ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL

APAC is capitalizing on the industrial future with a Wise Pivot to the new CONTENTS

Foreword 3

1. Adapt to thrive: the APAC imperative 5

2. New era, new ethos: how to grow business value with the wise pivot 12

3. Embody the wise pivot: APAC trailblazers showing the way forward 16

Case Studies 19

4. The industrial future in your hands 27

References 29

Authors 32 FOREWORD

Leaders of automotive and industrial equipment companies across Asia Pacific know all too well that disruptive forces are changing their industries irrevocably. Many are taking proactive steps to adapt. But equally many are still struggling with the question of how to pivot to new sources of growth in a balanced and sustainable way.

This paper highlights how companies across the Asia Pacific region are finding that RAGHU GULLAPALLI balance by making a ‘Wise Pivot’ to the new. They’re taking bold decisions to rethink Managing Director Industrial & Products; Industrial X.0 legacy businesses and operating models while developing investment strategies for Lead Asia Pacific, Africa, Middle new and emerging growth areas. East & Turkey In this new era, disruption and continuous reinvention are a given.

Those who succeed, adapt to thrive. They use widespread disruption to their advantage, harnessing it to accelerate growth. They have the courage to reinvent the business in their own terms, but in a careful and considered way. That’s what we call the Wise Pivot – and it’s the secret to shaping the industrial future across Asia Pacific.

3 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL “Digital technology is the biggest opportunity for industrial companies to make the wise pivot to the new – to reinvent. Not just how they make things, but also the products they make. By thinking about how they conceive, make, distribute and support the next generation of goods in the marketplace, they reshape the future of their industries”

ERIC SCHAEFFER Senior Managing Director Global Industrial & Global Product Industry X.0 Lead

“The Asia Pacific region is already an incredibly powerful engine for economic growth. As more and more industrial organizations digitalize their operations and invest in new partnerships and business models, that growth is set to accelerate exponentially.”

FABIO VACIRCA Senior Managing Director Products Operating Unit Lead Asia Pacific, Africa, Middle East & Turkey

4 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1 ADAPT TO THRIVE: THE APAC IMPERATIVE

5 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1 ADAPT TO THRIVE: THE APAC IMPERATIVE

Automotive and industrial equipment companies in Asia Pacific (APAC) are facing significant technology-led disruption in their industries. Growth now depends on the ability to continuously adapt to rapid change in both technological possibilities and customer expectations.

To shape and maintain APAC’s leading position in the industrial future, today’s enterprises must continue to adapt, innovate, and reinvent their China will have 4.1 billion businesses. They must manage a series of disruptive and converging industrial IoT connections “megatrends” – everything from accelerating consumer demand for electric and connected vehicles to the Industry X.0 revolution in industrial by 2025 – almost a third of processes being driven by machine learning, real-time connectivity, smart the global total.1 robots, and more.

6 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1

The C-suite recognises this disruption as an ever-present and growing THE IMPLICATION? challenge: nearly three quarters of industries have seen increased levels APAC automotive and industrial manufacturers must adapt and reinvent of disruption on multiple fronts since 2011.2 What’s more, Accenture’s their traditional product and engineering focus to secure the region’s Disruptability Index 2.0 highlights the vulnerability of automotive and position as the engine of growth in the industrial future. industrial equipment companies to future disruption (see Figure 1).3

FIGURE 1 Industry Sector Matri2018 Results IDST SETOS Disruption continues to VIABILITY VOLATILITY rise in automotive and 1% F IE etail 33% F IE

industrial equipment os & Media G&S INFRASTRUCTURE and machinery; both are TRANSPORTATION SERVICES Insurance in the “vulnerability” ighTech zone as per Disruptability Sotare & Plators index 2.0 AUTOMOTIVE anking Trael INDUSTRIAL EUIPMENT Lie Sciences AND MACHINERY

aital Markets Energy atural esources ealth heicals CURRENT LEVEL OF DISRUPTION TOTAL EV OF COMPANIES IN DURABILITY tilities VULNERABILITY INDUSTRY SAMPLE 11% F IE 3% F IE SUSCEPTIBILITY TO FUTURE DISRUPTION

7 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1

APAC: AN INCUBATOR OF INDUSTRIAL INNOVATION Industrial companies are In APAC this transition is well underway, fuelling a disruptive innovation undergoing extremely rapid boom across the region. Industrial companies are undergoing extremely rapid digital transformation, adding $1.16 trillion to APAC GDP digital transformation, adding and boosting annual growth rates by 0.8 per cent.4 $1.16 trillion to APAC GDP and

The region is also a hotbed of industrial robotics innovation, with China, boosting annual growth , and South Korea the largest three global markets (Korea having the rates by 0.8 per cent. highest “robot density” of any country in the world).5 In addition, half of all APAC manufacturers are expected to have smart factories within three years.6

Government policy and support across the region is another key factor. APAC authorities are facilitating free-trade reforms to support cross-border industrial ecosystems, including the Regional Comprehensive Economic Partnership (RCEP): a proposed agreement between ten ASEAN countries and six other APAC states.7 Similarly, Japan has recently signed a new trade agreement with the European Union.8 See Figure 2.

8 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1 JAPAN FIGURE 2 INDIA Favourable government policies are helping companies to excel CHINA in the new Industry 4.0 set up… “” A concerted initiative to move China up the value chain and compete globally in manufacturing innovative technologies12

COMMITMENT TO ELECTRIC MOBILITY China is targeting 2 million annual EV sales by 2020 TAX REFORM and a complete ban on internal combustion engines Largest tax reform rolled out in the form of the before 204013 Goods and Services Tax (GST), having a noticeable impact on supply chains9 MAKE IN INDIA SCHEME “Make in India” scheme to increase investment and innovation, grow skills, protect intellectual property, and build world-class manufacturing infrastructure10 INDUSTRIAL MANUFACTURING OF THE FUTURE SINGAPORE Japanese government and companies are investing heavily in manufacturing innovation, automation and job training14 The government is funding research specifically STRONG INSTITUTIONAL targeted at improving the manufacturing process15 FRAMEWORK Government announced the Singapore Smart The Ministry of Economy, Trade and Industry (METI) Industry Readiness Index, a tool to help industrial has identified advanced manufacturing as one of companies harness the full potential of the Fourth Japan’s key growing sectors, predicting that it will Industrial Revolution11 reach 30 trillion ($270 billion) by 202016

9 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL A BREEDING GROUND FOR GLOBAL INDUSTRIAL 1 START-UPS

APAC has rapidly become a global hothouse for disruptive start-ups in China, in particular, has a vibrant electric vehicle (EV) start-up scene. the industrial sector. Fuelled by close proximity to major manufacturing and Shanghai are hubs for EV development, with the former home to around heartlands and sources of government and private financing, there are 7,000 start-ups (including over 40 unicorns) and the latter hosting around now well over 500 active technology hubs across the region.17 500 incubators and accelerators18 (see Figure 3).

FIGURE 3 China is the breeding ground for electric vehicles start-ups, while Japan and India are honing many small start-ups in the automotive and IIOT space

CHINA JAPAN INDIA

HQ SHANGHAI NANJING BEIJING SHANGHAI SHANGHAI BEIJING BEIJING NAGOYA KANAGAWA-KEN TOKYO TOKYO BANGALORE BANGALORE BANGALORE

NIO Byton Xpeng Weltmeister YOUXIA BAIC BJEV Singulato Preferred AZAPA FOMM MUJIN ZMP Netradyne Intellicar Flutura Networks

Founded 2014 2016 2014 2015 2014 2009 2014 2014 2008 2013 2011 2001 2015 2015 2012 Valuation $6bn* $4 bn $4 bn $3 bn $2 bn $1.6 bn $0.9 bn $2 Bn N/A $31 Mn NA $82 Mn $8Mn N/A $47 Mn Major China Alibaba, Baidu, China Fortune Daimler, Sumitomo Private JAFCO Mission Reliance N/A , Vertex Investors Temasek Harmony Foxconn Tencent, Ocean, Zhongji Corporation Motors, company Capital Ventures, Auto Holding, Sequoia GaranTenson Investment Fanuc, NTT FAW Capital China Cap Chengtong

Focus Electric Focus on Focus Electric Electric Electric Electric Edge Heavy AI-based Micro Intelligent Self- Deep learning Telematics Cerebra, is a area premium interiors and on in- cars cars cars Computing ECUs for electric vehicles Robotics driving taxi and vision based analytics M-to-M analytics cars infotainment environment to process automotives and Smart analytics for platform for data at Machines fleet extraction and source management, analysis of surveillance etc. embedded machine data

10 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 1 MUJIN: AN ACADEMIC SPIN-OUT THAT BECAME AN INTELLIGENT ROBOT SUCCESS STORY Having been spun out of Tokyo University in 2011, Mujin builds intelligent robot However, key questions are being asked of these controllers providing an industrial robotics platform for the manufacturing APAC start-ups: and logistics industry. Its strength lies in the logistics and warehouse space, automating logistics processes and improving productivity and quality in • Can their operating models compete with the mature warehouses and fulfilment centers. The company’s flagship Mujin Controller capabilities of incumbents? is an AI-powered motion planning and computer vision technology which • Can they sustain investment, especially once can be retrofitted on existing industrial robots to automate operations.22 The government subsidies end? controller has been used to create the world’s first completely automated • Can they deliver significantly better products than distribution center for JD.com23 and is being applied to over 1,000 different incumbent manufacturers? robots in logistics settings globally as part of Mujin’s overseas expansion.

As yet, these questions remain unanswered. Incumbents and the rest of the market are nevertheless watching the NIO: THE FIRST CHINESE EV START-UP TO GO PUBLIC space closely, with some already beginning to partner IN THE USA with key players. Founded in 2014, EV start-up Nio is already valued at over $3.8 billion19. The company is pushing next-generation automotive technologies like in- car connectivity, autonomous driving, and artificial intelligence, and has a strategic cooperation agreement with Bosch Group20. Nio raised around $1 billion when it launched an IPO on the New York Stock Exchange in 201821. But the market is still somewhat cautious about the company’s prospects, with the share price recently dipping and pre-orders flattening.

11 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 2 SHAPING THE FUTURE HOW TO GROW BUSINESS VALUE WITH THE WISE PIVOT

12 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 2 SHAPING THE FUTURE: HOW TO GROW BUSINESS VALUE WITH THE WISE PIVOT

Amid all this disruption from technology-driven megatrends and increased competition from emerging players, how can APAC automotive and industrial companies best adapt to the tectonic shifts underway and position their businesses at the forefront of the region‘s industrial future?

With revenues contracting in their core businesses,24 companies must be Accenture has developed a strategy – the wise pivot – that guides a prepared to reinvent their business models and invest in the new. business as it shifts towards new sources of value while continuing to enjoy a strong and profitable core.A wise pivot has three components: But many are hesitant to do so. Some are hindered by an inability to raise and replenish sufficient investment capacity. Some fear getting the pace and direction of their new investments wrong. Others are so focused on their core business they’re failing to sense the changing headwinds and risk missing key opportunities to explore new business models and TRANSFORM GROW SCALE revenue streams. THE CORE THE CORE THE NEW to release new to ensure investment to build the capabilities investment capacity is sustainable needed in the years to come The solution? Develop a flexible strategy, unique to each business, that finds the right balance between the timing, scale, and direction of investments in core and new businesses. That needs leaders who have the right mindset: Balancing these three elements is key. Pivot too slowly to the new, and a those prepared to commit to new business models early, find synergies company risks being left behind as others capture fertile sources of value. between old and new sources of revenue, and leverage the wider ecosystem But pivot too quickly, and it risks jeopardizing its core business – and its of partners. ability to fund investment.

13 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 2

DETERMINED OR RESTRAINED? HOW ARE COMPANIES APPROACHING THE WISE PIVOT?

We examined the financial pivot of 313 APAC Industrial companies for this This revealed four starting positions for the financial pivot: “determined” paper, assessing them on both investment capacity (liquidity and access (high capacity, high velocity), “compelled” (lower capacity, high velocity), to financing) and investment velocity (direction and pace of capital “reserved” (high capacity, low velocity) and “restrained” (low capacity, low reallocation to the new). velocity)” (See Figure 4).

14 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 2

FIGURE 4 INDUSTRIAL AND AUTOMOTIVE AUTOMOTIVE HEAVY EQUIPMENT ELECTRICAL EQUIPMENT MANUFACTURERS SUPPLIERS: MANUFACTURERS: MANUFACTURERS: 55 COMPANIES 49 COMPANIES 112 COMPANIES 97 COMPANIES

25% 33% 24% 29% 21% 32% 11% 40% HIGH (DETERMINED) HIGH (DETERMINED) HIGH (DETERMINED) HIGH (DETERMINED) HIGH

INVESTMENT CAPACITY 22% 20% INVESTMENT CAPACITY 35% 12% INVESTMENT CAPACITY 27% 20% INVESTMENT CAPACITY 35% 14% LOW (RESTRAINED) LOW (RESTRAINED) LOW (RESTRAINED) LOW (RESTRAINED)

LOW (RESTRAINED) HIGH (DETERMINED) LOW (RESTRAINED) HIGH (DETERMINED) LOW (RESTRAINED) HIGH (DETERMINED) LOW (RESTRAINED) HIGH (DETERMINED) INVESTMENT VELOCITY INVESTMENT VELOCITY INVESTMENT VELOCITY INVESTMENT VELOCITY

THE RESULTS? It’s a complex picture, with all four starting positions There is no magic formula for an effective financial pivot. found right across the region and across industrial sub-sectors. In most Each company must take the approach most suited to its areas, except automotive suppliers, “determined” companies are the most particular industry, its capacity and willingness to invest, prevalent. That said, a sense of caution is clearly evident: a quarter of and its business ambition and growth objectives. automakers are “reserved” and nearly the same number are “restrained”. And over a third of industrial and electrical equipment manufacturers and automotive suppliers are “restrained”.

15 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 3 EMBODY THE WISE PIVOT: APAC TRAILBLAZERS SHOWING THE WAY FORWARD

16 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 3 EMBODY THE WISE PIVOT: WHAT CONNECTS THE APAC TRAILBLAZERS?

Pivoting wisely is a unique journey for each organization. It requires an investment approach that enables the organization to create major new businesses while rejuvenating their core.

The following case studies highlight just a selection of the APAC companies A strong commitment, from the top, to new business models, new who are starting to show how the wise pivot can be realised, bringing a operating models, and the digitized enterprise. uniquely potent combination of innovation mindset and careful investment A willingness to unlock synergies between existing and new businesses to their growth strategies. Operating across sub-sectors in China and and fuel growth through smart connected products and experiences. Japan, and illustrating the broader shift underway in APAC industry, these trailblazers share one or more key qualities: A determination to scale the new intelligently, especially through ecosystem partnerships, platform plays, and “outside-in” innovation.

The foresight to rethink operating models, using innovations like the “Digital Service Factory” to deliver greater innovation agility and faster time to market.

These qualities are manifested in the five Pivot Levers shown in Figure 5.

17 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 3

FIGURE 5 Trailblazer companies PLATFORM PLAY Hardware-centric product in APAC display a companies moving to platform strategies creating network commitment to one or effects more key Pivot Levers NEW INNOVATIVE BUSINESS MODELS Shift away from pure product based sales to as-a-service and outcome-based offerings

SMART AND CONNECTED PRODUCTS AND EPERIENCE Adaptive, collaborative and OVERARCHING proactive smart products using new technologies (AI, Big Data, IoT, THEMES 5G, Cloud) - PIVOT LEVERS

ECOSYSTEM PLAY/ OUTSIDE IN INNOVATION Co-development, co-innovation and strategic partnerships DIGITIZED ENTERPRISE / NEW OPERATING MODELS Flexible and NEW IT driven operating model to remain responsive to market

18 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 3 CASE STUDIES AUTOMOTIVE MANUFACTURERS: TOYOTA AND AUTOMOTIVE SUPPLIERS: AND HEAVY EQUIPMENT MANUFACTURERS: ZPMC AND CRRC INDUSTRIAL AND ELECTRICAL EQUIPMENT MANUFACTURERS:

19 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL AUTOMOTIVE MANUFACTURERS:

TOYOTA: TAKING THE FAST LANE 3 TO INNOVATION-FUELLED GROWTH

Toyota is a leading player in the APAC ’s pivot towards manufacturing.25 This includes planning for a major upshift in EV sales: innovative business models. The company is making a big bet that electric Toyota wants to sell 5.5 million EVs each year by 2030 (up from 1.5 million vehicles, autonomous driving, and mobility services represent the future at present) – a significant proportion of which will be zero-emission of automotive, and is therefore shifting its focus away from just “pure” car vehicles.26

Transform and grow the core Scaling the new • Toyota New Global Architecture (TNGA) will cut manufacturing costs by • Joint venture with Softbank to establish MONET: using connectivity 20 per cent. Half of all Toyota’s car manufacturing will use TNGA by 2020.27 and data to optimize transportation supply and demand, creating • Billion-dollar investments to expand core automaking operations Mobility-as-a-Service (MaaS).30 internationally by upgrading existing manufacturing sites and establishing • $1 billion stake in Grab (a South-East Asian ride-hailing company) – new facilities.28 the largest such investment by a carmaker to date.31 • Plans to build new automated vehicle testing and battery testing • Expanding car-subscription business Kinto, using gamification to reward facilities.29 customers based on how they drive.32 • Partnership with JapanTaxi, KDDI, and Accenture to develop a smart predictive taxi dispatch support system in Tokyo.33 • $3 billion investment in autonomous driving software, and accelerating company innovation with Big Data.34

20 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL AUTOMOTIVE MANUFACTURERS: GEELY: THE CHINESE AUTOMOTIVE MANUFACTURER 3 THAT’S OUTPACING THE COMPETITION

Reaching cumulative sales of over 1.5 million cars in 201835, Geely’s includes plans to raise sales of new energy vehicles (NEVs) to 90 per accelerated expansion in recent years makes it the fastest-growing cent of total volumes by 202036 and to become a leader in hybrid, pure automotive manufacturer in China. The company’s growth strategy electric, and alternative fuel and fuel cell technologies.

Transform and grow the core Scaling the new • Expanding NEV manufacturing with a power battery plant in Hubei37 • Formed a joint venture with Daimler to provide premium ride-hailing and Component Plant in Chengdu.38 services in several Chinese cities.41 • Acquired stakes in Daimler AG and Volvo Trucks to become the largest • Acquired US-based Terrafugia, a leading developer of flying cars.42 shareholder in both companies.39 • Working with on Big Data, 5G and V2X (vehicle-to- • Established Geely Design UK to support in-house design functions.40 everything) tech.43 • Partnering with Qualcomm and Gosuncn to launch 5G/C-V2X-support vehicles in 2021.44 • Collaboration with Smart Eye to produce semi-autonomous vehicles.45

21 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL AUTOMOTIVE SUPPLIERS:

DENSO: A KEY COMPONENT IN APAC 3 AUTOMOTIVE TRANSFORMATION

As Japan’s largest automotive parts manufacturer, Denso is driving business. While leveraging an ecosystem play for scaling the new, the forward its long-term 2030 vision to increase automotive performance in company is also widening its focus to value-adding initiatives outside the electrification, software, and autonomous driving, as well as accelerating automotive industry.46 R&D, enhancing collaboration, and transforming its core manufacturing

Transform and grow the core Scaling the new • Fuelled by cost-reduction initiatives, Denso has maintained a healthy • Investing around 9 per cent of revenue in R&D (focusing on EBITDA margin for a decade.47 autonomous driving, connectivity, and non-automotive technology). 50 • Launching new core products/services: in-vehicle computing, driver • Investing $1.6 billion during FY 2018-20 to support its aggressive monitoring, fleet management telematics.48 development and production of electrified automotive products, • Investing in companies like Ten to strengthen development of systems and technologies.51 circuitry technologies.49 • Partnering with world-leading innovation platform Plug and Play to accelerate development in connectivity, autonomy, shared mobility, and electrification (CASE).52 • Investing in start-ups such as Dellfer to enhance connected vehicle cybersecurity.53 • Also investing in CASE-focused start-ups like FLOSFIA, Metawave Corporation, and InfiniteKey.54

22 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL AUTOMOTIVE SUPPLIERS:

BRIDGESTONE: A BIG TYRE COMPANY TURNING 3 TO NEW MOBILITY SOLUTIONS

Thanks to its growing investment capacity, Bridgestone, the huge global in all aspects, the company is enhancing the productivity of its core tyre tyre manufacturer, has been turning its focus to new and innovative business, while scaling the new through digital transformation, mobility business models: in fleet management solutions and mobility services. innovation, and key acquisitions.55 With its ambition to achieve “Dan-Totsu” (clear and absolute leadership)

Transform and grow the core Scaling the new • Digital transformation is supporting a high EBITDA margin and annual • Acquired TomTom Digital Fleet solutions with a view to becoming return on capital.56 a leading player in the MaaS market.59 • Growing the core tyre business by expanding global manufacturing • Plans to leverage data from the 860k vehicles using TomTom to and investing in predictive maintenance.57 improve tyre maintenance services.60 • Introduced EXAMATION, a new productivity-enhancing assembly • Investing in Digital Garage – an open innovation platform – and system at its flagship Hikone plant.58 pioneering a range of digital solutions like Mobox, FleetPulse and Bridgestone Connect.61

23 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL HEAVY EQUIPMENT MANUFACTURERS: ZPMC: NAVIGATING THE TRANSITION TO DIGITAL 3 PORT SERVICES

With annual revenues of over $3 billion62, ZPMC is the largest manufacturer and digitalization and use a blend of connectivity, IoT, AI, and cloud of heavy equipment for ports in the world63. But with revenue growth technologies to transform itself into a provider and integrator of intelligent increasingly inconsistent, the company is aiming to accelerate innovation end-to-end digital terminal solutions.64

Transform and grow the core Scaling the new • Acquired 50 per cent stake in Greenland Heavylift Holdings (Hong Kong) • Developed new intelligent terminal solutions (unmanned inspection to grow core shipping operations.65 vehicles, truck fleet control system, intelligent storage yards and energy • Established a Russian subsidiary66 to focus on producing shipboard use, simulation planning, etc.).68 equipment. • Pivoting from selling hardware to providing software and services • Cooperating with Shaanxi Automobile Holding to increase dominance in by leveraging Microsoft Azure IoT solutions.69 high-end core markets.67 • Partnered with Qingdao Port Group, and Ericsson on 5G smart terminal technology.70 • Developed the world’s first AI straddle carrier in cooperation with start-up Westwell Lab.71

24 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL HEAVY EQUIPMENT MANUFACTURERS: CRRC: THE WORLD’S BIGGEST ROLLING STOCK 3 MANUFACTURER ON TRACK TO LEAD IN THE NEW

Formed through a merger of two state-owned companies72, Beijing-based company is refocusing its core business internationally and diversifying CRRC is the largest rolling stock and locomotive manufacturer globally.73 into autonomous technologies and new energy vehicles.75 Looking to stem slowing growth in a maturing domestic market74, the

Transform and grow the core Scaling the new • Boosting core manufacturing productivity by deploying a self-developed • Testing a self-driving bus fleet in Changsha, part of CRRC’s expansion intelligent MES (Manufacturing Execution System).76 into IoV offerings.80 • Planning a new plant in Canada to fuel expansion in North America77. • Trialling an Autonomous Rail Transit System with smart trains and • Acquired CSR Times Electric and ZF’s Rubber and business unit to virtual lines.81 strengthen operations in European markets.78 • Collaboration with US-based PerceptIn to develop long-range machine • Developed CRRC Procurement e-commerce platform.79 vision technology for trains.82 • Developed advanced sensing, diagnosis, prognosis and intelligent decision making for rolling stock.83 • Long-term collaboration with FAW on new energy vehicle development, intelligent connectivity and mobility services.84

25 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL INDUSTRIAL AND ELECTRICAL EQUIPMENT MANUFACTURERS: SANY: A CHINESE TRAILBLAZER OF INTELLIGENT MANUFACTURING 3 SETTING SIGHTS ON INTERNATIONAL MARKETS

Sany, a top-ten global industrial equipment manufacturer, is reversing Leveraging the Chinese government’s “belt and road” strategy, the company recent revenue decline by diversifying its business, using the industrial IoT is looking to expand internationally by applying Big Data and developing and open platforms to kick-start a new era of productivity and profitability. world-class intelligent industrial manufacturing services.

Transform and grow the core Scaling the new • New MES and ERP software at Changsha and Shanghai • New manufacturing base in Shenzhen equipped with intelligent manufacturing sites.85 manufacturing systems and smart service platforms. 88 • Acquired concrete machinery manufacturer Putzmeister to accelerate • Partnered with BriSky Technology to develop intelligent industrial technological development and open up international markets.86 drones.89 • Driving international expansion along the Chinese Belt and Road initiative – • Invested in IROOTECH to establish China’s first open Industrial IoT overseas revenue has increased from 7% in 2011 to average around platform.90 36% for the five-year period from 2013 to 2017.87 • Launched Enlightenment Capital, a new venture capital fund to invest in IoT start-ups in China. 91

26 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 4 ASIA PACIFIC INDUSTRIAL FUTURE IN YOUR HANDS

27 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL 4 ASIA PACIFIC INDUSTRIAL FUTURE IN YOUR HANDS

The automotive and industrial success stories of tomorrow will be written by the companies that know how and when to pivot wisely to the new.

Legacy businesses will need to be revitalized to generate new investment How do we balance the need to scale new sources of value capacity. That capacity will need to be invested carefully in new business with the need to continue growing our core business? What models, ecosystem and start-up collaboration, and platform strategies, while #1 services do our customers value today – and what will they supporting enterprise-wide innovation. value tomorrow?

Courageous decisions will need to be taken. But fortune will favour the bold – the trailblazer companies are demonstrating that already. They show How can we transform our existing organization to release that the wise pivot is the key to reinventing and scaling tomorrow’s business capital for vital investments in the new? How do we prioritize #2 those investments? What do we buy and what do we build? value in the APAC industrial sector. What data can we leverage to create new insights and new Asia Pacific companies can begin their wise pivot journeys by asking value for ecosystem stakeholders? these key questions… Which combination of the five Pivot Levers will best help us make the shift in a careful, considered and sustainable way? #3 What are the operating models and external partnerships that would be necessary to support it?

28 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL REFERENCES

1 Business Wire (26 June 2018) https://www.businesswire.com/news/home/20180626006274/en/ 17 GGSMA Mobile for Development (20 March 2018) https://www.gsma.com/ Greater-China-Set-Dominate-Global-Industrial-IoT mobilefordevelopment/programme/ecosystem-accelerator/1000-tech-hubs-are-powering- 2 Accenture Research analysis ecosystems-in-asia-pacific-and-africa/ 3 Accenture Research Disruptability Index 2.0 2019 18 CNBC (2 May 2018) https://www.cnbc.com/2018/05/02/where-to-start-up-in-east-asia-china- 4 IDC study in partnership with Microsoft titled “Unlocking the Economic hong-kong-japan-south-korea.html Impact of Digital Transformation in Asia Pacific” (February 2018). https://news.microsoft.com/ 19 Nio’s market capitalization value accessed from Capital IQ (29 May 2019) apac/2018/02/21/digital-transformation-to-contribute- more-than-us1-trillion-to-asia-pacific-gdp- 20 Nio (9 July 2018) https://www.nio.com/news/bosch-and-nio-sign-strategic-partnership-agreement by-2021-ai-is-primary-catalyst-for-further-growth/ 21 Reuters (12 September 2018) https://in.reuters.com/article/us-nio-inc-ipo/in-teslas-shadow- 5 IFR. (18 October 2018.) “Global industrial robot sales doubled over the past five years”. chinas-nio-raises-1-billion-from-ipo-sources-idINKCN1LR2QJ https://ifr.org/ifr-press-releases/news/global-industrial-robot-sales-doubled-over-the- 22 MUJIN https://mujin.co.jp/en/ past-five-years 23 CNBC (30 October 2018) https://www.cnbc.com/2018/10/30/the-worlds-first-humanless- 6 World Economic Forum - The Readiness for the Future of Production Report 2018. warehouse-is-run-only-by-robots.html https://www.digitalcentre2020.com/news/apac-manufacturing-industry/ 24 Accenture Research ‘Wise Pivot’ Analysis 7 Nikkei Asian Review. (10 November 2018.) “Five things to know about Asian trade megadeal equipment manufacturing, and automotive original equipment manufacturing RCEP”. https://asia.nikkei.com/Economy/Five-things-to-know-about-Asian-trade-megadeal-RCEP 25 Toyota. (9 January 2018.) “President Akio Toyoda’s Speech at CES 2018”. https://global.toyota/en/ 8 European Commission (1 February 2019) http://ec.europa.eu/trade/policy/in-focus/eu-japan- newsroom/corporate/20566886.html economic-partnership-agreement/ 26 Toyota. (18 December 2019) https://global.toyota/en/newsroom/corporate/20353243.html 9 http://www.gstcouncil.gov.in/brief-history-gst 27 Toyota Annual report, Earnings transcripts, (23 May 2018) https://www.wsws.org/en/ 10 IBEF https://www.ibef.org/economy/make-in-india articles/2018/05/23/toyo-m23.html 11 Economic Development Board (22 March 2018) https://www.edb.gov.sg/en/news-and-events/ 28 (4 May 2018) https://www.bloomberg.com/news/articles/2018-05-04/toyota-is-said-to-plan-1-1- news/advanced-manufacturing-release.html billion-expansion-at-canada-plant; (14 March 2019) https://www.wsj.com/articles/toyota-to-boost- 12 Made in China 2025: Source- Knight Frank (5 September 2018) https://www.knightfrank.co.uk/ u-s-investment-to-nearly-13-billion-by-2021-11552575771; (22 January 2018) https://newsroom. blog/2018/09/04/key-trends-behind-the-growth-in-asiapacifics-industrial-and-logistics-market- toyota.eu/toyota-announces-new-investment-in-tmmf/ 13 Forbes (30 May 2018) https://www.forbes.com/sites/energyinnovation/2018/05/30/chinas-all-in- 29 Toyota (3 May 2018) https://global.toyota/en/newsroom/corporate/22406883.html on-electric-vehicles-heres-how-that-will-accelerate-sales-in-other-nations/#6727cc1ee5c1 30 Toyota (1 February 2019) https://global.toyota/en/newsroom/corporate/26434644.html 14 Livemint (21 December 2017) https://www.livemint.com/Opinion/4Vc9DNa58dm1ELw8UbCmTI/ 31 Reuters (13 June 2018) https://www.reuters.com/article/us-grab-toyota-investment/toyota-pumps- Japan-has-figured-out-factories.html 1-billion-in-grab-in-auto-industrys-biggest-ride-hailing-bet-idUSKBN1J907E 15 Accenture Research analysis 16 Source: Export.gov (6 September 2018) https://www.export.gov/article?id=Japan-Advanced- Manufacturing

29 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL REFERENCES

32 TechCrunch (4 February 2019) https://techcrunch.com/2019/02/04/toyotas-new-car- 50 Morningstar Equity Research Analyst report accessed through Capital IQ (12 April 2018) subscription-company-kinto-is-gamifying-driving-behavior/ 51 Denso (5 April 2019) https://www.denso.com/global/en/news/news-releases/2019/ 33 https://global.toyota/en/newsroom/corporate/21417666.html 20190405-g02/ 34 Toyota (2 March 2018) https://global.toyota/en/newsroom/corporate/21315381.html 52 PR Newswire (17 July 2018) https://www.prnewswire.com/news-releases/denso-partners-with- 35 Geely (7 January 2019) http://global.geely.com/media-center/news/geely-auto-2018-sales- innovation-platform-plug-and-play-to-advance-the-future-of-mobility-300682113.html reach-1-5-million-units-increasing-over-20-from-previous-year/ 53 Denso (22 February 2018) https://www.denso.com/cz/en/news/news-releases/2018/ 36 Geely (28 May 2019) http://global.geely.com/media-center/news/geely-announces- 20180222-g01/ new-energy-strategy-with-launch-of-smart-hybrid-flagship/ 54 Denso (6 December 2018) https://www.denso.com/global/en/news/news-releases/2018/ 37 Marklines (12 September 2018) https://www.marklines.com/en/news/217967 20181206-g01/; (14 December 2017) https://www.denso.com/global/en/news/ 38 China Automotive News (25 May 2018) http://autonews.gasgoo.com/new_energy/70014682.html news-releases/2017/20171214-g02/ 39 CNBC (23 February 2018) https://www.cnbc.com/2018/02/23/chinas-geely-buys-a-9-billion- 55 Bridgestone https://www.bridgestone.com/responsibilities/commitment/index.html; stake-in-daimler-reports-bloomberg.html Accenture Research analysis 40 Geely (1 February 2019) http://global.geely.com/media-center/news/geely-design-establishes- 56 Capital IQ platform for financials, Accenture research analysis uk-design-and-innovation-studio/ 57 Bridgestone (9 January 2017) https://www.bridgestoneamericas.com/en/newsroom/press- 41 Daimler https://www.daimler.com/innovation/case/shared-services/daimler-and-geely.html releases/2017/Bridgestone-Announces-Additional-180-Million-Investment-in-Wilson-Passenger- 42 China Daily (14 November 2017) http://www.chinadaily.com.cn/bizchina/motoring/2017-11/14/ -Manufacturing-Plant content_34506418.htm and Automotive World (2 October 2018) https://www.automotiveworld.com/news-releases/ 43 MarkLines (29 November 2018) https://www.marklines.com/en/news/220593 bridgestone-help-drivers-to-take-better-care-of-their-vehicles-thanks-to-my-speedy-predictive- 44 Geely (26 February 2019) http://global.geely.com/media-center/news/geely-to-collaborate-with- maintenance-solution/ qualcomm-and-gosuncn-on-mass-produced-5g-and-c-v2x-enabled-vehicles/ 58 Bridgestone (17 October 2016) https://www.bridgestone.com/corporate/news/2016101703.html 45 SmartEye (31 August 2018) https://industryeurope.com/geely-smart-eye-to-create-semi- 59 Bridgestone (22 January 2019) https://www.bridgestone.com/corporate/news/2019012201.html autonomous-vehicles/ 60 Bridgestone (22 January 2019) https://www.bridgestone.com/corporate/news/2019012201.html 46 Denso (19 October 2018) https://www.denso.com/global/en/news/news-releases/ 61 Iris Capital (17 January 2019) https://www.iriscapital.com/en/detail-news/bridgestone-emea-and- 2018/20181019-g01/ iris-capital-announce-a-corporate-venture-partnership 47 Morningstar Equity Research Analyst report accessed through Capital IQ (12 April 2018) 62 CapitalIQ, year ending 31 December 2018 revenue 48 Denso (18 December 2018) https://www.denso.com/global/en/news/news-releases/2018/ 63 ZPMC https://www.zpmc.com/gsjies.aspx 20181220-g01/ 64 Accenture Research analysis; Port Technology (22 May 2018) https://www.porttechnology.org/ 49 UFJ Morgan Stanley, Thematic Research report accessed through Capital news/zpmc_defines_its_digital_disruption_with_microsoft IQ (25 October 2017) 65 Splash247 (26 Jun 2017) https://splash247.com/zpmc-acquire-50-stake-four-gpo-heavy-lift-vessels/

30 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL REFERENCES

66 ZPMC http://www.zpmc.ae/articledetails.aspx?ArticleID=c6b863cc-cbd1-437e-af33- 85 SANY (1 August 2016) - https://www.sanyglobal.com/news/217.html 985533dc4e95 86 Morningstar Equity Research Analyst report accessed through Capital IQ (10 January 2019) 67 ZPMC (26 July 2018) https://www.zpmc.com/news/cont.aspx?id=75 87 Morningstar Equity Research report accessed through Capital IQ (9 January 2019) 68 ZPMC (21 November 2018) https://www.zpmc.com/news/cont.aspx?id=88 88 SANY (19 August 2016) https://www.sanyglobal.com/news/224.html 69 Microsoft IoT (21 June 2017) https://blogs.microsoft.com/iot/2017/06/21/from-cranes-to- 89 SANY (19 August 2016) https://www.sanyglobal.com/news/224.html shipping-containers-iot-helps-zpmc-transform-the-worlds-ports/ 90 SANY (16 October 2017) http://usa.chinadaily.com.cn/business/2017-10/16/content_33308859.htm 70 Port News (3 March 2019) http://en.portnews.ru/news/273214/ 91 SANY (14 October 2015) https://www.chinamoneynetwork.com/2015/10/14/sany-heavy-industry- 71 Safety4Sea (02 May 2018) https://safety4sea.com/zpmc-develops-worlds-first-ai-straddle-carrier/ launches-venture-fund-to-invest-in-iot-start-ups 72 Railway Pro (5 June 2015) https://www.railwaypro.com/wp/cnr-and-csr-established-the-worlds- largest-rolling-stock-supplier/ 73 Nikkei Asian Review (4 November 2017) https://asia.nikkei.com/Business/Company-in-focus/ World-s-largest-train-maker-China-s-CRRC-on-uphill-climb-post-merger3 74 Accenture Research analysis 75 Accenture research analysis 76 People’s Daily Online (15 August 2018) http://en.people.cn/n3/2018/0815/c98649-9491109.html 77 China Daily (5 May 2017) http://www.chinadaily.com.cn/cndy/2017-05/05/content_29210980.htm 78 International Railway Journal (12 April 2016) https://www.railjournal.com/in_depth/crrc-aims-for- europe 79 CRRC 2018 Interim results report http://www.crrcgc.cc/Portals/73/Uploads/Fil es/2018/8-31/636713013500842019.pdf 80 China Daily (19 February 2019) http://www.chinadaily.com.cn/a/201902/19/ WS5c6b69e7a3106c65c34ea191.html 81 Mail Online (24 October 2017) https://www.dailymail.co.uk/news/peoplesdaily/article-5012187/ The-world-s-smart-railway-opens-China.html 82 Railway Gazette (17 January 2019) https://www.railwaygazette.com/news/news/asia/single-view/ view/machine-vision-to-support-autonomous-trains.html 83 CRRC (14 September 2018) http://www.crrcgc.cc/en/g7389/s14333/t295924.aspx 84 Auto info (28 December 2018) http://english.autoinfo.org.cn/autoinfo_eng/content/ yztt/20181228/1815508.html

31 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL Authors Thank you to the following contributors:

RAGHU GULLAPALLI YU KAMIJO CHARLIE JIANG Managing Director Managing Director Managing Director Industrial & Products; Industrial Products, Industrial Industry X.0 Lead for X.0 Lead Asia Pacific, Africa, Equipment Lead Greater China Middle East & Turkey Accenture Japan Accenture Greater China

HIDEYA ABE JOHN SHEN Managing Director Managing Director ABHISHEK GUPTA Products, Automotive Lead Products Industrial Global Automotive Accenture Japan Accenture Greater China Research Lead Accenture Research SHUGO SOHMA HIMANSHU PATNEY Managing Director TL Research Products, Industrial Sr Principal Accenture Japan Accenture India PRAVI DUBEY Industrial Research Associate Manager TAICHI TASHIRO OLGA WROBEL Accenture Research Managing Director Industrial Research Products, Industrial Specialist Accenture Japan Accenture Poland

32 ASIA PACIFIC: SHAPING THE FUTURE OF INDUSTRIAL About Accenture Accenture Research

Accenture is a leading global professional services Accenture Research shapes trends and creates The views and opinions expressed company, providing a broad range of services and datadriven insights about the most pressing issues in this document are meant to solutions in strategy, consulting, digital, technology global organizations face. Combining the power stimulate thought and discussion. and operations. Combining unmatched experience and of innovative research techniques with a deep As each business has unique specialized skills across more than 40 industries and all understanding of our clients’ industries, our team of requirements and objectives, these business functions—underpinned by the world’s largest 250 researchers and analysts spans 23 countries and ideas should not be viewed as delivery network—Accenture works at the intersection publishes hundreds of reports, articles and points professional advice with respect to of business and technology to help clients improve of view every year. Our thought-provoking research— your business. their performance and create sustainable value for supported by proprietary data and partnerships with their stakeholders. With approximately 477,000 people leading organizations such as MIT and Singularity— serving clients in more than 120 countries, Accenture guides our innovations and allows us to transform drives innovation to improve the way the world works theories and fresh ideas into real-world solutions for and lives. Visit us at www.accenture.com our clients. Visit us at www.accenture.com/research

More information Join the conversation www.accenture.com www.linkedin.com/showcase/ accenture-industrial/

@AccentureInd

Copyright © 2019 Accenture [email protected] All rights reserved.