China is poised to become a world leader in deploying IoT solutions at an industrial scale. There are a number of intersecting factors pushing the Chinese IoT market to the verge of exponential acceleration.
One big reason for China’s large-scale, rapid adoption of the industrial Internet of Things (IIoT): it has the capacity to generate enormous economies of scale with its current industrial infrastructure. There are more things connected to one another in China than in any other country.
China also produces most of the world’s electronics, including many of the sensors, microchips, and other electronics that would form the backbone of the growing IoT technology market. By 2020, there will be 200 billion IoT connected devices globally, out of which 95 percent will be manufactured in China.
China’s manufacturing sector, comprised of millions of factories, would not only be the foundational supplier of a global IoT network, but also the beneficiary – IIoT will allow factories to greatly increase efficiency, lower costs, and better manage infrastructure.
According to Ernst and Young, there are 5 major benefits of implementing IoT networks in manufacturing, including reducing correction cycle time; the ability to anticipate failures in advance; the improvement of design through big data analysis; saving money through proactive monitoring and prevention as opposed to reactive repairing; and ultimately reducing faulty products and product recalls that can cause severe reputational damage to a brand.
The benefits of extraordinary interconnectivity between machines which allows for real-time transmission of information and big data insights are not limited to manufacturing – these advantages will be a boon to the efficiency and productivity of many important economic sectors in China, including resources, energy, telecommunications and automotive.
Over the next 15 years, the economic value of IoT technologies to the China’s GDP from the manufacturing alone is projected to jump from US$196 billion to US$736 billion—a 276 percent increase. For the resources sector, the increase would be from US$48 billion to US$189 billion. Cumulatively, the growth of China’s GDP from IoT technologies will reach US$1.8 trillion by 2030 – no small number.
The Chinese government pushing IoT innovation
China’s rapid adoption of the Internet of Things has been fueled by the Chinese government’s proactive strategic and financial investments in the industry, driven by its desire to turn the IoT into a major pillar of the economy.
In 2010, then-Premier Wen Jiabao announced that the IoT is critical to China’s information and communication technology plans, and a national IoT Centre was established in Shanghai.
Various initiatives introduced by the Chinese government that will support the growth of IoT adoption include the “Made in China 2025” initiative. According to the Economist, the government is looking to upgrade the nation’s manufacturing capacity while calling for greener, more intelligent and higher-quality manufacturing. Its Internet Plus” strategy aims to integrate the mobile internet, cloud computing, big data and IoT innovation.
Additionally, the government’s spending on IoT technologies is set to account for the second highest proportion of economic benefits to the country, after manufacturing. Already, the Chinese government has been promoting IoT development in major economic areas such as industrial control, financial services, and healthcare.
As well, government officials are strategically providing funding to local governments and economic development zones as part of official “smart city” pilot projects, who are looking to use IoT applications to address major urban issues such as congestion and pollution.
A Market of Opportunity
The extraordinary benefits that China stands to gain in becoming a world-leader in IIoT technologies is clear, and the market is ripe with opportunities to enter. The country is keen on encouraging industrial partnerships and cross-sector collaborations that will fuel the growth of the industry. Additionally, international companies are poised to make positive impacts on the industry, considering the issues that could plague China’s domestic market.
For example, the Economist notes that Chinese firms are being “squeezed by both a weak local and global economy, [and] may not be able to afford to connect their machines to the cloud.” To compete with the world, China is up against parts of the world that have vastly more advanced infrastructure already in place.
That’s an opportunity for Western firms to start building inroads into the Chinese markt. One example of Western market penetration into the Chinese IoT economy is General Electric’s (the world’s largest industrial company) opening of a “digital foundry” in Shanghai. The foundry is set to help Chinese companies to develop and commercialize products for the industrial internet of things, and could set a precedent for further international investments and partnerships within the industrial IoT market.
The future looks connected for the IoT in China. It can generate enormous economies of scale. Also, strong government support and the potential for international partnerships are launching China to the forefront of the industrial IoT revolution.