VDMA at Hannover Messe 2019 Mechanical Engineering Industry Dampens Expectations
The VDMA has lowered its production forecast from 2 % to 1 %. The uncertainty on the world markets is making itself felt, says the association. This is mainly influenced by digitalization. Have buzzwords such as machine learning and industrial intelligence now arrived in reality?
According to the VDMA, trade disputes between the world's major economic blocs have lost none of their severity or impact in recent months. Dispute over tariffs and other trade barriers increasingly unsettled market participants and dampened the investment mood. This is now also making itself felt in the mechanical engineering industry. “The existing order backlog of 8.5 months on average still buffers production during the first few months of the current year," said VDMA President Carl Martin Welcker at the association's business press conference at the start of Hannover Messe 2019.
Mechanical Engineering Remains Largest Industrial Employer
With a further increase in the number of employees by 33,000 to 1.065 million (in companies with more than 50 employees) and a good 1.3 million in total, mechanical engineering remains the largest industrial employer in Germany. "However, Economic momentum is slowing down, both in Germany and abroad. The politically provoked risks on important sales markets are having an impact without solutions in sight," says the VDMA’s President. The VDMA has therefore lowered its production forecast for 2019 from previously plus 2 % in real terms to plus 1 %, Welcker explained.
The role of exports and free market access for Germany machine builders increased again slightly last year. In 2018, the industry achieved an export ratio of almost 79 %. Last year’s exports increased by 4 % in real terms to just under 178 billion euros compared to the previous year. Total sales in mechanical engineering reached a record level of 232.5 billion euros in 2018 (plus 1.3 %) and production grew by 2.1 % in real terms. “We had originally forecast a production increase of 5 % for 2018, but shortages in materials and personnel prevented this kind of growth. In addition, many companies have been reluctant to add the capacities required for higher production due to the growing uncertainties and risks," explained the VDMA President.
Trade Disputes Must Not Escalate Further
In 2018, the United States narrowly defended its position as the largest single sales market for Germany machine manufacturers. American customers are also likely to invest in automation of their production this year. However, the positive effects of the US corporate tax reform are gradually waning. In China, the second-largest single market, the VDMA also expects economic momentum to weaken. However, the plans of the Chinese government to implement their master plan "Made in China 2025" is likely to ensure further investment and thus export opportunities. “But above all there is the danger of a further intensification of the trade dispute between China and the USA", Welcker restricted. “We're hoping for an early de-escalation of the situation."
This also applies to the smoldering trade dispute between the USA and the EU. Europe must find strategic answers to US President Donald Trump's attempt to enforce American law through extra-territorial sanctions all over the world. At the same time, it is important not to carelessly jeopardize the close trade relations across the Atlantic that have been developed over decades. The VDMA therefore demands that the EU now quickly grants the negotiating mandates for a lean free trade agreement with the USA and does not wait until after the European elections. The result of such a free trade agreement must be the abolition of all industrial tariffs and technical barriers to trade, as well as the mutual recognition of conformity assessments.
Mechanical engineers are pleased to note that both in Germany and in the EU industrial policy and the necessary flanking of industry in global competition are once again being debated. "That was as right as it was overdue," said Welcker. For too long, Berlin and Brussels paid too little attention to digital transformation. However, the VDMA takes a critical stance on the political considerations of seeking to regulate and steer industry even more strongly and to give preference to certain technologies. “We need market principles and an openness to technology. The state is not the better entrepreneur or engineer," warned the VDMA President.
Machine Learning and Industrial Intelligence
Digital transformation is also increasing progressing in mechanical engineering, the association continues. Initially, own products were made Industry 4.0-capable and the data evaluation of the machines was intensified, but now the focus is increasingly on new business models and the use of machine learning and Industrial Intelligence in production. According to a recent VDMA survey, the share of companies that have determined a digitization strategy for products, services and processes has risen from 21 % (2016) to 40 % (2018). Internet of Things platforms have become important assets in three-quarters of mechanical engineering companies on average, and almost 30 % already have corresponding systems in use. A comparison: In 2016, more than 60 % of the Germany companies were either unaware of these platforms or attached no relevance to them.
The increasing use of artificial intelligence (AI) in production also offers great opportunities to secure and expand technological leadership. In 2019, German mechanical engineers plan to invest a projected 400 to 500 million euros in the development and use of AI/machine-learning-based applications. This would be a good 6 % of the total investment volume in mechanical engineering. Two thirds of the companies surveyed are already investing in this area. Particular obstacles are the lack of qualified data material needed for teaching the algorithms and the lack of qualified personnel. The VDMA is committed to this by, for example, using its junior staff foundation to pass on new requirements to vocational schools and trainers. The requirement profiles for engineering training were also revised. "Other countries like China or the USA may be ahead of us in basic research on artificial intelligence. But added value can only be generated by the targeted combination of algorithms with real physics. This is the strength of mechanical engineering," said Welcker. This makes it all the more important for smaller companies to exploit the benefits and possibilities offered by machine learning and artificial intelligence.
Machine Communication via OPC UA Is Turning into a Success Story
The subject of machine communication has developed into a success story for mechanical engineering and the VDMA. A few years ago, the industry agreed on a uniform interface for digital production to ensure that machines and systems can be networked error-free and manufacturer-independent and communicate with each other: OPC UA (Open Platform Communication Unified Architecture). It enables end customers to act more flexibly in their production. What has long been possible in the office with the USB standard is now becoming reality in production.
However, this only sets the basic vocabulary for machine-to-machine communication. OPC UA Companion Specifications must now be adapted to all machine types. The VDMA considers itself as an international gravitational center for this movement, which is being promoted in close cooperation with the OPC Foundation. “We define the world language of production - Made in Germany," Welcker emphasized.
According to the VDMA, the association together with its member companies, industrial customers and suppliers, is doing decisive work. Today, around 350 mechanical engineering companies are already participating in the respective VDMA working groups - with a growing number of partners. "This is the only way to successfully implement 'plug and work' in the factories," Welcker explained: “We create the universal remote control, so to speak - one that in theory is compatible with all machine types."
At the Hannover Messe, the VDMA was demonstrating the global degree of networking at the 1st World Interoperability Conference. "On the first day of the fair, around 30 international organizations gave an insight into the machine-to-machine communication of tomorrow," said the VDMA President.
This article was first published by MM Maschinenmarkt.
Original: Udo Fast / Translation: Alexander Stark