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Digital technologies: a central component of the 4th industrial revolution

All digital technologies together – the Internet of things, big data analysis, cloud computing, augmented reality and the use of platforms – constitute a central component of the fourth industrial revolution, highlighted the ECLAC in a report.

Digital technologies allow greater integration of production processes, reduction of governance and transaction costs, more efficient coordination of complex global value chains, and faster access for suppliers to global value chains.

When digitization is used in manufacturing, it increases the service component in manufacturing, a phenomenon known as “servicification” of manufacturing production.

However, digital technologies are in different stages of development and penetration in the business world.

On the one hand, they favor companies in developing countries, as they reduce transaction costs and facilitate access to markets and integration into global value chains.

On the other hand, digital technologies reveal and deepen the technological gap with industrialized countries and accentuate the market power of large digital platforms, stimulating phenomena of economic concentration that penalize less developed countries.

In fact, according to ECLAC, digitally enhanced international production networks tend to concentrate more value in a few developed economies, primarily the United States, and have a clearly light international footprint in terms of physical assets. Automation is based on the use of advanced robots.

At present these technologies are limited to a few sectors, among which the automotive and electronics stand out.

However, the decline in robot prices will cause their use to expand rapidly.

Digital technologies

Thus, the increasing robotization of production will erode the competitive advantage of low-cost production centers in developing countries.

However, given the growth of robots in some major global manufacturing centers (such as China, India and Mexico), the incentive for TNCs to relocate their production to their home countries is also likely to be reduced.

In fact, some companies with investments in those countries may decide not to move given the high levels of capital investment involved, initiatives to build a network of suppliers, and the availability of trained human capital.

To the extent that other technologies, such as additive manufacturing (3D printing), have technical and economic feasibility, they could also affect the organization of international production.

3D printing could drive a reconfiguration of localized production on a small scale.

According to ECLAC, the global 3D printing market is estimated to grow at an annual rate of 26.4% between 2020 and 2024, reaching about $ 41 billion.

 

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