China’s competitive digital capabilities in the industrial context are aggressively expanding. The government's strategic plan "Made in China 2025" and Industry 4.0 technologies are pushing Chinese factories to close the competitiveness gap with the Western world.
The “Made in China 2025” campaign started after China saw overcapacity in heavy industry that has dragged China’s manufacturing down. The overall growth of China’s manufacturing GDP continues to decline from 14.4% in 2005-2010 to 4.4% in 2015-2020.
The government-led campaign is expected to stimulate the growth of Chinese high-end manufacturing. In the medium-term, this policy will also create opportunities for foreign-invested enterprises (FIEs) in China.
One of the key focus industries in the “Made in China 2025” strategy is the advancement and expansion of robotics. The ultimate goal is for Chinese industrial robots to make up half of the Chinese market by 2020 and 70% by 2025, by which local robotics should be able to compete on par with global competitors.
Chinese government believes the fundamental transformation driven by technology will create new opportunities in consumption-driven industries as well as new manufacturing sectors.
Chinese manufacturers are beginning to digitalize to upgrade their factories, reduce costs and ultimately secure a high return on investment. Although most Chinese manufacturers are still in the digital followers and laggards category, they are catching up aggressively and even surpassing Western competitors by automating quickly.
As the future as Industry 4.0 unfolds, disruptive technology such as Industrial Internet of Things (IIoT) plays an important role in the automation of processes.
In the five layers of Industrial Internet of Things (IIoT) structure, multinational corporations are present in most categories. However, Chinese firms (Alibaba & Tencent) become more proactive at the top of the stack, enabling integration into the industrial sector typically dominated by hardware players. The large quantity of data, online payment schemes, along with advances in video and voice recognition, has propelled Chinese firms into the top of the IoT stack – moving into the B2B space and providing end-to-end solutions.
To capture bigger opportunity in IIoT, multinational corporations need to evolve swiftly as the value pool is shifting quickly from lower layers upwards to software and platforms – but this will require amassing relevant cases. In the top of the stack, the cost would reach between 20% and 35% of IIoT spending with current players are China’s Tencent and Alibaba as well as United States’ IBM and Oracle.
Industrial IoT adoption involves transformation from product to manufacture to business as a basis for organizational transformation, enabling value-added services and business model innovation. Foreign enterprises are finding this transformation of autonomous manufacturing happening the fastest in China and hence are required to have a thoughtful approach at participating in this pioneering market.