Thought Leadership

Sector Spotlight on Germany: Industry 4.0

21st January 2019

By Jason Purcell

The fourth industrial revolution, also known as Industry 4.0, is set to transform the manufacturing industry as we know it. Machine to machine communications of “things” connected via the Internet of Things (IoT) will provide previously unavailable operational insight, together with the ability for machines to make autonomous decisions fuelled by Artificial Intelligence (AI), which will drive greater automation, reduced costs and increased efficiency. This will go well beyond improving specific factories and will span enterprises and their supply chains, fundamentally reimagining the manufacturing process from end-to-end.

Industry 4.0 is being driven by technology; a major disruptor to the manufacturing sector. This has provided a huge opportunity for new players to enter into the market – particularly those specialising areas that will aid the process of digital transformation. These include things like sensor-based technology, data aggregating technology and robotics information processing, which all leverage AI to allow machinery to communicate in real-time, both machine to machine and also to derive greater insights to humans.

Germany leading the way

KPMG estimates that the implications of all this innovation are gigantic – Industry 4.0’s component markets “may amount to more than $4 trillion by 2020”. Traditionally, one of the biggest challenges for European software companies has been having large customers on their doorstep to sell to. However thanks to its strong industrial heritage and globally competitive car industry, Germany is very well positioned in this sector, and we see a lot of exciting innovation and promising start-ups.

Investments in Germany

German investments in Industry 4.0 technologies have been steadily increasing since 2013, with estimates suggesting that more than 80% of the nation’s companies will fully digitalise their value chain by 2021. Looking at recent activity, it is interesting to see the strong participation of both US investors and major strategic players in these deals:

Germany and the Global Market

 Incumbents in manufacturing are reacting to digital advancements, realising that if they fail to do so, they will fall behind. At the G20’s Digitising Manufacturing Conference, for example, the sector was urged to adopt a collaborative approach to combat the challenges of Industry 4.0 – sharing best practices was outlined as “essential to facilitate digital transformation on a global level”. And the international gaze is cast towards Germany and Europe. In fact, by 2020, the continent is expected to make up over a third of global Industry 4.0 investments.

The landscape is changing rapidly, and in order to maximise the opportunity, a strategic understanding of the challenges of selling a tech company and how best to position the business to attract the right partners is required. With that, FirstCapital can help.