Industry 4.0 —
the next digital level for Malaysian SMEs
29 Jul 2019
6 min read
If you are thinking that Industry 4.0 sounds like a weird or awesome name for anything, we completely agree. However, the phrase was all over the Malaysian Budget 2019 and it is one of the top buzzwords for businesses on the Internet. But what exactly is it about?
Let’s start from the beginning

Industry and 4.0 are used to describe what is considered the fourth generation in the series of industrial revolutions. The first revolution (in the 1700s and early 1800s) was the introduction of ‘machines’ to production.

These machines, although basic and steam-powered, paved the way for further improvements in using machines in manufacturing. By the second revolution, innovations had shifted to more promising ways of powering manufacturing: electricity, oil, and gas.

Around this time, another innovation was making (and helping to make) the news — the telegraph. This was also the era that brought flights, communication, light bulbs and affordable vehicles.

The more recent third revolution was dominated by technology and computerisation — using computers to solve complex problems. This was the generation when computers went from expensive, building-sized machines to affordable, portable solutions for everyone.

And here we are

The Fourth Industrial Revolution builds on the one before it — like all previous revolutions — taking the new technology and finding more effective uses for it. For instance, adding Internet connections to devices to create a digital network of smart machines in the Internet of Things (IoT).

These smart machines have access to and can process large amounts of raw data in short time frames that will be impossible for humans to accomplish. Processing this data properly can help businesses identify opportunities to improve their operations quickly and efficiently.

The practical, real-world uses include machines in your workplace that can predict when they will fail and start maintenance processes themselves or notify you to do so. That means your manufacturing line or business process does not get stuck in the middle of a production.

Is Malaysia ready for 4.0?

Well, yes. The main infrastructure — fast, affordable Internet access — is already available to most Malaysian SMEs. Malaysia currently has around 85.7% Internet penetration rate.

However, we shared how many SMEs in Malaysia are still stuck in the computerisation phase; just get a computer in the office or business, and that is that. No websites or real digital efforts, although this is starting to change especially in the e-commerce sector.

But the manufacturing sector is still slow — currently stuck between Industry 2.0 and 3.0, according to the Ministry of International Trade and Industry — to adopt elements of Industry 4.0. Hence the need for government intervention in the Budget 2019.

This includes the Industry4WRD: National Policy on Industry 4.0 that became operational in January 2019. The policy focuses on achieving four goals: drive growth in the manufacturing sector; increase national productivity; create higher-skilled employment opportunities; and raise innovation capabilities and competitiveness.

There is also the RM3 billion Industry Digitalisation Transformation Fundestablished by the Malaysian government to encourage industries to utilise artificial intelligence (AI). In addition, Malaysian SMEs could earn double tax deductions if they show that they are willing to embrace Industry 4.0 by offering scholarships to students studying engineering and technology.

Great incentives, but now what?

Now, you need to recognise the benefits of adopting and integrating Industry 4.0 into your manufacturing process. Technology is advancing really fast, and the businesses that are succeeding are the digital ones that adopt and integrate effective technologies which give them an edge in the global marketplace. And the world is already an interconnected global marketplace.

This means that it is only a matter of time before SMEs in Malaysia have to deal with pressure from increased global competition by digital businesses from around the world that are already on Industry 4.0.

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What stage are most SMEs in Malaysia?
That’s right – good job!
Uh oh, that’s not quite right…
Although Malaysia currently has a 85.7% internet penetration rate, most SMEs stop at the computerisation stage at the moment.
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