Industry 4.0 is becoming smarter and more automated with our components

When in 2022 the German company Chiron acquired the Zadar-based HSTEC, Mladen Šarlija retained a ten percent stake in the company, although the other partners withdrew. Šarlija wanted to remain a co-owner alongside his director position; he wanted to have his stake in the company because his experience shows that such responsibility ensures more effective management. We spoke with this engineer, who joined the legendary SAS in 1994, one of the flagships of once globally recognized Croatian machine engineering alongside Prvomajska and Dalstroj, about the experiences of modern domestic machine engineering from the perspective of a company that was founded on the foundations of SAS.

Most of the equipment in CRTA, the regional center of robotic excellence at FSB, was procured from Chiron. What is your collaboration with CRTA like?

– Let me clarify right away, we do not manufacture robots. But we buy robotic arms and integrate them into machines; we apply these robots in the industry for end users. We establish automated lines, automate various processes, parts of processes. That is our strength. When you mentioned CRTA, we are proud of it. We are proud because CRTA is the largest robotic center in Southeast Europe, and we are also proud to have been the largest implementer, or supplier of various robotic cells for it. CRTA is one of our largest projects, and we are proud to have collaborated with it. The students who come to us will be educated and trained on these robots.

You are based in Zadar, and although you continue the SAS tradition, I assume it is not easy for you to find staff.

– For engineering staff, the situation is even favorable. Fortunately, despite the orientation of Zadar County, young men and women still decide to go to technical faculties. It is important for us that people choose faculties of mechanical engineering, mechatronics, and electrical engineering. Split, Zagreb, and Rijeka are our most important centers for personnel.

Are you able to attract people from Zagreb?

– For relocation – it’s difficult, because Zadar is a very expensive city. We have had cases where our employees returned to their surroundings. Rent, living, and utilities in Zadar are quite expensive, and it is inconvenient if you are not from here. But we have a good offer in the engineering staff, and interested candidates are reaching out to us. This summer, we already have 15 students from various studies who will complete their summer internship with us.

How does your global collaboration reflect on your revenue structure? Is there any interest in your services here?

– The export share is about 85 percent; in some years, we had up to 90 percent. Customers from Croatia primarily seek servicing and repair of components. These are our companies that produce components for the Western European industry and have machinery that needs maintenance. We maintain and repair components, primarily motor spindles, robotics, automation, whatever our clients need.

In which industries do you most need your services of that kind?

– The metal industry, especially that which is linked to the automotive industry or general metal processing, needs our services the most. Indirectly, we have reduced our dependence on the automotive industry, somewhat forcibly, because, simply put, the European automotive industry is in decline, and on the other hand, we are seeking security, risk dispersion, and looking for other niches we can collaborate with.

How did you enter Chiron, and what has Chiron brought you?

– Coming out of the corona crisis, when our revenue fell by seven percent, the need arose to ensure further growth, especially global growth. We reached a hundred employees in 2021, and further expansion on our own, as well as through representations on various continents, was no longer simple, not in the way we had been growing, from a small company to a medium one. We expressed interest, actively sought partners, exclusively from the industry, and in 2022 we found it in Chiron. Chiron is a completely private company, German, owned by two families. It has been private since 1957 and is a traditional family business. Family members are not directly involved in operational and managerial functions, but they are on the board and act strategically. We quickly found common interests, and by the summer of the same year, we became part of the Chiron group, which acquired 90 percent of the shares.

How does the collaboration with the companies Kontakt and HST Glass Systems work on the other side?

– Kontakt had previously collaborated on large projects together with HSTEC, and that continues today. With our entry into the Chiron group, a global sales network, a global service network, and access to markets and supply chains that were not available to us in terms of conditions or breadth became available. In our region, Kontakt has been a significant partner, and it still is. Before merging with the Chiron group, we separated that business, and today that company is connected to this one exclusively through me. We have established ourselves in the glass industry market, specifically in glass packaging and tools for its production. The equipment and machines we have developed for that purpose are offered globally, from Asia through Europe to America.

With Chiron, you have achieved stability; how do you plan further growth?

– We have achieved stability, although unfortunately, we are also suffering from current global imbalances. Key to the growth of the Chiron group is the development of trade relations with the USA and China. These are still the largest export markets for the Group, especially the Chinese market. Unfortunately, the market for exporting machines and equipment to China is declining, and we expect some new rearrangements. With many of our partners in China, we see that complex products are managing to scale to larger sizes. Europe sees this in the automotive industry, machine engineering, and other products. A part of the market is being lost in China, and that is inevitable. As a group, we must position ourselves in new markets, and we see our chances for further growth there. We will seek partners in locations with a stronger metal processing industry, in South America and the Asia-Pacific region.

How have you experienced customs uncertainty, and what will the agreed customs bring to Chiron?

– I welcome the customs agreement reached between the EU and the USA. It is not ideal for us Europeans, but I believe it will positively affect the stabilization of the market and create potential for renewed growth. This will, of course, bring recovery to our metal industry as well. The previous waiting was very bad for business. Everyone was waiting with orders, anticipating new rules of the game to then adapt and consider what orders and at what prices they could contract. Since the negotiations on customs began, our machine exports to America have fallen by more than 20 percent. There is interest, but orders were not placed until new rules were defined. If you do not know what the rules will be, then the burden of any customs is borne by only one participant in the chain. Now we will distribute that burden among the participants, from the manufacturer through the distributor to the end customer. But uncertainty was killing business. I believe we will manage to negotiate business conditions because in America there is nothing like our five-axis machine for scanning and measuring that the American aerospace industry buys.

What about the construction of the new hall? The local environment has been tightening with some permits.

– In 2022 and 2023, we had a foundation for growth by expanding capacity and increasing the number of employees. We prepared a plan, made a project, but we also encountered certain obstacles. Unfortunately, the procedure has dragged on. We have reached the executive permit; we are waiting for the final approval. We do not want to start building until we receive the final approval, although we could because the permit is executive. An administrative procedure initiated by one of our neighbors is still ongoing. Most likely, we will start building next year. All of this coincided with the crisis; last year we recorded a revenue drop of 11 percent, and the pressure for further rapid growth was not so active. We have already realized option B; we rented part of the SAS facility, purchased thermal processing from the former SAS, and we are satisfied with that in the medium term, as long as that rental suits us. We assume that by then we will have built our own hall. Otherwise, we invest regularly, especially in equipment. To maintain the level of production and quality we have achieved, we must also maintain the level of machines we use.

How much have you invested in the last cycle and in what?

– In the last three years, we have regularly invested more than one million euros each year. Our last significant investment was in a machine for micron-precise grinding that cools the positions with water to prevent inaccuracies due to thermal instability. We have also digitized our business; we use SAP’s ERP system, and our machines are digitized and fully networked. This allows us complete control over processes in real-time, not only for us but also for our clients.

You are developing some interesting products like that AI smart micromotor spindle. What is that?

– The motor spindle is the main drive spindle of every machine tool. If we were to compare a machine tool to a car, it is essentially the engine, literally the heart of the machine tool, whose performance primarily depends on that motor spindle. Today’s motor spindles are upgraded with various sensors, collecting much more data that is processed, enabling predictive maintenance or changing a specific operation during use. Thus, we influence the machine’s work process in real-time with the help of AI algorithms. Essentially, AI manages a process that is completely automated.

And the smart micromotor spindle?

– We have applied for an IRI project in which we will develop three motor spindles. One of them is the smart micromotor spindle, which is so far the smallest spindle we have developed specifically for micro-processing. With this machine, we are trying to position ourselves in other niches and reduce dependence on the automotive industry. The application of the AI smart micromotor spindle is found in the medical industry, watch industry, jewelry industry, etc. It is about micro-processing with diameters of milling cutters or drills smaller than a millimeter, which cannot be operated manually by a person.

Are you working on any other innovations?

– In robotics, we are constantly developing innovations. We have our own standard products in which we offer, for example, a standalone flexible robotic cell whose performance and accompanying software we have standardized so much that it is quickly introduced to the customer, regardless of their specific requirements. For example, we introduce our flexible robotic cell within one working day, and operator training lasts two hours. Our cells are applicable in all industries, in Croatia, for example, from fish processing to confectionery factories to the metal processing industry. Every production needs some level of automation, and we are the main partner in development with our customers to raise their production levels. That famous industry 4.0 is becoming smarter and more automated with our components.

What do negotiations look like when ordering that robotic cell in Croatia?

– We have one in the plant that we are finishing. It has been ordered for the production of steel clamps coated with rubber at the point of contact with the object. It is fully automated and robotized with three robotic arms. It is equipped with robotic cameras that observe how raw positions enter the machine, and then the algorithm learns to find the best solution for how the arm picks up and processes positions, how to lift and place them. When the customer comes to us, they usually show the product and say they need a machine that produces a million pieces a year. We then draw it up and completely design it, from electrical design to artificial intelligence.

What do you expect from AI? Do you see any room for an explosion of progress?

– AI is today entering everyday life in a pointillist way, and at a certain moment, it will grow into everyday complete use of artificial intelligence for certain processes. Today in the industry, with AI algorithms, we can fully automate machines to work without a human, three shifts without supervision. We are talking about dark factories – dark because there is no need to turn on the lights. This is the new world that awaits us tomorrow. In every household, in a few years, everything will be robotized, not in the classical sense that a robot will walk around the space, but the lighting, heating, and all other systems will be smart, managed by AI. This is an unstoppable development. But there is no need to fear for jobs. Experience, at least in the last ten years, has shown that with the introduction of robotics, and then its upgrade with artificial intelligence, for one closed job, three are opened. Physical labor will disappear – in all industries, it has historically been replaced by mechanization and automation.