Smart Manufacturing Gains Ground in Taiwan

Faced with rising labor costs, Taiwanese companies are increasingly utilizing the latest sophisticated technologies to go beyond conventional automation to embrace Industry 4.0.

A growing number of Taiwanese manufacturers are making the leap to smart factories, reflecting the worldwide trend towards industrial automation known as “Industry 4.0.” The Tsai administration has made the development of smart machinery an integral part of its 5+2 Innovative Industries initiative, and the government continues to work toward bringing Taiwan in line with Industry 4.0 standards.

Smart manufacturing entails automating both the operations of a factory and its management, utilizing a combination of automation technology, IoT (Internet of Things), and artificial intelligence (AI). Revamping a factory with smart machinery carries the potential of significantly reduced operational costs and improved efficiency and quality.

The trend also poses some major challenges for Taiwan’s industrial sector. One is the need for specialized talent, including those trained in AI, automation, robotics, industrial control, IoT, communications, and software. Wu Yu-tien, president and CEO of Kaohsiung-based Advanced Semiconductor Engineering (ASE), notes that over the past 10 years the company has been able to cultivate only four specialists in big data analytics.

Another, larger challenge is ensuring information security, a critical factor given the central role of the internet in smart manufacturing processes. The extensive disruptions caused by a computer virus at the Taiwan Semiconductor Manufacturing Corp. in August 2018 highlight the importance of security in maintaining smart manufacturing systems. 

Some Taiwanese companies are adopting smart manufacturing in their offshore operations as well as domestically. For example, TECO Electric & Machinery, Taiwan’s leading manufacturer of motors, this July launched a new factory in Vietnam’s Binh Duong Province that will produce small, high-efficiency motors using smart manufacturing technologies developed by the company over the past several years.

Smart-manufacturing production facilities at TECO Electric & Machinery Co. Photo: TECO

The plant boasts an intelligent painting process, in which the paint designated for each specific workpiece is mixed and applied automatically after scanning of the work order. In addition, sensors and image-recognition technology detect precisely the amount of wear on the factory’s stamping press, which cuts costs due to premature replacement of the die or disruption of production because of a breakdown.

Industrial motors at work in the production line are outfitted with sensors that detect abnormal temperatures or vibration. The data is transmitted to the MHM (machine health management) system, enabling workers to recognize and solve any issues in a timely manner.

Once completed, parts are carried away to designated locations by automated guided vehicles (AGVs), which travel along preset routes, avoiding collision. Workers can monitor the status of these smart production lines via a smartphone or iPad.

“Smart manufacturing has benefited us in multiple ways,” says TECO’s Acting President J. George Lien. “We have enjoyed reductions in the amount of machinery equipment used, as well as in consumption of energy and materials. We have also seen increases in productivity and output, and a 300% reduction in our defect rate.”

Lien says the next step is to ensure the profitability of the company’s smart-manufacturing program, starting by selling its sensors and image-recognition technology to other local manufacturers. The added value gained by those companies will help them alleviate some of the pressure brought on by the U.S.-China trade war, he notes.

At the Victor Taichung factory in central Taiwan, production lines making machine tools operate independently for 72 hours nonstop while plant managers monitor operations remotely on mobile devices. The company’s smart machines, robotic arms, sensors, and automated warehousing devices are all connected by means of the company’s industrial IoT system.

“We’ve been shipping custom-made smart manufacturing systems costing NT$20 million to $30 million (US$625,000-$937,500) each to customers in Taiwan, China, and Southeast Asia,” says Chairman Bert Huang.

Innolux Corp., a leading Taiwanese LCD panel maker, began developing smart manufacturing operations in its factories in 2012. Over the past several years, the company has invested over NT$3 billion in this endeavor, and most of its production, assembly, and inspection operations have reached very high levels of automation.

This year, the company stepped up efforts to reach its goal of lights-out manufacturing. Also known as “dark factory,” the term refers to the full automation of manufacturing operations without the need for any workers to be present. As a result of this initiative, Innolux’s workforce has declined to 55,000, down from 136,000 in 2012.

Power-supply producer Delta Electronics has also entered the automation game. Delta has developed robotic arms for its manufacturing process, allowing it to reduce manpower at its China and Taiwan factories by 60% since 2015. It is now building a NT$1 billion robotic R&D center in the Central Taiwan Science Park, scheduled to begin operations in 2020.

Delta has been selling its solution to manufacturers in China, Europe, the U.S., and Southeast Asia. “Automation will be a major growth driver for the company in the coming years,” says Yancey Hai, Delta’s chairman. He notes that demand from China accounts for half of the company’s profits. “Given soaring labor costs and high turnover, factory automation is the only path forward for China,” says Hai. 

Other Taiwanese firms aiming at new levels of automation include Quanta Computer, AU Optronics, and ASE. These companies use various robotics, IoT, big data analysis, and AI technologies in their manufacturing processes. The result has been large savings in terms of usable space and energy, as well as increases in productivity.

Foxconn pulls ahead

Hon Hai Precision (also known as Foxconn), the world’s largest contract electronics manufacturer, has made huge strides in automating production. In order to cope with rising labor costs in China, where the bulk of its manufacturing operations takes place, Foxconn has made some sweeping changes that have received international attention.

A prime example is Foxconn’s dark factory in Shenzhen’s Longhua District. Visitors to the factory must use flashlights, as the only light source comes from the small green lights on machinery indicating that the equipment is functioning normally.

One of the facility’s production lines makes OTT (over-the-top) set-top boxes. Manufacturing, assembly, and packaging of the products have all been fully automated. Foxconn developed most of the robots – which the company calls “Foxbots” – used in the process. The entire production line requires only 30 workers, who mostly supervise operations, a huge reduction from the 300 that were needed for pre-automated production.

Foxconn also maintains a dark factory in Kunshan in China’s eastern Jiangsu Province. The factory’s automated manufacturing process covers delivery of materials, loading and unloading, assembly, and packaging. The entire factory now employs only 800 workers, as opposed to 3,000 in 2015, while production value over the past four years has increased by 38.7%.

Substituting automated machinery and robots for laborers has not only slashed production costs, it has also mitigated the issues associated with managing an enormous workforce, as manifested in the rash of suicides that took place at Foxconn’s Shenzhen production base in 2010. 

Foxconn is the only Taiwanese manufacturer to make it onto the World Economic Forum’s list of 16 “lighthouse factories” – facilities that have employed Industry 4.0 technologies at scale and have seen impressive gains.

In 2015, Hon Hai established Foxconn Industrial Internet (Fii), which focuses on automation and machine systems for smart manufacturing. This September, the company unveiled its plans for a new factory and office building in Mount Pleasant, Wisconsin.

Li Jieh, vice president of Fii, notes that the new plant would feature data-oriented management, employing IoT technology that allows workers to manage and control equipment from a network operations center inside the facility. The factory’s robots would complete entire work flows precisely, rapidly, and safely in darkness, enhancing the quantity and quality of production, reducing costs, and minimizing inventories.

Fii brought in revenue equivalent to US$3.8 billion in 2018, a 17.16% increase from the previous year.

Taiwan’s government, aware of smart manufacturing’s critical importance to the island’s industrial development, has rolled out several initiatives aimed at furthering local manufacturers’ embrace of the new and emerging technologies.

One of the initiatives was to organize a team of academics and industrial experts to assist local firms in introducing smart-manufacturing processes into their operations. Since its inception, the team has provided services to over 500 small and medium-sized enterprises in Taiwan.

In addition, the semi-official Industrial Technology Research Institute (ITRI) in 2018 launched its Intelligent Manufacturing Pilot Production Site at the Taichung City Precision Machinery Innovation Technology Park. Operation of the site’s equipment is controlled remotely by an MES (manufacturing execution system), which receives and analyzes information relayed by sensors and RFID (radio frequency identification) on the production line. It is also able to make on-the-spot adjustments, providing for both small-volume and large-variety production. Through the use of AI, the system can detect signs of malfunction and arrange for timely rectification.

Chen Lai-sheng, chief executive of ITRI’s Smart Machinery Center, notes that the MES is combined with resource planning software and sold to customers as a single module for a fraction of the price of similar systems sold abroad. The system makes technology transfer more convenient. So far, the center’s six-person team has helped 30 local enterprises set up smart production lines.

ITRI’s system can be used to make metal parts for a wide range of industries, including bicycle and automotive, ICT, semiconductor, machine tool, hardware, and aerospace manufacturing. It doubles as an open laboratory in which SMEs can experiment with different configurations and choose overall solutions based on their specific manufacturing needs.

ITRI was also responsible for the AGV system used by TECO in its new Vietnam plant. The system includes up to 100 vehicles that travel along different routes on a factory floor.

To encourage SMEs to ramp up their smart manufacturing practices, the Ministry of Economic Affairs’ Industrial Development Bureau in 2018 began promoting its smart machine box (SMB). Installed on existing machinery, the SMB connects each piece of equipment by way of Microsoft Azure and IoT Edge technology.

The Bureau helped 61 SMEs install an SMB on 1,300 pieces of machinery equipment in 2018. That number is expected to rise to over 9,100 boxes installed by 2022. 

This June, the Executive Yuan approved amendments to the Statute for Industrial Innovation that will provide tax incentives for those investing in smart machinery between 2019 and 2021. The amendments have been forwarded to the Legislative Yuan and are awaiting ratification.

ITRI’s Chen credits Taiwan’s impressive advances in Industry 4.0 to the government’s large investments in smart manufacturing and related technology. He emphasizes the importance of this trend to Taiwan’s future development. “Taiwan is squeezed between industrially developed and emerging countries,” he says. “Smart manufacturing is the only way forward.”

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