SINGAPORE
-�Media OutReach�-�1 April 2019 -�Microsoft Asia and IDC Asia/Pacific today released
findings specific to the manufacturing sector for the study, Future Ready Business: Assessing Asia Pacific's Growth
with AI[1].

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The manufacturing sector, which contributes to a
significant proportion of Asia Pacific's GDP, continues to face rising competitive
pressure due to growing costs and lower margins. Manufacturers are increasingly
turning to emerging technologies to stay ahead of the competition. Those organizations
that have started to adopt Artificial Intelligence (AI) believe it will nearly
double their competitiveness (1.8 times) in the next three years.

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"Manufacturers in Asia Pacific are slowly, but
surely, seeing the importance of adopting a digital strategy and latest
technologies. �The Study found that 76% of manufacturing business leaders
agree that AI is instrumental to their organization's competitiveness in the
next three years,"
said Scott Hunter, Regional Business Lead, Manufacturing, Microsoft Asia. "To achieve
supply chain excellence, and even develop new business models to address
changing customers' needs, integrating AI for their business is a must.
Organizations which fail to adopt an AI-first strategy risk being left behind
in today's competitive market landscape."

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"However, 59% of manufacturers have not adopted AI as
part of their business today. This is a worrying sign for the industry that
needs to thrive on innovation," added Hunter.

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For manufacturers that have started their AI journeys,
the top three business drivers to adopt AI include higher margins, higher
competitiveness and business agility, as well as better customer relationships
and outcomes.

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They are already seeing business improvements in the
range of 17% to 24% today, and further improvements are anticipated in three
years by at least 1.7 times. The biggest jumps are expected in driving
accelerate innovation (2.0 times), and higher margins (1.9 times).

Fig 1: AI improves business today and in three years

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One example is Piramal Glass, a leading glass
packaging manufacturer in India, which has turned to AI, Internet of Things and
advanced data analytics on the cloud to drive operational efficiency, enhance
customer experience and generate new revenue models. Their in-house solution,
RTMI, offers advanced insights in real-time that led to 5% reduction in
defects, 40% reduction in manual data gathering and 25% improvement in employee
productivity.

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�"The identified
business drivers are a clear sign of how technology such as AI can create
improved value by helping organizations gain insights, and better manage their
operations in a highly complex environment," said Stephanie Krishan, Research
Director, IDC Manufacturing Insights. "In fact, according to IDC
FutureScape for Manufacturing and Implications for Asia Pacific (excluding Japan), half of the top 10 predictions are
driven by data and AI-centric solutions or use cases, such as creating new ecosystems
for automation, or even to put data at the center of their processes to drive
speed, agility and efficiencies. This only points towards the fact that the
future of manufacturing will be built upon data in order to deliver scalable
and accelerate growth for the industry."

Asia
Pacific's Manufacturers Need to Focus on its Culture, Strategy and Data
Readiness

Fig
2: AI Readiness Model (Asia Pacific's Organizations vs Manufacturing
Organizations)

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The Study also evaluated six dimensions contributing
to the sector's AI readiness. "The manufacturing sector is lagging behind in
Culture, Data and Strategy, compared to Asia Pacific's overall readiness.
Business leaders must focus on those areas to stay competitive," said Krishan.

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1.����
Strategy: Manufacturers need to have an AI strategy in
place, and support a more distributed workforce

"By adopting AI industry players will accelerate their
transformation and enjoy higher benefits. To succeed in an increasingly digital
environment, Manufacturers need to have an AI- strategy in place, including
workforce transformation," said Hunter. Close to half of business leaders
polled see a shift towards a more distributed and flexible workforce due to AI
in the next three years.

2.����
Data: Manufacturers need to work on availability,
quality and governance of existing data

There is no surprise that manufacturers need to have a
more robust data strategy in place in order to train task-based AI solutions.
Today, manufacturers in the region are still dealing with a data structure
where it can only be accessed by a centralized analytics team. The quality and
timeliness of data are still major issues that are being addressed on an ad-hoc
basis. There is also no extensive enterprise data governance program in place.

3.����
Culture: Traits required for AI adoption lacking in
manufacturing organizations

More than half of the manufacturing workers, and
nearly half of the business leaders polled believe that cultural traits and
behaviors are not pervasive in their organization today. For example, 63% of
workers and 57% of business leaders do not agree that employees are empowered
to take risks, and act with speed and agility within the organization.

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"Manufacturers in the region must work on better
integration of AI into their existing operations, including how data is used
and processed. They need to build an AI-ready workforce that is agile and
empowered to innovate," said Krishan. "Only when manufacturers nail down its
strategy and skills capabilities they can fully harness the full power of AI
for their organization."

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Dairy enterprise ACM's
newly opened high-tech milk processing and manufacturing facility in Victoria,
Australia is leveraging state-of-the-art intelligent technology to better
manage costs via a rich data approach. By introducing machine learning
capabilities, ACM is able to reduce human errors from contaminating organic
milk with conventional milk, which also minimizes wastage. In addition, by
introducing automation for production planning, logging and quality assurance;
as well as factory maintenance with the help of CRM and AI solutions, ACM has
been able to rein in weekend overtime costs of AU$100,000 annually.

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Skills
for an AI-Ready Workforce

The good news is that majority of business leaders and
workers in the sector believe that AI will have a positive impact on their
jobs. 62% of business leaders and 77% of workers believing that AI will either
help do their existing jobs better or reduce repetitive tasks.

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Fig 3:
Perception of AI's impact on jobs (Business Leaders and Workers)

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However, according to business leaders, the skills
required for an AI future are in shortage. Communication and negotiation skills,
entrepreneurship and initiative-taking as well as adaptability and continuous
learning are the top three skills identified in which demand will outstrip
supply in the next three years. At the same time, business leaders believe that
the demand for basic data processing, literacy & numeracy and general
equipment operations and mechanical skills will decrease in three years. Those
skills are broadly available today, and already now the supply is higher than
the demand.

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The disconnect comes with employers' perception of
their workers' willingness to reskill. "Business leaders are aware of the
massive reskilling efforts required to build an AI ready workforce. However, 22%
of business leaders felt that workers have no interest to reskill, but only 8%
of workers feel the same. In addition, 48% of business leaders feel that
workers do not have enough time to reskill, but only 34% feel the same way,"
shared Hunter. "Business leaders in this space must prioritize reskilling and
upskilling, dedicating employee's time for this to address skills shortage. Even
as it may result in short term productivity impact as building an AI-ready
workforce will result in greater gains in the future."

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Microsoft
at Hannover Messe 2019

Microsoft will be at Hannover Messe this year at Hall 7, Stand C40 between 1 to 5 April
where we will showcase how customers, partners are working with Microsoft to
transform manufacturing outcomes.

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To learn more about how Microsoft is powering the
transformation of the industry, visit https://www.microsoft.com/en-us/enterprise/manufacturing

About Microsoft

Microsoft
(Nasdaq "MSFT" @microsoft) is the leading platform and productivity company for
the mobile-first, cloud-first world, and its mission is to empower every person
and every organization on the planet to achieve more.