Can AI be a lifeline for legacy producers?

With the worldwide financial system present process deep restructuring and technological breakthroughs accelerating, China’s manufacturing sector is experiencing a structural transformation of historic proportions. By June, manufacturing value-added accounted for 27.3 % of China’s GDP, cementing the nation’s place because the world’s largest manufacturing hub for the 14th consecutive 12 months.

But beneath these spectacular figures, conventional producers proceed to grapple with rising challenges: low manufacturing effectivity, rising operational prices, and mounting environmental strain. With labor and useful resource prices rising, many legacy producers are seeing their revenue margins shrink, and their long-term sustainability aim diminish.

In opposition to this backdrop, synthetic intelligence and the economic web are rising as highly effective drivers of change. For a lot of getting old industrial giants, the trail from “Made in China” to “Created in China” lies in know-how adoption. However this journey isn’t straightforward; it calls for large investments in automation tools, software program methods, digital infrastructure and workforce coaching.

Some corporations, nonetheless, are displaying the way in which ahead. By together with AI and industrial web into their core insurance policies, and steadily rolling out digital upgrades, they’re reworking excessive upfront prices into excessive returns.

Take the Midea Group as an example. As soon as referred to as a serious dwelling equipment producer, Midea is redefining its tech frontier and enterprise panorama. In 2024, the corporate reported income of 409.1 billion yuan ($56.97 billion), with its industrial and industrial options division contributing 104.5 billion yuan, a steadily rising share.

At its manufacturing facility base in Shunde in Guangdong province, Midea has launched AI-powered scheduling methods and good robots, capturing real-time manufacturing knowledge by means of greater than 3,000 sensors. And AI algorithms dynamically reconfigure manufacturing strains primarily based on order fluctuations. This “Business 4.0” setup has boosted Midea’s provide chain responsiveness by 40 % and improved stock turnover effectivity by 25 %.

Midea has additionally constructed its personal industrial web platform, M.IoT, which hyperlinks each step of the worth chain, from uncooked materials sourcing to manufacturing, logistics and after-sales. The outcome: a closed-loop knowledge system that considerably strengthens digital decision-making. Backed by robust R&D and end-to-end digital integration, Midea is growing a aggressive edge on the worldwide manufacturing stage.

However not all corporations have reaped rewards from digital transformation. Some have fallen into the “tech spending entice”, the place investments in know-how fail to ship actual returns, typically because of flawed technique or poor execution.

Additionally, take into account Zhejiang Furun’s failed digital pivot. In 2016, the textile firm carried out a “conventional trade + digital financial system” coverage, buying Hangzhou Taiyi Zhishang Know-how Co for 1.2 billion yuan and later investing 750 million yuan to construct a dual-core mannequin of textiles and digital promoting. But as regulatory strain mounted on China’s web promoting sector, Taiyi Zhishang missed its revenue targets by a large margin. And in 2021, Furun needed to write off 240 million yuan in goodwill.

Furthermore, its core textile enterprise suffered because of excessive environmental compliance prices and rising uncooked materials costs, with its revenue margins declining from 21 to five %. As a matter of truth, in 2020, the corporate shut down its printing and dyeing base in Zhuji, Zhejiang province. As a substitute of discovering a brand new development engine, fulfilling Furun’s digital ambitions turned a monetary burden.

Furun is not alone. In March, Lionhead, a 24-year-old cement producer, shocked markets by saying its entry into the AI sector by means of the acquisition of Hangzhou Leaper Know-how. The transfer raised a significant query: Can a heavy-asset cement agency actually morph right into a supplier of AI-driven manufacturing options? The transition from bricks to algorithms stays unsure.

Trying forward, AI and the economic web will proceed to redefine the highway map of China’s conventional producers. The promise of smarter, extra environment friendly manufacturing is actual — nevertheless it calls for greater than flashy high-tech, together with a strategic imaginative and prescient, deep technical capability, and organizational alignment. Whereas some corporations have already confirmed that digital upgrading can yield exponential returns, others stay trapped in a cycle of pricey trial and error.

Digital transformation is not only about upgrading machines. It is a full-scale reconfiguration of the worth chain. Solely by rightly studying the indicators and advancing with self-discipline can producers actually evolve from old-world factories to new-age good producers, and safe their place within the world industrial future.