Smart manufacturing, factory floor bottlenecks moving LatAm tech investments

Production bottlenecks and the need for technology updates, robotization, automation and systems integration of manufacturing plants in Latin America are leveraging the business of some of the main software and IT companies.

The perspective for 2023 is for yet more investments in advanced manufacturing, also known as smart manufacturing or manufacturing 4.0.

Angela Gheller, director of manufacturing products at Totvs, Brazil’s largest software firm and one of the main players in Latin America, told BNamericas that the segment is the biggest and among the fastest-growing of the group’s business lines.

Prior to a reformulation of its business reporting, solutions and projects for manufacturing accounted for around 25% of sales, she said. Now, these figures are dispersed across segments and projects. 

Totvs’ Q3 total net sales amounted to 1.04bn reais (US$205mn), up 26% year-over-year.

“We now have around 6,000 manufacturing customers. It has always been a very traditional segment for us. Two of our ERPs have emerged within industries. It's in our DNA,” Gheller said.

Capital goods, consumer goods, durable goods, metalworking and plastic, paper and pulp, chemistry and recycling, extraction and processing, and textiles and clothing are the main industry verticals served.

Despite the macroeconomic challenges, a goal in 2023 is to close more complex manufacturing projects, especially regarding the digitization of the factory floor, beyond ERP management software.

“All in all, we keep Totvs as our favored pick among our [technology, media, telecoms] coverage, as the company should be able to sustain double-digit growth in 2023 with lower risks of downward earnings revision,” Bradesco BBI said in a recent report, favoring Totvs' shares over those of telecom companies.

Citing an industry federation study, Gheller said that almost all manufacturing companies in Brazil already operate some sort of management system for supply and stock but only 42% use technology in the core manufacturing process. “It has always been a challenge to take technology down to the factory floor.”

Also in Brazil, Gerdau Next, the new business division of Brazil's biggest steelmaker Gerdau, launched a joint venture with startup SpaceTime Labs, dubbed Ubiratã.

The new company will focus on high-end technology and the creation of platforms that integrate into the industrial environment through artificial intelligence, autonomous systems and robotic operations, Gerdau said in a statement.

Ubiratã was originally created as a joint project in April 2021. Since then, the companies have acted in synergy and efforts have evolved to a 50:50 JV.

One of Ubiratã's first projects is a digital twin for online monitoring of the quality of mineral inputs supply.

SONDA

At Chile’s Sonda, one of the largest systems integrators in Latin America, solutions for manufacturing are a growth engine of the smart cities and digital business lines in its 2022-24 strategic plan.

The company plans to invest US$340mn and grow its profit margins by 300 base points in the period.

CEO José Orlandini said in a statement that this investment will be focused on long-term contracts and IT infrastructure, which will allow the company to provide services and develop first-class solutions for the customer network throughout the region.

OPPORTUNITIES 

Chief manufacturing 4.0 trends relate to segment-specialized ERPs, 5G use cases, digital supply chain security, e-commerce for manufacturing, as well as ESG practices related to the digitization of the industry.

Overall, the Latin American smart manufacturing market is expected to grow at a compound annual rate of 15.3% by 2030, according to a GrandViewResearch forecast.

"Since the modern technological revolution has only recently begun in Latin America, opportunities in smart manufacturing are expanding. The region is also close to and accessible to various raw materials, which aids in smart manufacturing and drives the growth of the market," the study said.

Although the commodity-oriented region is not among the most industrialized geographies, and de-industrialization has accelerated in different markets in recent years, coupled with the growth of the services sector, the participation of industry in regional economies is not negligible.

According to the UN's Economic Commission for Latin America & the Caribbean (Eclac), manufacturing concentrated 12.8% of employment in Latin America and the Caribbean and 12.6% of GDP, as of 2020. 

“In a country like Mexico, these figures go up to 16.6% and 17.3% respectively, while in Argentina the sector represents 18.7% of GDP and 18.8% of total employment,” a 2022 Eclac report on smart manufacturing opportunities said.

At the World Economic Forum this month, the governor of Mexico’s Nuevo León state, Samuel García, announced that an “advanced manufacturing platform” would soon launch in the state, focusing on the digitization of processes and automation.

"Today we have officialized a center, an advanced manufacturing platform, on industry 4.0, which will soon arrive to Nuevo León," he was quoted as saying by Mexican media.

García did not mention regional technology firms, nor disclose partnerships for the platform, but said he will invite “first world companies to settle in the state.”

The biggest market players are ABB, Siemens, General Electric, Rockwell Automation, Schneider Electric, Honeywell and Emerson Electric, among others. 

Yet, more Latin American companies are seeking to grab bigger slices of this pie, aiming mainly at contracts with small and medium-sized companies.

Mexico has a government-sponsored advanced technology center for smart manufacturing. Called Ciateq, it is headquartered in Querétaro with branches in six other states. Its goal is to promote links between the government, private sector, startups and academia for the development of smart manufacturing and industry 4.0.

Among other recent regional initiatives, Belago Technologies, an integrator that provides IT solutions, announced this month a partnership with Israeli technology company Matics. 

The cooperation is expected to accelerate adoption of state-of-the-art technologies for the manufacturing sector, initially in Brazil, but with the potential to reach other regional markets.

According to the companies, the Matics system can generate savings of up to 25% in machine availability, around 10% in energy use and 3% in material and scrap waste.

New, cutting-edge emerging technologies are on the radar, although they might not be immediately available in Latin America.

In addition to operational and logistics processes, among the main trends for advanced manufacturing, specialized firm Alfa Sistemas cites nanotechnology for packaging, with sensors that indicate the maturation of a product, 3D printing to reduce the use of natural resources, and biosensors to identify the presence of contaminating agents in goods.

Prices for advanced manufacturing solutions, including software and sensors, are falling – which tends to favor investments and bolster factory-floor digitization.