The trends of IOT manufacturing in China
The Internet of Things (IoT) unites the physical world of objects and the virtual one of computing and analytics. It offers huge opportunities for productivity gains, innovation, and new markets. In China, like elsewhere, industry is working to seize the opportunities that this new digital age promises, not just with the IoT, but with the Industrial Internet of Things (IIoT). It’s estimated that there will be 13.8 billion IIoT connections globally by 2025 and Greater China is forecast to account for approximately 4.1 billion of these connections or as much as a third of the global market (Source GSMA). This article explores the implications of the IIoT sector for manufacturing in China and some of the opportunities it offers international businesses.
Background to IIoT manufacturing in China
In 2015, significant state measures were taken to upgrade manufacturing and push the development of new technologies in China. The goal of the development program ‘Made in China 2025’ was to upgrade the nation’s manufacturing capacity, with the aim of boosting China’s global position in manufacturing and production. It called for greener, more intelligent and higher-quality manufacturing through the integration of production processes with the internet. Additionally, the Chinese government introduced its ‘Internet Plus’ strategy, also in 2015, to integrate the country’s mobile internet, cloud computing and big data initiatives to promote the extensive application of IT and smart technologies. The IIoT has steadily evolved in China since then, bridging these two areas of manufacturing and smart, digital technologies. ‘China is betting big on the IIoT to increase productivity and drive efficiencies by streamlining and automating manufacturing processes via internet connectivity. Backed by positive government support, China is set to become the world’s leader,” says Alex Sinclair, Chief Technology Officer, GSMA.
The IIoT and smart manufacturing in China
The digitization of manufacturing – or ‘smart’ manufacturing – in China is having three key benefits for industry (Source: Deloittes China Manufacturing Enterprise Survey, 2018):
– Enabling greater analysis, prediction and ‘self-adaptation’ of manufacturing systems
– Generating major contributions to corporate profitability
– Creating a boom in the demand for industrial robots
The Industrial IIoT is a key part of this smart manufacturing, providing multiple new capabilities for businesses including:
– Sensory orientated IIoT in the form of sensors, RFID and chips
– Analytics oriented big data analysis
– Application platforms for better decision making and improved manufacturing services
The chart below shows how the IIoT in China is impacting different industry sectors in different ways, with sensor technology having the highest penetration. For example, 76% of electronics and electrical appliances sector and 73% of automobile and auto parts manufacturers in China are using sensor technology. Whilst the Chinese pharma sector, with huge data flows and massive amounts of unstructured data, has the highest penetration of big data IoT at 50%.
Multiple benefits ensue from these IIoT technologies and breakthroughs in China, especially in improved efficiencies and competitiveness. Benefits from an evolving IIoT include:
– Streamlining the supply chain: IIoT can enhance overall industrial customer experiences by enabling faster and better ordering and re-ordering processes and subsequent supplier delivery. It also enables supplying manufacturers to plan, build and sustain long-term relationships with their buyers for better ease and convenience of purchase.
– Providing preventative maintenance: The IIoT enables industrial buyers to anticipate any production maintenance issues in their factories before any become serious issues through sensor technologies, therefore avoiding costly downtime and disruption.
– Offering new services and greater experiences to buyers: Known as ‘servitisation’, the IIoT helps suppliers anticipate any problems or issues before the customer discovers them and so can initiate repair work on an as and when needed basis; again, improving the customer’s experience (Source: Manufacturing Global).
International companies and brands are building their presence in the IIoT in China
The IIoT gives many different types of companies an opportunity as the IIoT advances in China, including both product and service providers, both independently of and in partnership with Chinese companies:
– Alibaba, the vast Chinese e-commerce and tech conglomerate is doing its part to accelerate the growth of China’s IIoT ecosystem with Siemens. In 2019, Alibaba Cloud has partnered with Siemens in a deal worth over €20bn ($23.51bn) on the launch of MindSphere (Source: Manufacturing Global). As part of Siemens digital offering, MindSphere is Siemens’ cloud-based, open IoT operating system that delivers a wide range of device and enterprise connectivity options, robust applications, advanced analytics, and closed-loop innovation with complete digital twin solutions. The implementation of MindSphere on Alibaba Cloud will provide services for companies in China Mainland to innovate with advanced industrial solutions (Source: Siemens).
– McKinseys, the global management consulting firm has just opened its IIoT hub in China to help local firms drive digital transformation. According to McKinseys, the biggest challenge for IIoT application is “the last mile,” especially the large-scale integration of information technology and operational technology. At present, many enterprises across the world are launching digital transformation and carrying out IIoT technology pilot programs to enhance innovation and realize mass customization at a lower cost. McKinseys sees their opportunity in assisting with resources and long-term digital strategies (Source: McKinseys).
– Ayla Networkshas developed an IoT cloud platform tailored to manufacturers. The company presents itself as an end-to-end platform for IoT solutions and also offers a mobile IoT design kit for developers. Ayla’s development lab and prototype manufacturing centre in Shenzhen – one of the main manufacturing hubs in China – focuses on software development, product design, IoT security, and feasibility of design. Earlier in 2017, Ayla announced a partnership with China Unicom, one of the region’s major telecom providers (Source: UBS).
How Melchers can support foreign businesses in China’s IIOT manufacturing sector
IIoT manufacturing in China offers a variety of opportunities for foreign business participation, especially those such as telcos, IIoT and industry 4.0 system integrators, IIoT platform developers, analytics software and industrial automation companies. Service opportunities also exist in China’s IIoT, including in product design, supply chain and inventory management. But it is vital for any brand considering entering China to understand that it is a unique market and requires a carefully crafted approach.
Market profiling, sales, channels, gaining access to decision makers, pricing and brand protection are only some of the aspects which need to be considered for a China strategy. Especially for small and medium-size enterprises the costs and challenges of doing business in China can easily be overwhelming. Choosing the right local partner to be successful in China will be paramount.
Melchers has a long tradition in China with doing business for more than 150 years and can support you to successfully navigate through China’s manufacturing transformation. Our services cover the entire value chain – from product development and manufacture through sales and marketing to after-sales service. For more information about establishing a presence or doing business in China, please contact Melchers at email@example.com.