China is gearing up for a manufacturing update with industrial IoT.
Report and case studies by Comet Labs Research — Beijing
Over the last half century, China has evolved into a manufacturing powerhouse, maintaining the title as the world’s greatest exporter since 2009. But the low-wage and high-savings business models of China’s manufacturers is now proving to be insufficient in competing with advanced economies across the globe. According to reports from Boston Consulting Group, China’s manufacturing costs were just 4% less than costs in the United States in 2014.
With manufacturers actively seeking solutions to solve inefficiencies in their operations, the opportunity for industrial IoT in China is massive. Leading manufacturers such as Omron and ZPMC have taken the first steps, integrating product life cycle and processes management systems into their factories in the last decade.
Today, the massive workforce in China coupled with innovative automation is an unstoppable duo, and IoT is at the forefront.
China needs an industrial upgrade.
China's traditional manufacturing industry is facing pressure from both established and developing countries.
China’s industrial competitors across the globe are undergoing major transformations. After the international financial crisis occurred, developed countries implemented industrialization strategies that gave them competitive advantages over the manufacturing industry. Developing countries, on the other hand, have also been actively dividing their labor across the globe, expanding throughout the international market space.
But the cost of production is rising in China. According to a report by the Financial Times, average wage levels in China have tripled since 2005, as more and more families have migrated into industrial cities and overall conditions of living have improved. China has begun to run out of cheap rural labor — and labor costs for manufacturers have thus skyrocketed.
The low-cost advantage of the traditional labor-intensive manufacturing industry in China has been steadily falling. As a result, growth rates of investments and exports have also slowed.
Realizing this, Chinese manufacturers are clamoring to upgrade their infrastructure in order to regain their competitive edge worldwide.
China’s manufacturing industry is inefficient.
The manufacturing industry in China is without a doubt the largest in the world, but it currently lacks the ability to innovate with high-end equipment. Additionally, Chinese manufacturers most often are producing low-end products without brand recognition and are wasteful in their utilization of resources and energy.
Still, the industrial IoT market is very profitable and has great potential in China. According to the China Electronics Standardization Institute, the value of China’s industrial IoT market in 2016 was 189.6 billion RMB, accounting for 18% of the total IoT industry worldwide.
It has even been predicted that after policy and application requirements are solidified, industrial IoT in China will account for 25% of the global industry by 2020, exceeding 450 billion RMB.
Because industrial IoT can be applied to the entire product life cycle — design, production, management, and service — integrating advanced technology into Chinese manufacturing will bring profound changes to manufacturers’ traditional processes.
Case Studies: Adopters of industrial IoT in China
Case 1: ZPMC — Optimizing management decisions
Shanghai Zhenhua Heavy Industries Company (ZPMC) is one of the largest heavy equipment manufacturers in the world.
As a large-scale heavy equipment manufacturing unit, all types of equipment including forklift trucks, tractors, cranes, climbers, and door machines are commonly used. Prior to implementing IoT technologies, all records regarding these machines were manually documented — a process which was incredibly inefficient and resulted in high operating costs.
The company’s changes took place in three areas:
- Optimizing mobile machinery. For all machinery and vehicles, the company was able to understand the real-time accurate positioning within the enclosed area and collect operational data.
- Intelligent production scheduling. The production and management personnel for each department applied for remote one-click applications for various types of mobile machinery.
- Automated cost calculations from each data point.
ZPMC saw improved operating efficiency, improved production efficiency, and improved safety management and control capabilities as a result of implementing IoT capabilities.
Case 2: Omron Smart Factory — Optimizing production processes
Omron is a world-renowned manufacturer of automation control and electronic equipment. Because Omron produces a wide variety of products, each product requires different quality controls and delivery standards. Therefore, the company decided to adopt IoT technologies in its production lines in 2006.
The company completed this transformation in three phases. Each phase was allocated five years.
- Stage 1: Omron constructed an ASSY platform, which is responsible for the product assembly. With the new process, each part is constructed through the traditional SMT process, and then sent to the ASSY assembly platform to be finished before leaving the factory.
- Stage 2: Omron also integrated a visual management system. With the new system, everyone in the factory — from the on-site operator to production management personnel — gained access to information about the ongoing processes. The visual management program takes measurements prior to taking any action, in order to prevent error.
- Stage 3: The final phase was integrating all platforms (such as management platforms and hardware operating platforms) into a whole system, where equipment and data are monitored and coordinated in real-time.
The step-by-step transformation process of Omron embodies a successful introduction of industrial IoT technology. In 2010, when Omron's Shanghai factory decreased the sales price of its corresponding commodities in China by 50%, while doubling its output and substantially increasing its revenue.
Case 3: SANY Group — Product life cycle management
Founded in 1989, SANY is China's leading and fifth-largest construction machinery manufacturing enterprise with annual sales of 60 billion yuan. Its products are sold in more than 100 countries and regions worldwide.
SANY Group applied automation to one of its plants that has a total area of 100,000 square meter and is Asia's largest single-unit production plant. The factory has multiple assembly lines for concrete machinery, road machinery, and port machinery with an annual production capacity of 30 billion yuan.
To improve its operation, SANY built a digital factory modeling platform, industrial design software, and product lifecycle management system in a 3-D environment to model the entire production process. Production tests are then performed in a completely virtual environment.
These digital systems resulted in SANY’s production efficiency increasing by 24%. Additionally, SANY’s production timeline shortened by 28% and delivery speed increased by 12% with labor cost savings of approximately 20%. Moreover, 14% fewer defective products were created and operations were 18% more efficient. Overall, SANY’s manufacturing operating costs were reduced by 28% and found production energy savings of 7%.
Areas for Growth in Sensors and IoT
As shown through prior case studies and industry trends, major Chinese manufacturers have been actively seeking factory upgrades with industrial IoT. For example, Chinese companies Sany Heavy, Haier, XCMG, and INDICS recently came out with cloud-based solutions for manufacturing. In addition, tech giants such as Baidu, Alibaba, JD.com, and Tencent are working on their own industrial IoT platforms.
The sensor market is also rapidly growing in China. According to data from the China Electronics Standardization Institute, the CAGR of the sensor industry is expected to be 11% in 2021, with the market size reaching 190 billion USD. In recent years, China has increased investment in sensor-related industries, especially in Shenyang at the Shenyang Academy of Instrumentation Science, Shenzhen Tsinghua University Research Institute, and Henan Hanwei Electronics.
Industrial control is mainly embodied in programmable logic controllers (PLC), distributed control systems (DCS), and other products. In the PLC market, overseas brands have competitive advantages. China’s PLC market is still dominated by foreign products, and Chinese production capacity of PLCs still has room for improvement.
In the DCS market, Chinese DCS products have gained market share worldwide. In recent years, the market share of domestically-produced DCS has been increasing rapidly. Many companies in this space are considered advanced on an international level. Some examples include the Beijing Syntron, Shanghai Xinhua Group, Zhejiang University, SUPCON, Weisheng Automation, Beijing Control Technology, and CASIC.
As we enter a new age of technological innovation driven by machine learning and robotics, we expect more industrial companies to adopt IoT systems into their operations. Soon, it’ll be a requirement to stay competitive. Coupled with more productive robotic solutions, machine learning software will profoundly increase the capabilities that modern industrial IoT systems can bring. We’re excited to see what new ideas startup founders in this space will introduce.
The Comet Labs Research Team in Beijing explores industry and AI technology trends in China, and seeks to understand how they might serve as helpful cases for startups in the United States and around the world.
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