Smart upgrading of China’s process industries
Will China’s economy experience a hard landing? This is a topic that stirs hot debate among scholars every year, reflecting the various daunting challenges and uncertainties in China’s recent economic development. Views vary, but automation, optimization, and energy efficiency efforts are likely to help. As the backbone of China’s economy, the manufacturing industry’s stable growth means far more than sheer numbers in China’s strategic value. Manufacturing is the foundation of the development of the whole country. But in some industrial sectors, excessive capacity has become quite a serious issue for industries like iron and steel.
Overcapacity is not the only problem
"For China’s steel industry, a reshuffle to reduce overcapacity is inevitable. In fact, most developed economies have undergone such a process-for example, there was rapid economic expansion in the booming iron and steel industries, then the economic growth returned to normal, leaving those industries struggling with overcapacity. Capacity digestion and reduction are no doubt the urgent tasks facing China’s steel industry; however, enterprises need to do far more than just address these. There are many other aspects to improve, such as operational performance and environmental friendliness," said Erik Oja, senior vice president and head of the process automation division, ABB China.
Oja used energy savings as an example. As iron and steel is a very energy-demanding and carbon-emitting industry, saving energy through the optimization of the production process, for instance, the recycling of waste heat for power generation, is crucial to address China’s environmental problems. Saving energy translates into less carbon emissions.
While the "new normal" of China’s economy makes some people lament the end of double-digit annual economic growth, it also brings confidence to those who believe that a more scientific and rational development mode will lead China to sustainable growth. According to Oja, Chinese industry needs to focus on quality, not quantity. China’s capacity in several industries has been among the world’s largest for years. But nowadays, "quality," "productivity" and "lean" are the new keywords.
Currently, some process industries, such as metal and paper making, are facing different levels of overcapacity. On the one hand, capacity reduction is unavoidable; on the other hand, many old production lines need to be upgraded, and a successful upgrade will deliver long-term benefits.
"Air pollution has become quite severe in China, but it’s also important to know that the industrial pollution was similarly severe in Western countries in the 1960s-1970s," Oja said. "The situation in Europe and the U.S. has seen great improvement, and nowadays the daunting task comes to China. However, as it’s a different time, the approach can also be different."
Thinking of the next level
Today, as China’s economy enters a new stage, so does its endeavor of industrial transformation and upgrade. In September 2014, ABB announced its "next level" global strategy for 2015-2020.
During the next five years, the company will place more focus on profitable growth, relentless execution and business-led collaboration. It will drive growth by coming closer to customers and markets, offering faster responses and more innovations to meet customers’ demands.
At its process automation division, the most evident organization framework change is that oil, gas, and chemicals, formerly a part of the process industries, will operate as a separate business unit. This demonstrates ABB’s determination to increase investments in this field.
ABB has set up more than 200 service stations across China, providing service packages including spare parts, after-sales repair, annual service packages, equipment lifecycle management, energy efficiency assessment, as well as predictive service and remote monitoring services.
Go smart to create value
Currently, the industrial community is implementing a few novel concepts and visions about the future development, such as Industry 4.0, the Internet of Things, smart manufacturing, and digital factory. These visions or concepts share many similarities but with different focuses. Which concept or approach will better address the realistic needs of China’s process industries? Oja has his own opinion.
"Actually, all these concepts or visions are what China needs. They have something in common, but with different focuses. In my opinion, all these expressions have three core elements: digitalization, networking, and-the most important one-how to translate the advantages of the first two elements into value," Oja said.
As sensor technology advances, factories can easily collect production data of process units. Networking enables the flow of these data. But how will these technical advantages be translated into value? A case in point, downtime means huge loss and waste in some sectors, but a smart factory can effectively solve operation problems before the occurrence of downtime, through data capture and analysis.
"What we deemed as advanced technologies 10 years ago are outdated. We have much smarter technologies to ensure reliable and sustainable production. What’s more, we can consider all these issues from the perspective of plant lifecycle management, thus reducing the total cost of ownership for customers, and this is the true value," he said.
Innovations in the changing market place
When talking about the trends of process industries, Oja used the cellphone market as an analogy.
"If I were to choose a cellphone only to make calls, the conventional Nokia models are more reliable choices. However, if the cellphone must provide multiple functions such as camera, email, and Internet surfing, I will choose new smartphones. This is why several handset titans were eliminated, because of market changes and consumers’ increasing needs," Oja said. By referring to the replacement of a conventional cellphone with a smartphone, Oja was making an analogy to the replacement of conventional single-function products with smart and integrated solutions in process industries.
"The market changes in the process industry won’t be that fast, yet in the long run, the trends of increasing focus on integrated solutions will rise," he said.
To seek development amid changes, China’s process industry needs to deploy "smart technologies" for "intelligent upgrading." ABB provided an integrated solution for the COSCO Nantong offshore rigs. The solution, including integrated power, propulsion, and automation systems, can help reduce fuel consumption by 25%, apart from a significant improvement in the operational performance of the ship.
We have smart technologies, but to "go smart" requires not only technologies, but also enterprises’ insights and innovative thinking about the market. In the fast-changing market, there is no permanent advantage or strength. Only the fittest will survive. China’s process industrial companies need to have strategic visions and continue to improve core competitiveness, to realize sustained growth.
– Edited by Joy Chang, digital project manager, Control Engineering, firstname.lastname@example.org