Inside fDi: How manufacturing became smart and sexy

It wasn’t so long ago that manufacturing was almost a dirty word among local economic developers. Everyone wanted their jurisdictions to be post-industrial and to focus on tech and services, to move up the fabled value chain. But a funny thing happened on the way to manufacturing’s funeral. It has now found new life in a slimmer, sexier form, and is in demand again.

Industry’s latest iteration – Industry 4.0 – has breathed fresh oxygen into not only the manufacturing sector as a whole but also into locations that production facilities inhabit. As we report in our cover story, Industry 4.0 is giving rise to smart factories that are reshaping the manufacturing industry and redirecting foreign investment onshore, including – perhaps most especially – in developed countries. Industry 4.0 technology, which requires skilled labour and highly developed infrastructure, is incentivising advanced manufacturers to bring production closer to customers rather than shunting it to low labour cost locations. This trend has vast implications for FDI, macroeconomics and supply chains.

Europe, with its early embrace of and enthusiasm for the smart factory concept – I can remember German economic developers using the Industry 4.0 term long before it became a buzz-phrase in other parts of the world – has a lead in seeing FDI dividends from it. Europe has received 32% of the world’s greenfield investment projects in manufacturing since 2009, while in Asia-Pacific the figure is 32% and in the US 14%, according to fDi Markets.

But perhaps its most powerful effect is at the city level. In the ‘post-industrial’ era, urban developers and public animosity pushed factories further and further into the suburbs, or out of the country altogether. This made sense at a time when manufacturing wasn’t just a dirty word, it was a dirty industry. But as the sector cleaned up its act and harnessed technological innovation to become more efficient, it became more attractive as a lifeforce for cities and started to return, with open arms, to city centres. This can help reverse the fraying and decaying experienced by many urban cores, if handled properly. 

“The future of cities is with manufacturing within the cities,” Stefan Schostok, mayor of Hannover, told our recent fDi Podcast on the topic.

Reports of the death of manufacturing in developed economies and in cities were, it seems, premature. Industry 4.0 is leaner and greener than its ancestors; it is not only fighting fit, it is more fit for cities. It also requires new and different skills, which require new approaches to workforce training and development: a challenge for local economic developers as well as opportunity to give new life to their landscapes as well as mindscapes.

Courtney Fingar is editor-in-chief at fDi Magazine. Email: courtney.fingar@ft.com