By Christopher Alessi and Chase Gummer
AMBERG, Germany--The next front in Germany's effort to keep up
with the digital revolution lies in a factory in this sleepy
industrial town.
At stake isn't what the Siemens AG plant produces--in this case,
automated machines to be used in other industrial factories--but
how its 1,000 manufacturing units communicate through the Web.
As a result, most units in this 100,000-plus square-foot factory
are able to fetch and assemble components without further human
input.
The Amberg plant is an early-stage example of a concerted effort
by the German government, companies, universities and research
institutions to develop fully automated, Internet-based "smart"
factories.
Such factories would make products fully customizable while on
the shop floor: An incomplete product on the assembly line would
tell "the machine itself what services it needs" and the final
product would immediately be put together, said Wolfgang Wahlster,
a co-chairman of Industrie 4.0, as the collective project is
known.
The initiative seeks to help German industrial
manufacturing--the backbone of Europe's largest economy--keep its
competitive edge against the labor-cost advantages of developing
countries and a resurgence in U.S. manufacturing.
Underpinning the effort is the Internet of Things, where the Web
meets real-world equipment. Google Inc. made a big push on the
consumer front this year with its $3.2 billion purchase of Nest
Labs Inc., which makes thermostats that can be remotely controlled
by smartphones and other connected devices.
Full-fledged smart manufacturing is still in the pilot phase.
But the German Research Center for Artificial Intelligence has
worked with German industrial companies to engineer some of the
most advanced demonstrations in the field.
At the center's pilot smart factory in Kaiserslautern, chemicals
giant BASF SE produced fully customized shampoos and liquid soaps.
As a test order was placed online, radio identification tags
attached to empty soap bottles on an assembly line simultaneously
communicated to production machines what kind of soap, fragrance,
bottle cap color, and labeling it required. Each bottle had the
potential to be entirely different from the one next to it on the
conveyor belt.
The experiment relied on a wireless network through which the
machines and products did all the talking, with the only human
input coming from the person placing the sample order.
Siemens's Amberg facility shows what is possible in an
operational factory at this point. The plant, which builds
automated machines for the factories of German industrial companies
like BASF, Bayer AG, Daimler AG and BMW AG--and many of their
rivals abroad--has been digitizing gradually for 25 years. Today it
is about 75% on autopilot, with 1,150 employees mostly operating
computers and monitoring the production process.
Designing a self-operating intelligent manufacturing system over
an Internet network could still be a decade away. "We have the
building blocks," said Siemens board member Siegfried Russwurm.
Besides Amberg, other German factories on the road to
intelligent manufacturing include one operated by electronic motors
producer Wittenstein AG, and Robert Bosch GmbH's nascent adaptive
assembly line for hydraulic equipment, set to be operational in
Homburg this fall.
Germany's foray into the industrial Internet comes amid
widespread unease here about U.S. domination of the Internet.
Google currently handles 95% of all German Internet searches,
according to online statistics portal Statista, and its
pervasiveness could pose a challenge for German industrial
companies trying to harness the Internet to adopt a more
service-oriented business model.
Günther Schuh, a member of the National Academy of Science and
Engineering, which helped launch Industrie 4.0, said he has noted
"genuine concern in German industry about the monopoly position of
companies like Amazon or Google" because they control the interface
between consumers and companies.
Google could potentially use its dominant position as a search
engine to push its own products and services, while expanding
beyond simply providing email, word processing and cloud computing
software. For example, the tech company is in the early stages of
producing technology for a self-driving car.
Amazon hasn't just stuck to online retailing, but has moved into
consumer electronics with its tablet device Kindle Fire and its
Fire Phone smartphone.
German Chancellor Angela Merkel has warned that German companies
need to do more to stay competitive in the digital economy, while
German economics minister Sigmar Gabriel sees dangers in allowing
American companies like Google to dominate the so-called Internet
data business.
"The big data necessary for Industrie 4.0 to work isn't being
collected by German companies, but by four big firms in Silicon
Valley. That's our worry," Mr. Gabriel said at a public debate with
Google Chairman Eric Schmidt earlier this month.
German executives appear less worried.
Peter Herweck, chief executive of Siemens's division handling
motorized equipment, said he doesn't see Google's Internet
dominance as a threat to Siemens's digital-manufacturing efforts.
"Maybe they can become a partner," he said, by someday helping
engineers find tools or parts needing repair inside factories.
"When it comes to the connected world, one needs more than just
software" for smart manufacturing, said Werner Struth, a Bosch
board member. "One needs products one can touch."
German companies have been at the cutting edge of production
technology for years--and now they are getting government help to
stay on top.
Industrie 4.0 is the kind of public-private program Germany does
well. The government doesn't pick winners through subsidies, but is
giving EUR200 million ($253 million) for research to create new
technologies and networking opportunities for companies to develop
common standards--harnessing a vast system of public research
institutes that help companies carry out research and
development.
In the U.S., the Obama administration is trying to emulate that
research network, having earmarked over $2.2 billion in 2013 for a
nationwide manufacturing initiative.
Concurrently, U.S. industrial and tech giants including General
Electric Co., AT&T Inc., Cisco Systems Inc., Intel Corp., and
International Business Machines Corp. have joined forces in March
to create the Industrial Internet Consortium. Like Industrie 4.0,
the nonprofit consortium seeks to create a framework for companies
and university researchers to establish standards and best
practices for industrial applications of the Internet.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Chase Gummer at Chase.Gummer@wsj.com