Germany's initiative for the digitalization of manufacturing is called Industry 4.0. The fourth industrial revolution is all about using digital tools to make real things and, according to Germany's Chancellor Merkel, it will determine the future strength of the world's leading industrial centres.
Yet, while Geman-based global manufacturing giants are among the leaders in digitalisation, it appears that there is a considerable lag in uptake of the digital revolution among the SMEs (the "Mittelstand") which constitute an essential part of the German manufacturing industry. According to a recent survey of 4,500 companies conducted by the research institute ZEW, less than 20% of companies were familiar with the concept of Industry 4.0.
At the same time, as we discuss in a recent article, German competition authorities are among the most proactive in Europe when it comes to developing frameworks for the review of markets undergoing change through disruptive new technologies. For example, the German Federal Cartel Office has set up a "Task Force for Internet Platforms" to give appropriate attention to "the importance of the digital economy for all sectors of industry".
More importantly, the German Monopolies Commission published a special report last year which provides a comprehensive overview of the state of competition and competition law in the digital era and describes in detail the issues and uncertainties inherent in digital markets. The report concludes that the currently applicable competition law instruments are generally sufficient for digital markets, but could be applied more efficiently. This is in line with the prevailing view amongst commentators that competition law should not be overhauled, but that any major changes should occur in other legal frameworks, such as data protection laws.
So while the largest German manufacturing companies and the country's competition regulators seem to be taking a very active role in seeking to shape the digital future, SMEs in Germany's manufacturing industry may need to pick up the pace of digital transformation in order to preserve their leading role in Europe's largest expert-oriented economy.
If German manufacturers don’t embrace the digital shift, economists and politicians warn, they might be quickly overtaken by U.S. and Asian competitors. Germany’s export economy — and by extension Europe’s — would take a big hit.