Industrial Internet: The "Apple" Dream of Manufacturing Giants

On July 7, General Electric (GE) of the United States reached a cooperation agreement with China Telecom Group to connect its industrial internet Predix platform (equivalent to an operating system for industrial equipment) with China Telecom's comprehensive information services. The American industrial internet will thus enter fields such as cloud storage, telemedicine applications, intelligent manufacturing, and cloud computing in China.

A few days later, the Industrial Internet Association of China was established in New York, marking a significant breakthrough in international cooperation between the industrial and information communication sectors of China and the United States, following the establishment of the Industrial 4.0 dialogue between China and Germany.

It is reported that GE has launched 12 pilot projects for the industrial internet in China and is promoting the implementation of more than 40 big data analysis applications. The industrial internet, known as the hallmark of the third industrial wave, has begun to substantially participate in and influence the progress of the "Internet Plus" action plan in China's industrial sector.

Before the large-scale introduction of the industrial internet in China's industry, it is necessary to deeply examine how the industrial internet came about, what it aims to do, and whether there are any side effects.

Industrial Internet

Reinventing American Manufacturing

After the 2008 financial crisis, the biggest reflection of the U.S. government was realizing the importance of the real economy in the national economy, believing that industry is the most important component of national competitiveness. A series of national plans were successively introduced, such as the "Framework for Revitalizing American Manufacturing," the "Advanced Manufacturing Partnership Program," and the "National Strategy for Advanced Manufacturing," to achieve the national strategy of "re-industrialization."

In 2012, GE, as a leader in American manufacturing, was the first to propose the concept of "industrial internet," relying on the interconnection and analysis software between machines and equipment to change the previous model dominated by individual intelligent devices. By combining high-performance equipment, low-cost sensors, the internet, and big data collection and analysis technologies, it significantly improves the efficiency of existing industries and creates new industries.

This idea has a long history. As early as 2005, GE's aircraft engine company restructured into GE Aviation and began to change its business model. The company's original business was only to produce aircraft engines. Now, by installing numerous sensors on aircraft, it collects various parameters of the aircraft in real-time and provides a complete set of solutions for airlines in operation and maintenance management, capability assurance, operational optimization, and financial planning through big data analysis technology. It can also provide safety controls, flight predictions, and various services, gradually transforming GE into a genuine software company.

Taking Alitalia as an example, GE installed hundreds of sensors on each of their aircraft, which can collect real-time data on engine operation, temperature, fuel consumption, and more. After massive analysis using GE's software, it accurately provides ideal control methods. Just this alone saved Alitalia $15 million in fuel costs for its 145 aircraft in one year. Moreover, through this data, potential engine failures can be predicted in advance, allowing for proactive maintenance to avoid flight delays, increased costs, or even greater safety incidents due to machine failures.

GE is gradually transforming from a equipment manufacturer to an intelligent service provider through the deep integration of IT technology and equipment. The company's business model is also shifting from a single equipment sales model to a three-in-one intelligent system supplier model that includes intelligent equipment, intelligent analysis, and intelligent decision-making.

Experts generally believe that the value of the industrial internet will be reflected in three main aspects: first, it improves the efficiency of equipment use, thereby reducing energy waste and partially increasing GDP. Second, it enhances the maintenance efficiency of system equipment, shortening maintenance time, which is equivalent to increasing productivity. Finally, it optimizes and simplifies operations, effectively liberating more valuable human resources.

GE predicts that if the industrial internet can increase productivity by 1% to 1.5% annually, it will raise the average income of Americans by 25% to 40% over the next 20 years; if other regions of the world can achieve half of the productivity growth of the United States, the industrial internet will contribute an additional $10 trillion to $15 trillion to global GDP during this period.

To this end, GE established a research and development center for the industrial internet in Silicon Valley in 2011, and the R&D team has now grown to over a thousand people. In 2013, GE announced it would invest $1.5 billion over the next three years to develop the industrial internet. In April of this year, GE announced that it would divest most of its financial business valued at $363 billion over the next two years and plans that by 2018, 90% of GE's profits will come from high-return industrial businesses, compared to 58% last year.

From this, we can see that the value of the industrial internet lies not only in promoting major manufacturers to transform into intelligent manufacturing systems and service providers but also in potentially creating a new high-end real economy model with profit margins higher than those of the financial industry.

Open Platform

Creating an Intelligent Manufacturing "Apple" System

The United States is the birthplace of the internet, and the industrial internet was born with a distinct internet imprint, which is openness. Compared to the internet, the industrial internet not only needs to achieve openness among ICT technology fields such as telecommunications networks, data storage, and transmission but also needs to realize the openness and integration between manufacturing technology and IT technology.

This is a research and development camp that spans "two ITs." In March 2014, GE collaborated with IT companies such as IBM, Cisco, Intel, and AT&T to establish the Global Industrial Internet Consortium (IIC). The industrial internet consortium adopts an open membership system and is committed to enabling data sharing between devices from various manufacturers. This involves not only Internet network protocols but also various parameter indicators of data storage capacity, interconnected and non-interconnected devices in IT systems. The goal is to break down technical barriers by establishing common standards, activating traditional industrial processes using the internet, and better promoting the integration of the physical and digital worlds. "It aims to accelerate the development, collection, and widespread use of interconnected machines and devices, promote intelligent analysis, and provide assistance to workers." Currently, the number of members in the industrial internet consortium has reached 167.

This is an open system with ecological significance rather than industrial chain significance. In October 2014, GE announced that its industrial internet Predix platform (equivalent to an operating system for industrial equipment) would be open to all companies worldwide, introducing the cooperation model between platform and application developers in the internet field into the industrial sector, facilitating users to rapidly develop customized industry applications on a large scale. This industrial ecosystem, highly similar to Apple's in the smartphone field, will greatly accelerate the rooting and landing of the industrial internet in various sub-sectors of manufacturing.

This is a standardized cooperative organization aimed at the global market. Currently, Chinese companies and institutions such as China Telecom, Haier, Huawei, the China Academy of Information and Communications Technology, and the Shenyang Institute of Automation of the Chinese Academy of Sciences have joined the IIC, sharing cutting-edge technologies and resources with the global industrial internet industry.

We believe that the purpose of companies like GE establishing the industrial internet consortium is to leverage the United States' advantages in information technology, to take the initiative in technical and industrial standards through deep integration with the manufacturing industry, thereby gaining a dominant position in global competition. So far, the industrial internet is not yet a national strategy of the United States, which sharply contrasts with Germany's vigorous promotion of the Industry 4.0 strategy. However, many American companies within the alliance are responsible for the U.S. "re-industrialization," and one of its core technologies is the CPS cyber-physical system, so many scholars study the industrial internet as an industrial strategy equivalent to Industry 4.0.

The cooperation with China Telecom can be seen as the first step for the industrial internet to extend an olive branch to Chinese enterprises. But wait, what can China gain from participating in this new industrial process aimed at revitalizing American manufacturing?

Let us shift our focus back to the first ecosystem of intelligent manufacturing—the smartphone platform. During the feature phone era, Nokia, which held the global market share for 15 consecutive years and had R&D investments that were once five times that of Apple, ultimately fell in the first battle of the smartphone ecosystem in 2013 and changed ownership. This is a lamentable story of the first manufacturing giant that could not adapt to the intelligent era. In this story, China is clearly an observer, learner, and beneficiary. Soon after Apple, a new platform with a more open spirit—Android—rose rapidly. Through cooperation with Apple, a large number of small and medium-sized developers in China gained billions in application revenue sharing, cultivating a large number of software and hardware development teams for the arrival of the current "Internet+" era. With the help of cooperation with Android, along with the enterprising spirit of Chinese mobile phone manufacturers, companies like Huawei, ZTE, Xiaomi, and Coolpad have truly entered the first camp of global smartphone shipments.

The field of intelligent manufacturing is likely to replicate the competitive landscape similar to that of smartphones. Germany's Industry 4.0 and America's Industrial Internet will undoubtedly support the two most important global platforms for intelligent manufacturing in the future. I urge our industrial and information communication sectors to highly value the historical opportunities that emerge from this, to work together, and to integrate global innovation resources to accelerate the intelligent transformation of China's industrial economy. In comparison, the dialogue process of China-Germany Industry 4.0 is relatively slow due to government leadership and has not yet reached the level where heavyweight enterprises mutually join each other's industrial cooperation organizations to jointly promote the negotiation of concepts and define standard systems. The Industrial Internet, positioned for open cooperation between enterprises and market-oriented, has already "arrived ahead" in its localization journey.

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Through the examination of GE's transformation to intelligent manufacturing via the Industrial Internet, we find that world-class manufacturing giants have moved from individual equipment intelligence to system intelligence, and have evolved from simple automation and informatization to the deep integration of ICT and equipment, thus forming a series of new industrial intelligent services such as equipment networking, data collection, big data analysis, and intelligent decision-making. Although GE advocates and has established the Industrial Internet Consortium and was the first to open the Predix platform, a main manufacturer with a relatively singular manufacturing model (mainly concentrated in aviation, energy, and healthcare) may not necessarily develop into a unified industrial application platform controller like Apple. The dispersion of various sub-industries and the complexity of manufacturing technology will make the platform competition in intelligent manufacturing and the competition among major powers even more intricate.

When American manufacturing giants bravely abandon the lucrative financial sector and unhesitatingly invest in the tide of intelligent manufacturing, the intelligent transformation is undoubtedly a wave of industrial revolution that will change the future landscape. Meanwhile, we see that Chinese listed companies have borrowed many new concepts to attract huge amounts of capital, most of which flow into real estate, finance, and especially the stock market. The comparison of highs and lows among them is worth our vigilance! (Hu Hu, Zhu Duo Xian)