BEIJING--(BUSINESS WIRE)--The Internet-of-things is among major areas in a strategic emerging industry. Developing the Internet-of-things industry is an important move for increasing the core competitiveness of the information industry, improving traditional industries and enhancing IT applications in society. Moreover, it has also become an area where major breakthroughs are to be made to speed up the transformation of the growth pattern and promote innovation across China.
China's Internet-of-things industry will see important opportunities for faster growth and better layout. At the beginning of the 12th Five-Year Plan period, CCID Consulting analyzed regional trends of China's Internet-of-things industry based on summarizing distribution characteristics of the global Internet-of-things industry and successful moves and analyzing distribution and resource characteristics of China's Internet-of-things industry. The analysis aims to provide reference for local and national layout of the Internet-of-things industry as well as relevant macro decisions.
Regional Distribution Characteristics of China's Internet-of-Things Industry
China's Internet-of-things industry reached RMB 193.3 billion in 2010 (exclusive of the application layer). The industry has seen a landscape characterized by clustering in four regions including the Bohai Rim, the Yangtze River Delta, the Pearl River Delta as well as central and western China. Among them, the Yangtze River Delta is the leader by industry size.
Fig. 1 Map of China's Internet-of-Things Industry 2010
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Source: CCID Consulting Internet-of-Things Industry Database, Aug. 2011
The Bohai Rim is an important base for R&D, design, equipment manufacturing and system integration in China's Internet-of-things industry. This region boasts excellence in R&D of key supportive technologies, high extents of sensing-node industrialization and penetration, diverse network transmission modes, rapid construction of integrated platforms and wide Internet-of-things applications. In addition, it has created a complete architecture for the growth of the Internet-of-things industry.
The Yangtze River Delta is the origin of Internet-of-things technologies and applications in China, where it has first-mover advantages in terms of developing the Internet-of-things industry. With a solid foundation in the electronics and information industries, this region focuses the growth of the Internet-of-things industry on the high-end portion of the industry chain. By starting from core software/hardware products and technologies for the Internet-of-things, it is implementing a standards- and patent-based strategy to realize the clustering of leading companies in China's Internet-of-things industry.
The Pearl River Delta is an important electronics system production base in China. When it comes to the growth of the Internet-of-things industry, this region is working on Internet-of-things equipment manufacturing, software and system integration, network operation services and application demonstration. It focuses its efforts on making breakthroughs in core technologies, enhancing the capability of innovation, building Internet-of-things infrastructures, improving IT applications for urban management and developing IT applications in the countryside.
The Internet-of-things industry is growing rapidly in central and western China, where major municipalities and provinces are racing to develop the industry in combination with their respective advantages to seize early market opportunities. Among them, Hubei, Sichuan, Shaanxi, Chongqing and Yunnan are building Internet-of-things industry chains and systems based on their advantages in research, education and human resources as well as better industry bases in fields such as RFID, chip design, sensing & transmission, automatic control, network communications & processing, software and information services. They are focusing on cultivating leading Internet-of-things companies and promoting Internet-of-things application demonstration projects.
Urban Development Status Matches Regional Distribution Characteristics of Information Industry
Developing the Internet-of-things industry requires a solid information industry basis as the support. Therefore, almost all the major Chinese cities that treat the Internet-of-things industry as a priority are leading cities in the information industry. The regional landscape of China's Internet-of-things industry fundamentally matches the distribution of major cities in the information industry.
Fig. 2 Distribution of Major Cities in China's Internet-of-Things Industry, 2010
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Source: CCID Consulting, Aug. 2011
There will be three major trends in terms of the regional evolution of China's Internet-of-things industry:
(1) The industry will grow rapidly in multiple places, with hot areas emerging one after another. Numerous domestic cities including Tianjin, Kunming and Ningbo also treat the Internet-of-things industry as a priority. Provinces such as Jilin, Shanxi, Henan, Hunan and Guizhou as well as municipalities such as Hefei, Xiamen and Dalian are also planning the growth of this industry.
(2) The industry distribution will become extensive as Tiers 2 and 3 cities are racing to develop the Internet-of-things industry. Cities such as Xuzhou and Foshan as well as counties such as Shuangliu County in Sichuan Province, Gu'an County in Hebei Province and Weishan County in Shandong Province are racing to cultivate the Internet-of-things industry in combination with their respective local characteristics.
(3) The industry will evolve both vertically and horizontally as regional division of work will become clearer. Today, the distribution of China's Internet-of-things industry has already presented relatively high concentration. Division of work and consolidation across the industry chain will occur with an increasing size of China's Internet-of-things industry and a growing variety of applications. Interregional division of work and collaboration will also increase.
Trend Analysis of China's Internet-of-Things Industry
Applications Lead Industry Growth
The growth of China's Internet-of-things industry is led by applications, which present a trend of increasing maturity of market segments ranging from public administration and service markets through enterprise and industry application ones to individual and home application ones. Today, China's Internet-of-things industry is still in the early concept-introduction and industry-chain formation period without mature technical standards and a complete technology system. In other words, the entire industry is in the womb. Breakthroughs in areas such as logistics and retail have long been expected in the RFID market, but the entire market is growing slowly due to an excessively long industry chain, overly complex industry organization, overly high transaction costs and the difficulty of reducing costs because of the industry size.
After the advent of the "Internet-of-things" concept, pushing the Internet-of-things market through government application demonstration projects will be a necessary move to satisfy the urgent need of the public administration and service sector. After that, a complete Internet-of-things industry chain may come into being with the increasing maturity of application solutions for the public administration and service market, the clustering of enterprises and the ongoing integration and improvement of technologies. That will drive the industry and large-enterprise application markets. Increasingly mature industry applications will promote service and process improvements. The individual application market will then grow up.
An Increasingly Mature Standards System
The Internet-of-things standards system is in the process of growth and maturity. The "Internet-of-things" concept covers numerous technologies, industries and fields, making it nearly impossible to develop a universal set of unified standards. Standards in the Internet-of-things industry will constitute an extensive standards system that will grow and maturate along with the market.
A single advanced technology does not necessarily guarantee that its standard is viable during the growth of the Internet-of-things industry. Instead, the openness of the standard and the size of the market are critical for its viability. With the expansion of Internet-of-things applications and the increasing maturity of the market, standards derived from an application with a bigger market share will be more likely to become widely accepted de-facto standards.
Integrated Platforms that Are about to Emerge
New, universal Internet-of-things technology platforms will emerge with the increasing maturity of industry applications. Internet-of-things innovations are about application integration. It is impossible for a single company to develop a complete solution. An application with mature technologies, complete services, numerous product types and friendly application interfaces will result from the collaboration among equipment suppliers, technology solution providers, operators and service providers. Common technology platforms supporting different equipment interfaces and interconnectivity protocols and enabling the integration of various services will result from the increasing maturity of the Internet-of-things industry.
Mobile devices, embedded devices and Internet service platforms will become the mainstream in the era of the Internet-of-things. Large-scale common platforms, including technology ones, will emerge as industry applications become increasingly mature. Participants all need to reposition themselves in a new round of competition regardless of device makers, network operators, software developers, system integrators or application service providers.
Emerging Effective Business Models
Business model innovations for the Internet-of-things will result from full combination between technologies and human behavioral patterns. The Internet-of-things interconnects behaviors of machines, human beings and society. New business models will result from full combination between technologies for the Internet-of-things and human behavioral patterns.
In addition, Internet-of-things applications are beginning to migrate toward larger environments from smaller ones. As a result, it is necessary to upgrade the original business models in order to suit large-scale, high-speed, cross-field applications. One more critical thing is to create a business model that enables an all-win situation, which is the real primary motivation for the long-term growth of the Internet-of-things. To achieve an all-win situation, the Internet-of-things must become a real commercial driving force rather than an administrative force. The continuous, rapid growth of the Internet-of-things is possible only when all the industry-chain participants in the development of the Internet-of-things can benefit from it and receive commercial return.