If you can’t see the YouTube player above, try watching here instead.
Largely driven by its 1.4 billion citizens, a fifth of the world’s population, China has quickly risen as an economic powerhouse and tech leader with rich data resources over the past few years. It has some of the world’s biggest tech companies, including e-commerce giant Alibaba with GMV forecasted to exceed $1 trillion by 2020, and social heavyweight Tencent, creator of super messaging app WeChat which boasts an impressive 1 billion-plus users.
Chinese netizens enjoy discussing the country’s “four great new inventions”: high-speed rail, mobile payments, online shopping, and rental bike platforms. However, huge consumer-facing successes have done little to influence the adoption of innovative technologies in traditional industries such as manufacturing. Certain technologies such as AI and cloud computing could have transformative effects on this industry in particular.
“The scenario in consumer internet is comparatively simple, and the solutions can be highly replicable. However, the situation becomes much more complex in the industrial world,” Jesse Zhang, director of software engineering for Chinese business software provider Black Lake Technology, told TechNode in an interview at the Emerge by TechNode conference on May 23 in Shanghai.
Backed by a list of prominent venture capitalists (VCs) including GSR Ventures, GGV Capital, and Bertelsmann Asia Investments, Black Lake has been selling software-as-a-service (SaaS) applications to manufacturers since 2017. The company’s aim is to achieve highly automated yet intelligent manufacturing processes, enabling more flexible and efficient production to meet consumers’ changing demands, while lowering risks and failures.
Its manufacturer collaboration and intelligence software have been running in production bases for some big names, including Anheuser-Busch InBev and McDonald’s. One of the company’s use cases was helping McDonald’s Chinese vendors that make Happy Meal toys. Better controls over its procedures and improved inventory visibility allowed for a wider variety of toys from different cultures and changing trends in flexible quantities, rather than in fixed categories and amounts.
However, there are still millions of Chinese factories that have not yet digitized. As of 2018, only 25% of Chinese manufacturers had smart-factory initiatives, compared with 54% in the US. The adoption of industrial IT such as cloud services for data connection across systems is also low, only one-third compared with 80% of those in the US, according to a joint study by BCG, Alibaba, and Baidu.
Also, a company’s digital investment usually does not translate into return on investment immediately. “Digital transformation requires heavy investment in a long-term perspective, and this is particularly challenging to small- and medium-sized companies,” (our translation) reported Xinhua citing a researcher from the National Development and Reform Commission (NRDC).
Another big challenge is that a large amount of data available at currently are isolated. “It takes much effort to associate the datasets from one system with another. Companies should establish jointly a networking infrastructure for industrial use which is applicable to each player rather than building their own networks,” said Zhang. The former GE Digital and Tsinghua alumnus believes that for Chinese factory owners, the future of a scalable industrial internet is based on a commonly accepted standard protocol, where data could be openly shared and connected in real time.