Technological innovations and new concepts of value chain organization, supported by productive development policies in the major developed countries, are in the process of establishing a new industrial paradigm. The terms Industry 4.0 and Advanced Manufacturing are often employed to synthesize the set of transformations pertaining to the Fourth Industrial Revolution.

This is the theme of this Letter IEDI, which is based on work done by economist and innovation expert João Furtado and team, whose final report is available on the website of the IEDI. Special attention has been given to the challenges that Brazil must face for its industry to be an integral part of the new paradigm that is forthcoming. In this sense, at the end of this Letter we reproduce the ten measures proposed by the authors that could help the country not to lose the windows of opportunity that open with the advent of Industry 4.0.

A relatively diverse spectrum of technologies applied to manufacturing production is the prerequisite of Industry 4.0. Among those most frequently cited are: Cyber-physical systems (CPS), Big Data Analytics, Cloud computing, Internet of Things (IoT) and Internet of services (IoS), 3D printing and other forms of additive manufacturing, Artificial intelligence, Digitalization, Energy harvesting and Increased Reality.

But the concept is not limited to the combined application of these technologies. Industry 4.0 creates and articulates intelligent factories in a substantially different productive and marketing system. In intelligent factories, products that are also intelligent have a unique identity and their production and consumption history can be tracked at any time, allowing for important changes or specific adjustments throughout the production processes involved. Manufacturing systems are connected vertically, along the production chain, and horizontally, with other value networks, and can be managed in real time.

One high-impact consequence is the drastic reduction in inventories and minimum production scales (in the limit, single-unit batches). In addition, Industry 4.0 creates intelligent industrial plants and systems in such a way that profoundly affects professional qualifications and labor relations, creates new markets and business models, and can significantly change the economic dynamics of the modern world.

Countries such as Germany and the United States, among others, through industrial and science, technology and innovation policies, have not only supported the development of the different technologies involved, but also strive to articulate them in such a way as to extract their greatest potential, deliberately contributing to the constitution of what is known as Industry 4.0 or Advanced Manufacturing.

Then, a relevant question is figuring out which place Brazil and its industry will occupy in this "new world". The challenges are not negligible and arise, to a great extent, due to limitations that we inherited from the past. The authors highlight three sets of limitations that complicate the full development of Industry 4.0 in the country.

First, there are those limitations relating to the industrial structure itself. It is worth remembering that Brazil was not able to keep up with the rest of the world in key sectors for the development of Industry 4.0 technologies, as is the case of microelectronics. Thus, we find ourselves, from the beginning, at a disadvantage. Moreover, due to the very nature of the country's industrialization process, two other aspects have become increasingly important deficiencies: small integration in international trade and relatively modest technological efforts.

Second, unlike developed countries', Brazil's consumption characteristics do not favor the strong product differentiation that could promote Industry 4.0. Third, because of these shortcomings, Brazil is in danger of becoming a target market for China's production, a country that is expected to follow with a delay the industrial advance of developed economies, which today comprise the main consumer markets of Chinese goods.

Despite this, the windows of opportunity of a new industrial paradigm exist, but not unconditionally. They involve some kind of cross-industry commitment (of producers and users of Industry 4.0 solutions) to establish feasible paths, with costs and benefits distributed equally over time among stakeholders. Industry 4.0's biggest challenge for Brazil is to build a consensual strategy among key stakeholders—the users of the model and the producers of its material components and services.

Choosing a model of rapid incorporation of the Industry 4.0 components through imports ensures islands of modernity, but it wastes industrial opportunities and their diffusion throughout the productive system. On the other hand, the option for a national production model of 4.0 solutions can expand technological development and industrial opportunities, with wider diffusion of the new industrial standard. Despite the risks accompanying the latter option, it should be at the center of the country's future industrial policy. The hesitation between a rapid strategy of assimilation through imports and policies to stimulate local production can bring about the worst of the two paths.

The authors suggest some measures that may aid the virtuous development of Industry 4.0 in the country. A first set of actions does not refer directly to Industry 4.0, but rather to creating the conditions for various segments and strata of companies to prepare for this second effort, which will be the emerging industrial standard, currently being defined in the leading countries. Measures have also been proposed for the training of human resources and technological skills that will be required for Industry 4.0 as well as for the transformation of the industrial fabric of small, large, and technology-based enterprises, and of the industrial chains in which Brazil has a leading role.

The full text is available in Portuguese.