"Increasing Reshoring Companies through Smart Factory Adoption"

Interview with Park Han-gu, Head of Smart Manufacturing Innovation Promotion Team at the Ministry of SMEs and Startups
Goal to Distribute 30,000 Smart Factories by 2022
"Introducing Smart Factories Will Lead to a Shift in Work Patterns on Production Sites, Not Job Reduction"

Park Hangu, head of the Smart Manufacturing Innovation Promotion Group, emphasized that "the introduction of smart factories for manufacturing SMEs in the post-COVID era is not a choice but a necessity." He also added that the adoption of smart factories is the only solution to respond to the changing global value chain after COVID-19 and to enhance corporate competitiveness. Photo by Kim Heeyoon

[Asia Economy Reporter Kim Heeyoon] To support the digitalization of industries accelerated by COVID-19, the government has started supporting the establishment of smart systems by providing preferential guarantees of 2 trillion won to small and medium-sized enterprises (SMEs) utilizing big data and artificial intelligence (AI). Through this, the plan is to create 300,000 new jobs by 2025 and increase the industrial value-added ratio to 65%.

Park Hangoo, head of the Smart Manufacturing Innovation Promotion Group under the Ministry of SMEs and Startups, which oversees the distribution and expansion of domestic smart factories, emphasized in an interview with Asia Economy on the 22nd that “the introduction of smart factories for manufacturing SMEs in the post-COVID era is not a choice but a necessity.” Park also added that the introduction of smart factories is the only solution to respond to the changing global value chain after COVID-19 and to enhance corporate competitiveness. According to statistics from the Ministry of SMEs and Startups, through the establishment of smart factories, production costs and industrial accidents decreased by 15.9% and 18.3%, respectively, while productivity and quality increased by 30% and 43.5%, respectively. The Ministry is accelerating support projects with the goal of establishing 30,000 smart factories by 2022.

Below is a Q&A with Director Park.

Q. In manufacturing sites, smart factories are often understood simply as ‘factory automation.’ How would you explain smart factories and factory automation respectively?

A. Factory automation is the simple automation of production processes using computers or robots. On the other hand, smart factories focus on the organic connection between each process through data collection and analysis in addition to automation. Using the collected data, production time and costs are minimized while producing market-desired products through optimal processes. In other words, the factory can be autonomously operated centered on big data-based AI.

Q. What achievements have been made since the launch of the Promotion Group?

A. First, establishing a policy promotion foundation that enables the introduction of smart factories is a major achievement. Robots are deployed in poor production sites, and simple tasks are entrusted to automated equipment, which made us strongly feel the necessity for labor to change into knowledge workers. Last year, we simultaneously carried out digitalization up to collecting and storing process data measured from automated equipment, thereby expanding the spread of smart factories. I was worried that achieving the initial goal might be difficult, but the response from the field was so enthusiastic that the project closed on November 20 last year.

Q. There are concerns that the introduction of smart factories reduces jobs.

A. The personnel reduced by robots being deployed in simple labor tasks can be reassigned to tasks such as quality improvement and design changes. Through the introduction of smart factories, simple laborers are transformed into knowledge workers. It becomes an opportunity to redeploy optimal personnel in suitable environments. When I introduced smart factories at POSCO, there was a case where personnel responsible for signaling and rope handling of large ceiling cranes were reassigned to control these unmanned operations and then transferred to production sites, resulting in greater efficiency.

Q. What is the current status of smart factory distribution in Korea?

A. From 2014 to last year, 19,799 companies were supported. Since there are about 67,000 manufacturing companies with 10 or more employees domestically, this corresponds to a distribution rate close to 30%. In fact, the smart factories distributed so far correspond to basic-level systems at levels 1 to 2. Since productivity improvement and defect rate reduction have been proven, the remaining task is to raise the level by introducing AI technology to collect, utilize, and apply big data based on this.

Q. How has COVID-19 affected the establishment of smart factories?

A. It has been recognized as a crisis recovery measure for domestic small and medium manufacturing companies. Smart factories have also emerged as a reshoring solution for overseas companies. Among domestic manufacturing companies that expanded overseas to reduce production costs and labor costs, those affected by COVID-19 in raw material supply, etc., will be supported by the government to enable reshoring through the introduction of smart factories from a long-term perspective.

Q. Are there cases where productivity has explosively increased due to the introduction of smart factories?

A. Infusion sets used in domestic hospitals are currently all imported. About 13 million units are used annually, and since all are assembled manually, they are assembled in China and Southeast Asia and imported. We proposed producing this labor-intensive product in a technology-intensive factory, and currently, two development companies have introduced smart factories and are manufacturing the sets. We plan to distribute domestically produced quantities with price competitiveness over imports to the market within this year.

Q. What is the smart factory manufacturing data platform construction project, which is this year’s priority project?

A. The reality is that most SMEs find it difficult to analyze and utilize data collected after introducing smart factories. Therefore, to enhance the usability of manufacturing data at the government level, a manufacturing data platform center dedicated to SMEs will be established to provide data analysis and customized services for each company. In addition, to support supply chain improvement for increasing sales of companies that have introduced smart factories, a digital cluster project will be promoted. While productivity of companies that introduced smart factories increased by 30%, sales only rose by 7.7%. This can increase only if upper-tier vendors absorb it. The goal is to nurture companies with economic efficiency and competitiveness through standardized one-package work like alliance companies for supply companies in each industry.