paper and printing, have considerably lower levels of intangibles as part of their value chains, at 2.3%, 3.1% and 3.9% respectively. Agriculture and mining see capitalisation of around 5%. IT has the highest level in the knowledge intensive sector at 13.7%, while professional services stands at 3.5%.Developed economies output to developing economies boomedThe study also notes that recent decades have seen a boom in demand for high production value goods exports to developing economies. As such, the share of advanced economies exports to advanced economies has decreased, from 77% in 1995 to 59% in 2017, while, in total, advanced economies’ exports to developing countries grew from $1 trillion in 1995 to $4.2 trillion in 2017.

Here, the most in demand segment from advanced economies is machinery and equipment, with a net increase of $450 billion between 2000 and 2017, while computers and electronics saw an increase of $364 billion in the same period – with more than half of the $573 billion in total accounted for by demand from China. Chemicals and auto also increased significantly, by a respective $351 billion and $262 billion.Developing countries increase share of global consumptionDemand from emerging economies is also set to grow significantly, as large-scale demographic shifts begin to take shape. The world’s share of consumption has shifted away from advanced economies at scale since 1995, falling from then 81% to 62% in 2017. This is expected to fall further, to 49% of the world’s total by 2030. China in particular is set to pick up pace, representing 16% of all consumption by 2030, with the rest of developing Asia to make up 10%.

The impact on supply and value chains will be significant, according to McKinsey. The shift in consumption could see emerging markets consume two thirds of manufactured goods by 2025, with the firm citing significant shifts in cars, building products, and machinery. One of the consequences of the shift is that more and more of what is made in China is sold in China. This has already had a net effect on the country’s trade intensity, which has fallen as domestic demand picked up.

“Although trade tensions dominate the headlines, deeper changes in the nature of globalisation have gone largely unnoticed,” states the report. “China and other developing countries are consuming more of what they produce and exporting a smaller share. Second, emerging economies are building more comprehensive domestic supply chains, reducing their reliance on imported intermediate inputs. Lower global trade intensity is a sign that these countries are reaching the next stage of economic development.”