Industry 4.0: Welcome to the smart factory

After steam power, assembly lines, computers and electronics, Industry 4.0 is the epitome of digital production: The Internet of Things connects the entire value chain in the manufacturing industry through digitization and new technologies. People, machines, products, and systems communicate with each other in real time – automated processes get established. Smart factories are more efficient, more flexible, and more cost-effective. The advantages are obvious – but new processes also change the demands on the labor market, and challenge companies to make strategic decisions. In this Discovery, you will find out what digital twins in racing have to do with Industry 4.0, the many opportunities and challenges of transformation, and what role Infineon plays within it.

The fourth Industrial Revolution – what is Industry 4.0?

Robots move autonomously through factory halls and transport materials from point A to point B. Products communicate with machines, which make decisions and initiate their next production step autonomously. When devices determine that they need to be serviced in a timely manner, they automatically notify the technical service department. Centralized controls are a thing of the past. Welcome to the smart factory!

The term first appeared during the Hannover Messe 2011: Industry 4.0 is the Internet of Things for production, and transparently connects the entire value chain. It is therefore also referred to as the "Industrial Internet of Things", or IIoT for short. Industry associations and their member companies, the German Federal Ministry of Education and Research (BMBF) and the Federal Ministry for Economic Affairs and Energy (BMWi), have come together to promote the dawn of the fourth industrial age. Digitalization and the use of new technologies have since paved the way for intelligent machines that exchange information with each other and organize themselves. Processes across the entire value chain are connected and can be automated.

By linking the physical and digital world, production becomes more efficient, more flexible and more cost-effective. These possibilities give rise to far-reaching changes, both for companies and their employees. That is why the term Industry 4.0 stands for the fourth Industrial Revolution. After the steam engine (Industry 1.0), assembly lines (Industry 2.0), computers and electronics (Industry 3.0), intelligent, connected systems are now the fourth milestone of industrialization.

The first phase of the Industrial Revolution started with the invention of the mechanical loom in 1784. Mechanical production plants were powered by water or steam energy. The introduction of electricity as a driving force at the end of the 19th century heralded the second phase. For example, the first assembly line in the slaughterhouses of Cincinnati in 1870 made mass production based on the division of labor possible. The third phase began with the use of IT and electronics in production in the 1970s. In 1969, the first programmable logic controller (PLC) was introduced, enabling further automation. Today, we are in the fourth Industrial Revolution in which networked, intelligent systems operate in a smart factory.

Examples of Industry 4.0

According to the Statista survey "What is the significance of Industry 4.0 for your company?", 62 percent of German companies already stated that they would be using special applications for Industry 4.0 in 2021. This trend is continuing and has been evident for years in the fundamental way production is changing in how it’s carried out. For instance, machines can communicate via smart sensors – their sensory organs, so to speak. They collect data, which they pass on pre-filtered to a digitally linked platform. This shapes the memory or brain. There, the machine data is merged with information from other sources, such as business applications for resource planning (ERP). The data is evaluated, and the necessary actions are derived from the results.


The twins in racing: A smart example of Industry 4.0 are digital twins, which were already mentioned at the beginning of this Discovery. In collaboration with Siemens, the U.S. racing team Penske developed a virtual test bench for the production of new vehicle components. The idea behind it: Sensors attached to a real car measure values such as tire pressure, engine control or wind speed. These values are analyzed and transferred to a virtual vehicle model. The digital twin is created: the digital model of an object from the real world. With the help of this digital twin, engineers can simulate and test various configurations as well as designs and evaluate the results in real time. This way, the performance of a vehicle can be optimized even before it heads to the starting line on the racetrack. You can read more about this example in the article "Spotlight: Racing to win with digital twins" on the AMFG (Autonomous Manufacturing) website.

Many companies also use predictive maintenance – learn more about this topic in our Discovery "Predictive Maintenance: Smart Servicing". For more expert knowledge on this topic, you can also dive in our "Smart Factory" page. Predictive maintenance continuously evaluates machine data and compares it with past information. This allows for the identification of the conditions under which faults usually occur and service work can be carried out before expensive breakdowns ensue. The technology behind this is called edge computing: data is collected and evaluated "on the edge", at the location of the event. The relevant data – for example, a too high temperature – is then sent to the cloud where actions are derived from it. However, the principle of a smart factory is not limited to local areas: It can connect machines worldwide from different locations to create one huge, virtual factory.

New production processes based on Industry 4.0 applications are also emerging in the semiconductor industry. At Infineon, sites in Asia transmit their test results directly to the plant in Dresden. There, they flow into production, which has already been converted from manual to automated. Investments were also made at the Villach site in Austria, and fully automated production started at the end of 2021. In that same year, Infineon received an award from ROI-EFESO for its Industry 4.0 supply chain solution in the "Smart Supply Chain" category. The goal: to strengthen the resilience of its global production network against volatility and order fluctuations. 


Industry 4.0 in the automotive sector

Industry 4.0 is already successfully established in the automotive industry. Volkswagen AG has implemented an exciting approach with the "Transparent Prototype", which is described in more detail on the plattform-i40 website in the article "Volkswagen: Gläserner Prototyp": The AG uses company-wide RFID (Radio Frequency Identification) technology to detect components in test vehicles more quickly. The components are already fitted with RFID chips by suppliers at the factory. During vehicle testing, engineers can easily identify the prototype parts installed and read out detailed information they need for development. This means they have the right information at the right place, at the right time.

Another example of Industry 4.0 within the automotive industry is the joint venture between Porsche and the Schuler company, which is described in more detail in the article "Industrie-4.0-Prämissen für die Smart Factory" by ROI. In the city Halle an der Saale, a completely digital and automated press shop was put into operation. Digitalized from the order for production to the tooling to the production of the body parts. "Paperwork" is a thing of the past here – the future is cloud-based and transparent. In terms of sustainability, the press shop showcases low-emission operation using renewable energies.

Industry 4.0 in logistics

In logistics, Industry 4.0 technologies help optimize transport routes, utilize storage capacities precisely, and plan ahead. One example brings us to the river Elbe: According to the Statista survey "Statistiken zum Hamburger Hafen", seaborne cargo handling at the Port of Hamburg amounted to around 129 million tons in 2021. By 2030, this figure is expected to double. However, there is not enough space in the port to handle this amount. That's why the Hamburg Port Authority was faced with the challenge of needing to move containers faster. In an Industry 4.0 project, people, trucks, containers, ships, cranes, and traffic control systems were connected intelligently to solve this challenge. They communicate and provide business-relevant data in real time. As a result, trucks now reached their destinations faster and their drivers know where they can unload their cargo quicker. Shipmasters could plan their routes in advance. The results of the project simplified operations, enabling the Port of Hamburg to move goods at an advanced pace. This example is described in more detail on the Media Economics Institute website in the article "Fallstudie zur Digitalen Transformation – Smart Port Logistics".

Connected production becomes a strategy – Digitalization 4.0

Digitization in Industry 4.0 does not mean exploiting everything that is technically possible at all touchpoints. On the contrary, companies must fully digitize their production or manufacturing to successfully hold their own in the market and to be able to act flexibly – the competitive pressure on the international stage is great. Developing strategies for successful change management, optimizing processes, and saving costs is therefore part of the supreme discipline of "Digitalization 4.0". Intelligent, connected systems enable companies to produce even smaller quantities based on individual customer requirements for a profit. This gives them the chance to stand out from "low-cost suppliers" who position themselves in the market with mass production.

Demographic change also requires production to be optimized. After all, our society is becoming increasingly older, while the amount of employed people is reducing – something that cannot be fully offset by immigration either. The German Federal Statistical Office has calculated that the number of people in Germany aged 67 and over will rise by 42 percent to at least 21.5 million by 2040. By contrast, the number of 20- to 66-year-olds is expected to fall by 11 to 25 percent, depending on the immigration rate. Experts therefore agree that if we want to maintain our prosperity, we must make the world of work even more efficient in the future and utilize the available workforce better.

5G in Industry 4.0

In terms of efficiency and speed, the new 5G (Fifth Generation) mobile communications standard is seen as a key technology for the Internet of Things in Industry 4.0. Thanks to the rapid transmission of large volumes of data in real time, 5G enables high-performance communication. 85 percent of industrial companies consider this important for their business, according to the survey "Industrie 4.0 – so digital sind Deutschlands Fabriken" by Bitkom Research. With high-performance components, Infineon creates solutions in this area that ensure better energy efficiency. Find out how 5G works and in which everyday applications it shows potential in the Discovery: "5G – The high-speed mobile network of the future".



What does Industry 4.0 do to jobs?

What happens to people in companies when machines take over more and more tasks due to automation? Many employees are worried about their jobs – especially simple routine tasks can be automated. Jochen Hanebeck, CEO of Infineon, is calm in the face of this development: "Half of all employees will certainly be affected by digitalization. We don't see any jobs being lost overall." A prime example is Infineon's semiconductor production in Dresden. Here, the company produces chips on 200-millimeter and 300-millimeter wafers. The 300-millimeter line was designed for a fully automated production right from the start. On the other hand, the older 200-millimeter line has been gradually automated and connected to an ever-greater extent over the past few years. It’s degree of automation now is at around 90 percent. This has enabled the production site to increase its productivity by 70 percent since it was founded in the mid-1990s. At the same time, the number of employees has remained constant at around 2,000 over the past ten years. At the Dresden plant, digitalization and connectivity have maintained competitiveness, ensured growth and made a significant contribution to securing the site in the long term.

The study "Digitalisierung schafft mehr Arbeitsplätze, als sie vernichtet" by the Cologne Institute for Economic Research, which is described on the "Forschung und Wissen" website, also reaches a promising forecast: Digitalization of work and business processes creates more jobs overall than it puts at risk. However, the study also confirms that the demand for more highly complex jobs will rise in the future, especially in the areas of IT, data analysis and maintenance. Meanwhile, predominantly simple routine tasks will be less in demand – and there are also positive aspects: When a robot hauls heavy boxes around day after day, people not only maintain their health, but also have more time to devote to more demanding tasks. One thing is clear: depending on the activity and the market, many of today’s man-made jobs will disappear. At the same time, new skills and business models will also create new jobs that have yet to exist. In the field of sustainability for example, new skilled workers will be needed for green energy, environmentally friendly buildings and smart cities. People will continue to take the center stage – while Industry 4.0 will create the conditions for long-term job security.

These developments require a willingness to further personal development among employees throughout their lives. The keyword is "EdTech", a combination of education and technology that offers individual opportunities for training and education. This is where the commitment of companies is also needed. One successful example is Uwe Häßler: The trained electrician started as a skilled worker within the mechanical engineering company Harting Applied Technologies in 1990 and switched to PLC programming in 2001. Today, he develops Industry 4.0 systems and IT interfaces. "Three years ago, when I started the research project, all the things that were mentioned then were unimaginable visions for me," says Uwe Häßler, "At the time, I said it would never work. Nowadays, I myself am one of those who say, yes, it can be done. And I'm the one developing these visions."

Digital security in Industry 4.0

The more connected devices, the more potential security gaps: The technological infrastructure of Industry 4.0 and IIoT places high demands on digital security. As long as production machines are separated from IT, it is relatively easy to shield them from the outside world. In the connected and constantly evolving world of Industry 4.0, on the other hand, there are many ways to gain access. Cybercriminals can aim to:

  • bring production facilities under their control,
  • manipulate or falsify machines (data poisoning),
  • carry out economic or industrial espionage,
  • collect personal data that is sold on the Darknet,
  • seek access to employees via social engineering.

A well-known cyber-attack occurred in May 2017: The "Wannacry" crypto Trojan attacked computers of the National Health Service in the United Kingdom, the car manufacturer Renault in France, and Deutsche Bahn, amongst others. The malware encrypted systems and caused them to fail temporarily. With this method the hackers aimed to extort a ransom.

To shield against such scenarios, companies must therefore consider the security of their Industry 4.0 technologies from the get-go. On the one hand, this means always keeping systems up-to-date and applying security updates – on the other hand, a combination of software and hardware-based security solutions can ensure the protection of connected machines and communication nodes. Security often starts with the chips used in the devices. Ideally, these are already protected against cyber-attacks. Examples include Infineon's OPTIGA TPM-chips. They can be installed in routers, industrial PCs or complex control units and serve as identification of the devices for the communication partners within the network. Another future topic will be "Post Quantum Cryptography". Here, Infineon is already developing solutions to ensure the future data security of quantum computers

Upfitting old machines for the internet

In addition to security, companies face a fundamental challenge in their Industry 4.0 projects: How do they connect their machines to the internet in the first place? Manufacturers today do offer new devices that already have IoT modules integrated – but very few factories are built from scratch. They operate with a historically grown production line that contains machines of various ages. Such equipment is expensive and cannot be replaced in one fell swoop. While we as consumers buy a new smartphone or PC every three years, industrial machines are often in use for 20 years or more.

To make these older devices fit for Digitalization 4.0, sensors, software, and an IoT-capable industrial control system must be retrofitted. The market offers retrofitting solutions for this purpose. For example, the IoT gateway from Bosch Rexroth was even able to connect a pedal-driven lathe from 1887 to the internet. A sensor monitors the speed of the lathe and transmits this data to a switching device: the IoT gateway. This in turn is connected with other company systems. A monitor on the lathe displays the transmitted data in real time. This tells you whether you need to pedal faster or slower to maintain the optimum speed. You can find out more about IoT in our Discovery: "What you need to know about the Internet of Things".


The future of Industry 4.0

What is the future like in the eyes of manufacturing companies? The answers vary, but the opinion is clear: 95 percent clearly see Industry 4.0 as an opportunity for their business according to the Bitkom press release "10 Jahre Industrie 4.0 – was noch zu tun ist". The implementation of an ecosystem for digitalization and new technologies already plays an important role not only in industrial applications, but also in areas such as climate, energy, and mobility. However, the manufacturing sector as the heart of the German economy, is currently feeling left behind: two-thirds of these companies consider themselves to be lagging or say that they are already out of the loop. The challenges lie not only in the financial resources needed, but also in the requirements for data protection and IT security. Jochen Hanebeck, CEO of Infineon, believes Germany is very well positioned: "Basically, we are excellently positioned for Industry 4.0 in Germany and Europe. We have the entire value chain and we have mastered the production of very complex products of the highest quality. In short, we are good at making things."

Find out how Infineon is actively shaping the future of Industry 4.0 with its semiconductor solutions on our page: "Smart factory".



Last update: June 2022