Digitalization is the new fashion for Chinese enterprises

What can corn do in your wildest imagination? Has it ever occurred to you that the yellow kernels can become soccer jerseys?

Young Yusuf (pseudonym) has always believed that one day he could use his family-grown corn to create a Cristiano Ronaldo jersey to brag to his friends about. But some Chinese companies are taking his dream a step further: they can actually make jerseys with corn.

Yusuf’s dream is ready to become a reality in his hometown of Wusu City, northwest China’s Xinjiang Uyghur Autonomous Region, where Chinese biotechnology company Cathay Industrial Biotech is based.

The Shanghai-headquartered company began to reverse nylon-inventor Wallace Carothers’s petrol-based organic chemistry research in 1997 with its corn-to-nylon products, including bio-based polyamide, bio-based DN5 (1,5-pentanediamine), long chain dibasic acids (LCDA), and biobutanol.

As Cathay’s newly invested site, the factory in Yusuf’s hometown will generate an annual output of 50 thousand tonnes of bio-based DN5, plus 100 thousand tonnes of bio-based polyamide and 30 thousand tonnes of LCDA – a much larger output than its site in east China’s Shandong province, which already boasts annual LCDA production of 40 thousand tonnes.

Behind Cathay’s great ambition is no longer the traditional experience-based manufacturing – it’s all digital now. For example, the company’s pilot program alone is busy sifting through 500 thousand tissue cells before one is selected for mass production. With five million data points, the success rate is so low that it can even risk the mass production.

“We will find the principle to guide production through the massive amount of data generated at the digital factory in Wusu. This is how digitalization will make us triumph,” Liu Xiucai, CEO of Cathay noted.

Digital factory, the new fashion

At the Industry Forum Siemens 2018 in Suzhou, east China’s Jiangsu province, Yusuf’s and Cathay’s story were widely echoed by Chinese enterprises that are going down the same path, whose choices came amid Cathay and others’ sparkling progress.

Shandong-based tire company Doublestar Group has already brought down its production cost by 60% and defect ratio down by 80% through digital manufacturing system that monitors and improves enterprise management, production efficiency, and output.

Even China’s largest ultra-deepwater drilling rig, “Blue Whale 1,” which used to be deployed in the South China Sea, uses digitalization to reduce maintenance costs by 50%, fuel consumption by 11%, and carbon dioxide emission by 20%.

All this came under cooperation with Siemens, which, sitting on its century-old factory operation and digitalization experience, now takes special pride in its latest manufacturing simulation system called “Digital Twin,” which allows enterprises to calculate the best options for their operations in the virtual world before moving onto real production.

Another apple in the eye for Siemens as well as many Chinese enterprises is the cloud-based, open Internet of Things operating system “MindSphere,” which will roll out in the Chinese mainland in cooperation with Alibaba Cloud by the first quarter of 2019.

The well-established German powerhouse alone has joined hands with over 100 Chinese companies so far and further inked deals with several new ones from various backgrounds at the forum on Wednesday, including Sichuan liquor company Luzhou Laojiao and China Resources Cement Holdings Limited.

Beyond “yes, I do”

Such digitalization fervor goes far beyond China.

Data from McKinsey & Company’s survey on hundreds of CEOs from seven countries showed that 68% of the surveyed business leaders put digitalization on top of their work priority and the figure in China was 87%, only second to India, as both countries’ businesses have shown eagerness to jump on the digital wagon.

However, only 8% of the surveyed international businesses have actually achieved digitalization. In China, the percentage point was slightly higher at 10.2%. Specifically, 30% of the surveyed businesspeople in China embracing digitalization have not really tapped into it, and 41% have only started pilot programs. In fact, only 29% of them have taken actions to go fully digital.

Zhang Kuiqi, head of Machinery Industry Ninth Planning and Design Institute, pointed out at a panel discussion of the forum that the delayed action may be a result of the high costs of digitalization implementation and the limited talent pool ready for the digital era.

Jürgen Brandes, CEO of Process Industries and Drives Division, Siemens AG, told People’s Daily that many businesses tend to look at and keep their efforts focused on maintaining their hard-won successes instead of mulling over tomorrow’s challenges, which involve various new trends beyond digitalization.

“More importantly, enterprises should first improve their automation level. That is, all its devices should be able to communicate and produce data first. It is just like visiting a car expo. You need to have a driver’s license before you get behind the wheel,” noted Lin Bin, General Manager of Process Industry and Drives Division of Siemens Ltd., China.

Job stealer or creator

Similar to artificial intelligence, digitalization triggers the same fear among some people over the loss of jobs, especially as more enterprises show interest in developing a new competitive edge among fierce market competition.

Dismissing such concerns, Jan Michael Mrosik, CEO of the Digital Factory Division, Siemens AG, told People’s Daily that digital factories would naturally change job profiles when more jobs become available for people who are better educated and can deal with digitalization – something enterprises should take a responsibility in.

“One success factor of digitalization is taking your people along. Make sure get your staff educated and they can be part of this transition,” Mrosik summarized.

The CEO then raised examples of two Siemens factories that have digitized without staff reductions. In Amberg, Germany, a factory was founded in 1989 with 1,200 people. Almost 30 years later, the number of employees remains the same, whereas output has grown by a factor of 30 thanks to digitalization. Likewise, the Siemens digital factory in Chengdu and its 480 employees have increased output a factor of four since 2013, when it was first founded.

“Digitalization saves jobs, because it makes companies competitive and it creates high-value jobs,” Mrosik stressed.