HOW GREATER CHINA IS SET TO LEAD THE GLOBAL INDUSTRIAL IOT MARKET A GSMA INTERNET OF THINGS REPORT. JULY 2018 FOREWORD The Fourth Industrial Revolution describes a dramatic step change in all of our lives. The confluence of high internet speeds, big data, the Internet of Things (IoT), analytics and artificial intelligence (AI) will fundamentally alter the way we live and work, intelligently connecting virtually every device, making our cities smarter and our lives easier and more productive. Central to this will be the Industrial Internet of Things (IIoT), which will help to increase productivity by streamlining and automating manufacturing processes via internet connectivity. Overlaid with AI, cloud computing and advanced analytics, factories can monitor and interpret data from production lines and complex machinery in real time to anticipate faults, manage infrastructure and mitigate risk. The captured data will, in turn, drive efficiencies, optimise productivity and decrease costs in many important economic sectors beyond manufacturing such as resources, energy and telecoms. Backed by positive and proactive government support, China is betting big on the IIoT and, as one of the world’s largest economies, is poised to not only become the world’s leader in deploying solutions but benefit from enormous economies of scale. As the producer, supplier and end user of many of the world’s IoT-related sensors and devices, China is in the early stages of this latest industrial transformation. Intelligent production processes, collaborative manufacturing and cloud manufacturing platforms will enable interconnectivity and collaboration across the entire value chain. Location tracking will allow suppliers and manufacturers to monitor the location of critical materials throughout the manufacturing cycle, pinpointing and resolving issues before they occur. China, as elsewhere, is also making advances in the area of AI which, with machine learning, will help factories and businesses manage complex processes and drive innovation. China’s mobile operators will play a fundamental role in all of these developments by providing secure, reliable and intelligent connectivity to businesses and enterprises across the country. They are integral to the development of the IIoT and an invaluable and strategic partner for cities, governments and other organisations. The GSMA’s Internet of Things Programme is working closely with all operators as well as other vendors in the ecosystem to support and help accelerate the delivery of compelling and secure IoT solutions including Low Power Wide Area networks, such as NB-IoT and LTE-M, which are helping to usher in innovative new services across the country. Through intelligent connectivity, China is creating a better future for its citizens and businesses and providing an example for the rest of the world to follow. Foreword by Mats Granryd Director General, GSMA 2 ©GSMA | www.gsma.com/iot/ | @gsma | [email protected] CONTENTS Foreword:............................................................................................................................................................ 2 Introduction ....................................................................................................................................................... 4 Overview of the Industrial IoT ....................................................................................................................... 5 The Role of China’s Government .................................................................................................................. 7 The Role of Mobile IoT and the GSMA ........................................................................................................ 8 Key Sectors for the Industrial IoT In China ................................................................................................. 9 Challenges for the Industrial IoT in China ..................................................................................................11 Operator Focus – Interviews .........................................................................................................................12 Asia Pacific Telecom Group ..................................................................................................................12 China Mobile .............................................................................................................................................13 China Telecom ..........................................................................................................................................13 China Unicom ...........................................................................................................................................14 Far EasTone ...............................................................................................................................................16 Taiwan Mobile ...........................................................................................................................................17 Conclusions .......................................................................................................................................................18 ©GSMA | www.gsma.com/iot/ | @gsma | [email protected] 3 INTRODUCTION The Industrial Internet - the convergence of industrial systems In time, AI systems should be able to help people manage with Internet-based technology, such as cloud computing complex industrial facilities effectively and efficiently, with the and advanced analytics – is now developing apace. Large system learning and refining its algorithms over time. numbers of connected sensors can monitor the performance This paper explores the development of the Industrial IoT in of complex physical machinery in real-time. The analysis of the Greater China, drawing on interviews with six mobile operators resulting data can be used to optimize production and perform in the region. It identifies the key trends in this sector, the predictive maintenance, increasing efficiency and generating benefits seen by exponents of the Industrial IoT and the insights that can be used to develop new processes. This challenges they face, before drawing conclusions about how concept is known as the Industrial Internet of Things (IIoT). digital technologies will drive the next industrial revolution in The data captured by the Industrial IoT can also be used for East Asia. machine learning to develop artificial intelligence (AI) systems – a field that is developing rapidly in China and elsewhere. 4 ©GSMA | www.gsma.com/iot/ | @gsma | [email protected] OVERVIEW OF THE INDUSTRIAL IOT According to GSMA Intelligence, the global Internet of Things At the same time, China is also producing start-ups, such as (IoT) market will be worth $1.1 trillion in revenue by 2025 as landing.ai (founded by Baidu’s former chief AI scientist Andrew market value shifts from connectivity to applications, platforms Ng), K2Data, and RootCloud, that could play a key role in the and services. Players from a range of backgrounds – including development of the Industrial Internet. The city of Wuxi, a hot spot telecoms, IT, device manufacturing and systems integration – are for the IoT industry in China, runs an annual 10 million yuan (US$1.5 all vying to capture a portion of this opportunity. million) competition for IoT innovations – a form of crowdsourcing that can drive innovation. Business applications account for about half of the overall IoT market. By 2020, total global expenditure on IoT is set to top US$3 Many of the IoT components and services developed in Greater trillion, according to research firm Gartner, with cross-industry China are deployed locally. Indeed, China’s manufacturing sector business applications accounting for US$570 billion and vertical is a major customer for IoT solutions. The Industrial IoT promises industry applications US$910 billion, respectively. That represents to enable China’s millions of factories and production plants to compound annual growth rates of 30% and 8% from 2016. greatly increase their efficiency, lower costs and better manage their infrastructure. Greater China is both a huge market for the IoT and a major supplier of the component technologies. The workshop of the Research firm IDC forecasts that the overall market for IoT kit world, China is a leading producer of all kinds of goods, including of various forms in China will rise from US$193 billion in 2017 to much of the world’s electronics. In fact, Greater China makes most US$361 billion in 2020. Within that, the Industrial IoT market in of the sensors, microchips, and other components that are the China is growing by about 25% per annum and is set to reach fabric of the IoT. By 2020, there will be 200 billion IoT connected almost 300 billion yuan (US$47 billion) in 2018, according components and devices globally, of which 95 percent will be to China’s Ministry of Industry and Information Technology manufactured in China, according to Axa Insurance1. (see chart). The Overall scale and growth forecast of China’s IIoT in year 2010 to 2019 (100 million RMB) 4000 0.45 3500 0.4 37.10% 3000 0.35 0.3 2500 24.60% 0.25 2000 0.2 1500 0.15 1000 0.1 500 0.05 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: China's Ministry of Industry and Information Technology 1 https://www.axa.com/en/spotlight/story/internet-of-things-made-in-china According to GSMA Intelligence, the global Internet of Things (IoT) market will