INDUSTRY 4.0 – What’s up? The 4th Industrial Revolution

March 2018

The Italian business world is strongly engaged in a transition towards fully automated and interconnected production systems: the so-called Fourth Industrial Revolution.  

The government has chosen to support such efforts through the so-called National Plan for 4.0 Industry. 

Launched in two steps at the end of 2016, the plan is worth €13 billion and includes tax incentives, support for venture capital, promotion of ultra-broadband, support for research and development and training.

This plan has already had successful outcomes for the companies.

The original Plan has identified nine major areas of intervention which have been evaluated as critical:

1.    Advanced Manufacturing Solutions – including both interconnected and modular advanced production systems, and systems for the automatic handling of materials, components and products.

2.    Additive Manufacturing - 3D printers connected to software for digital development; they imply both control of CAD projects stored in one or more databases, together with the definition of new ways of accessing and sharing information, aimed at protecting intellectual property, as well as production quality control.

3.    Augmented reality - using augmented reality (vision systems) to support production processes means adding to the real image a new layer of information derived from a digital device.

4.    Simulation - using simulations helps companies to be more proactive and productive, with lower costs and improved levels of efficiency.

5.    Horizontal / Vertical Integration - integrating information along the value chain - from suppliers to consumers - helps protecting every single link in the supply chain.

6.    Industrial Internet - multi-directional communication between production processes and products requires an extremely scalable and performing service infrastructure.

7.    Cloud – has been identified as an enabler and simplifier of many key processes, as it helps manage large amount of data on open systems.

8.    Cybersecurity – coupled with cyber-resilience, it increases operations’ safety levels of network operations and open systems.

9.    Big Data and Analytics - analyzing large data bases through Business Intelligence makes it possible for both industry and Distribution to optimize products and production processes.

2017 results have been extremely positive, with a 9% increase in order levels, together with a relevant drop in inventories.

The Ministry of Economic Development has just launched Phase 2, the so-called Industrial Competences Plan, aimed at “broadening the scope of action to the service sector, focusing on digitization activities, while fostering a pervasive growth in workers’ skills and knowledge throughout all sectors”.

The incentive map for the period 2017-2020, which is also available for companies with foreign control, includes the following interventions:

a)    Investments for growth, through an increase of the depreciation base: the so-called “Hyper” and “Super” depreciation.

b)    Subsidized credit to innovation, the so-called “Nuova Sabatini”.

c)    Incentives for R&D activities, through a relevant tax credit.

d)    Incentives for Intangible assets creation, through a permanent reduction of the taxable base (“Patent Box”).

e)    Incentives for accelerating innovation, through the introduction of tax incentives for innovative start-ups and innovative SME.

f)     Expansion of Credit opportunities, through a system of State-based Guarantees (Fondo di Garanzia)

g)    Incentives to financing investment, through equity injections (the so-called ACE - Aid for Economic Growth)

h)    Freeing up of financial resources, through tax breaks (IRI) and introduction of “cash accounting” for smaller enterprises

The challenges ahead: focus on skills

Over the next few years Italy needs to quickly move to a new growth path levering on both digital technologies and higher skills. The Italian economy seems to be trapped in a disequilibrium position, with few graduates and qualified technicians, and a low demand for skilled labor on the part of companies. Particularly in SMEs, we find a stagnating demand for high-skilled work, with workers with university or equivalent qualifications too often employed in routine jobs, which tend to hamper their creative potential.

Such a situation implies that too often companies still tend to focus on marginal innovation, aimed mostly at cost savings. It will probably be insufficient in the medium term in order to help them maintain their competitiveness on international markets.

Beyond factories…

Phase 2 of the Industry 4.0 plan is certainly an ambitious project, in a political phase which is bound to lead us in March 2018 to a new legislature.

We sincerely hope that innovation will reach not just districts and factories, but also our Public Administration, as well as society at large, starting from our towns, which are today bound to remain, and also in the future pivot for knowledge and innovation development.

Author: Luca Borella and Fabio Corno

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