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Internet of Things (IoT) in China: State and Future Directions

How far is China from connecting everything?

· interview

{{{Jana Tian & Sharon Chen}}}

Source: Internet

The Internet of Things (IoT) is a technology frontier that connects the physical realm with the digital. A multitude of sensors collect and transmit real-time data, which allows for unprecedented monitoring, control, and feedback in a system. IoT has transformed manufacturing lines, urban infrastructure, and is now vying for a place in the average household.

The Global System for Mobile Communications Association (GSMA) estimated that by 2025, there will be 14 billion IoT connections worldwide, with a third coming from China. As its society embraces digital transformation, China has seen its IoT market size nearly double in just the past three years - from $56 billion to $100 billion.

Source: GSMA Intelligence

How has China achieved such rapid growth in its IoT industry, and what’s on the horizon? We interviewed industry veteran Dan Qiao to get an insider glance into the mix of industrial, government, and consumer forces behind China’s IoT boom.

About Dan Qiao

Dan Qiao is a VP at Plug and Play China and leads the IoT Accelerator. He has been active in tech incubation, open innovation and early-stage investment in China since 2013. Previously, he worked at Huawei for seven years, playing a key role in their overseas expansion sales operations. His experience has given him both hands-on experience and a bird’s eye view around China’s IoT industry.


How do you define IoT?

IoT is not a very new concept. In short, the idea is to connect everything. On a basic level, we build small, localized networks involving physical objects. Then, upon this foundation, we can collect data, perform optimization, and apply machine learning/AI. IoT has already found many applications among various industries and consumers, and with additional policy incentives, I think high connectivity can be attained within three to five years.

What does the IoT market in China look like today?

Source: Internet

Many tech innovations start in business-driven applications then trickle down to consumer adoption. For IoT in China, the three major sectors of activity are industry (IIoT), smart city, and smart home.

Industry & manufacturing: IoT has been embraced in manufacturing and agriculture, as increased monitoring and feedback capability help companies boost productivity, cut costs, and increase efficiency. This has also driven the development and scale-up of specialized sensors that can then benefit other non-industrial IoT applications.

Smart cities: Many governments are looking to incorporate IoT in their transportation systems in the form of traffic cameras, EV chargers, and even manhole covers. Another major application is utilities management. In most large cities in China, water and electricity meter readings are automated through IoT, which has helped cut costs in the long-term, despite higher upfront investment.

Smart homes / consumer goods: This is the newest frontier of IoT development, including Internet-connected household appliances and wearables such as smart watches. We also see intersections with healthcare needs, with products that can perform health monitoring. The two groups of players racing to develop consumer-facing IoT today are 1) tech giants like Xiaomi and Huawei and 2) traditional home appliance companies like Haier and Midea.

Which of the three areas is the innovation focused on now?

At Plug and Play, we are currently more focused on 2B applications, such as IoT in manufacturing, agriculture, and smart cities. In these cases, if you can solve the technical problem, there will be a market and business. In contrast, consumer-facing applications are riskier because their business model requires “killer apps”, mature technology, and proper timing. That being said, companies like Baidu, Alibaba, Tencent, JD, and Meituan are all investing in their own consumer IoT projects.

What do you think has contributed towards the rapid growth of IoT in China?

To be market ready, a technology needs to demonstrate not only performance, but also cost competitiveness. For IoT in China, the policy environment around network infrastructure has really lowered the cost.

For example, take the cost of data bandwidth. A few years ago, there was no distinction between data use by users versus by objects. Without this distinction, even connecting something as basic as an electricity meter was prohibitively expensive. Now, with infrastructure advances, and platforms designed by the three largest network providers specifically for IoT, costs have lowered significantly.

In fact, since 2015, Chinese government has been backing the support towards integrating the country’s mobile internet, cloud computing and big data initiatives through its ‘Internet Plus’ strategy. I believe the growth of IoT in China will continue as long as Chinese government keeps providing positive support. China has just committed to the ‘Made in China 2025’ program to upgrade the nation’s manufacturing capacity, which is promising to the whole IoT industry but especially IIoT.

How is the IoT landscape in China compared to that in the United States, or other parts of the world?

Source: Internet

From the demand side, the products that consumers want are probably more similar than not. The differences lie in the cost of and the ecosystem around IoT. For example, a key factor of lowering cost in China is the government push to invest in IoT and enabling technologies. Sharing an ecosystem with Huawei, who can provide advanced and affordable 5G networks, is a clear advantage.

In other countries, industry growth is mostly driven by private sector players and market forces, which focus more on short-term returns on investment. This can hinder the development of infrastructure on which IoT depends. Policy and culture can play roles too. For example, more skeptical attitudes towards data privacy have posed major challenges for IoT companies in other parts of the world.

What is the role of 5G in driving forward IoT?

The power of IoT lies in the number of devices connected. As the Internet infrastructure continues to mature with the spread of 4G/5G, IoT will only continue to grow. However, infrastructure is only the first step - real market takeoff will require killer apps to convince people to buy in. Most consumer-facing projects harnessing 5G capabilities are still in their experimental phase, but I expect some key benefits to be realized as soon as next year.

One example is a digital mall piloted by Wanda and Huawei. By providing 5G/IoT capability, they are exploring how to better serve shops and customers through guided purchasing and more bespoke shopping experiences. For example, by combining location data and a customer’s purchase history, they can make recommendations, and make it easier to buy what you want to buy.

Supported by government policy and network providers, Chinese IoT products have found a multitude of applications in industry and urban infrastructure. Now, the industry has set its gaze on extending into people’s everyday lives in the form of wearables, smart home appliances, and next generation mall experiences. Active support through investment and policy, combined with the dawn of 5G network capability, continues to propel China towards IoT’s promise of connecting everything.

All opinions expressed in this essay represent our personal views only.

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