China is on its way to turn itself from the “Factory of the World” to the “Smart Factory of the World.” The goal of the upgrade is to replace low-skilled labor with high-tech machines and solutions. The Chinese government aims to automate its manufacturing with nation-wide initiatives such as “Made in China 2025” and to make it smarter with the “Internet Plus” plan.

But is China ready to enter the Fourth Industrial Revolution? Despite the apparent lack of talent, core technology, and key components, one of the main pillars of the Made in China 2025 plan—robotics —has already begun to show results. Today, with government support more than 20 provinces and cities throughout the country have made robots a key industry; there are now more than 800 robotics enterprises in China (although the actual success of these companies is a subject of debate).

But upgrading industry doesn’t just mean bringing in shiny new machines to replace workers; it’s also about making industrial work smarter, faster, and better. This requires implementing the next big step: automatization with the help of big data, cloud computing, AI, and the Internet of Things (IoT). China hopes that its growth in Industry 4.0 will be exponential rather than linear, crossing one big gap with a single step. However, according to a recent analysis by IT consulting company Capgemini, China is still lagging behind most Western industries and even India in the smart factory initiative.

Screenshot from Capgemini's analysis on smart factories.

Capgemini’s analysis on smart factories

Henry Chu, Vice President of industrial internet platform NeuCloud (寄云科技), holds a similar view. According to him, Chinese manufacturers are still quite conservative in making the most out of new technologies, especially when it comes to solutions such as cloud computing.

“Our clients like our IoT and data solutions but they do not want to perform a large IT infrastructure change. They want to stabilize their IT structures,” Chu told TechNode.

NeuCloud is one of the companies trying to bring China’s industry into the era of Made in China 2025. The Beijing-based company provides industrial internet solutions ranging from intelligent manufacturing equipment to edge computing, IoT, cloud and big data technology. Their clients come from industries such as aircraft manufacturing, high-tech, and energy, and include Mercedes-Benz in Beijing and the Shenzhen Metro.

Chu explained that despite the government’s push to develop cloud computing and force its use in certain sectors—like medical, high-tech, and the government itself—Chinese industry is still shy to adopt it. The biggest reasons keeping Chinese companies away from the cloud are inconvenience, fears about security, and lack of large cloud providers.

“There is also a mindset that Chinese have,” said Chu. “They want their own data and IT system within their house. They do not want to put their data and system in other companies. It’s not about intellectual rights; it’s about ownership. Even if the data is useless they do not want to share it or leak it to their competitors.”

Vice President of NeuCloud Henry Chu. Photo Credit: TechNode

Vice President of NeuCloud Henry Chu (Image credit: TechNode)

Cloud computing is just one of the areas where Chinese industry is making slower progress than its rivals in the US and Western Europe. Chinese companies lack knowledge, technology and a concept of how to build their systems and achieve automatization, says Chu.

“In China, most of the manufacturers are at the level of the Second Industrial Revolution, some are even at 1.5, but they want to make a very big step from 2 to 4,” said Chu. “Our product can help but it is only a tool.”

According to the Deloitte’s Global Manufacturing Competitiveness Ranking issued in 2016, the US is expected to displace China as No. 1 by 2020. Chu believes that the goals set out by Made in China 2025” are still realistic; the Chinese government is motivated enough to drive the whole industry into that kind of venture. However, there is still a lot of work to do.

To keep their competitive edge, Chinese companies have been importing and buying foreign hardware and software solutions. Last year, Chinese iron and steel company Baosteel Group and Siemens AG signed a strategic agreement on intelligent manufacturing, while appliance manufacturer Midea took over German robot maker Kuka. But Chu is not worried about losing his job to foreign imports any time soon.

“In China, most of the companies, especially large enterprises, would like to have solution providers from local companies, but when the technology in China is not so advanced, they will adapt solutions and equipment from foreign companies,” he said.