China’s Internet of Things - Market and Ecosystem Analysis

May, 2012

Draft v0.1, Tony Zeng, mobility@gmail.com

Ecosystem Analysis

Executive Summary – Key Findings

IoT is booming in China with an average of 30% CAGR in the coming 2-3 years. Currently the development of IoT in China is mainly driven by the government . Other important vertical

HIGHLIGHTS

mainly driven by the government . Other important vertical industries, regions, and key players are identified as well in the following slides.Despite its promising future, IoT in China is facing some challenges such as no well-established industry standards in place, no well-defined business model has taken form, as well as the lacking of end-2-end solution providers and experienced operators

Executive Summary – Conclusions

HIGHLIGHTS

Opportunities have been identified in different IoT layers and vertical markets. In the coming 2-3 years, the most important industries are markets. In the coming 2-3 years, the most important industries are intelligent city (including public surveillance), intelligent transportation (telematics), smart grid, and mobile payment industry

Aiming at generating revenue and gaining market share in the vertical industries, it is critical to build up strategic alliance with int./ext. stakeholders to deliver end-2-end solutions, trying to get involved proactively in the standards/regulations establishment process and develop mutual trust with the local governments through interaction and cooperation

Agendaq Market and Ecosystem Analysisq Challenge and Opportunity q Product and Market Strategy

2222

Definition of IOT[ ]IoT: Internet of Things

Platform and Service Layer

App. layer

3333

IoT: Internet of Things

Layered Architecture:Perception, Transfer, Platform, Support, and Application Layers

Perception layer

Transfer layer

IoT in China: PAST, NOW & FUTURE

604.8

916.2

EXPONENTIALGROWTH

190.0 211.5 303.2

418.2

604.8

2010 2011 2012E 2013E 2014E 2015E

Yr. 2011: RMB 200 billion (~$38 billon)Yr. 2015: RMB 916 billon

3%

22%

37%

5%

IoT: Market Size W.R.T. Layers

Currently, the perception layer, the transfer layer, and the

HIGHLIGHTS

33%

the support layer the perception layerthe transfer layer the platform layer the application layer

the transfer layer, and the platform layer constitute the majority of the industry revenue (adds up to 92%) in China.

China’s IoT Development Tendency

Currently, 90% of the investment came from the government

It is anticipated that the enterprise/personal/home applications will ramp up starting from 2013

HIGHLIGHTS

# of Users Standards # of Users

Year2010 2013 2015 2020

Public Service: Intelligent City, Public Cloud, telematics ,etc.

Standards Published

Policy/Regulatory/Standard Overview

Policy:“物联网“十二五”发展规划 was published in Nov. 2011 and was endorsed by Chinese Premier Wen JiabaoCCSA (China Communication Standard Association) has started the standards drafting process from 2010, it is believed that the IoT standards will be published in 2013.

Highlights

The Most Important Vertical Industries

• Surveillance: Invasion detection, video surveillance, and smart home

• Smart Grid: remote meter, site monitoring

The early adaptors are:

Vertical market share per industry in ChinaSource: CCID, 2011

monitoring• Transportation: Car (i.e., taxi) Dispatching,

telematics• Logistic: Medical/food tracking• Others: Mobile Payment

The IoT Ecosystem in China (need to complete market landscape)

Sensor/IC vendor

HW VendorModule Vendor

Middleware and Application Vendor

System Integrator

Service Provider

Test Solution Telecom Operators

Government – Standard/Regulation

ConsultingConsulting

Sensor �������������� ������

IC���TI������������, ����������� ��

Module ������������ ��� !��Hardware "#$,�%��&�Middleware/Application VendorSystem Integrator

Oracle, '��,�(,� ��,�)�*,��+,, IBM, MSFT, Google Android

Telecom CMCC, CU, CTService Provider Bank Union

The Most Active/Important Regions in China

Currently, China's IoT industry has formed four clusters in the Bohai

HIGHLIGHTS

formed four clusters in the BohaiRim Area, the Yangtze River Delta, the Pearl River Delta and the Midwest Region.

2011 IoT Revenue in different regions of China, Source: CATR

>10Billion RMB<1 Billion RMB

Revenue in a specific region

Challenge and OpportunityChallenge and Opportunity

IoT is still Intranet of Things in China

• Fragmented architectures, no coherent unifying

Current Status: Intranets of Things

• Fragmented architectures, no coherent unifying concepts, solutions exist only for application silos

• No coherent approaches to implement the IoT have been proposed, yet

• Many island solutions do exist (RFID, Sensor nets, etc.)

• Little cross-sectorial re-use of technology and exchange of knowledge

Challenges of Migrating from Intranet of things to Internet of things

�No Regulations and Standards �

End to end Solution

Demanding from enterprise and personal/ home users��

�Business Model is not Clear

�IoToperating experience�

home users�

Opportunities in the Coming 1-3 Years

�Get involved in the drafting of Standards �

Build up strategic alliance with high-potential vendors, telecom op., and service providers � ��

�Develop projects in vertical Industries such as public surveillance, smart transportation���

Participate in government driven projects

Offer business and technology consulting service

�

Market and Product StrategyMarket and Product Strategy

Winning Winning Winning Winning

the the the the

Critical Critical Critical Critical

GroundGroundGroundGround �Market Market Market Market Strategy:Strategy:Strategy:Strategy:

IoTIoTIoTIoT is still in the is still in the is still in the is still in the ramp up phase ramp up phase ramp up phase ramp up phase

and and and and require/deserve require/deserve require/deserve require/deserve

investmentinvestmentinvestmentinvestment

• Align with strategic partner in order to • Act proactively together to pursue common

interest in standards establishment• Enable delivery of end-to-end solutions• Team up with domestic companies in order

to win government projects

Standard and government projects are the critical grounds

Market Strategy for the coming 1-3 years

�Gaining Gaining Gaining Gaining

Market Market Market Market

ShareShareShareShare�investmentinvestmentinvestmentinvestment

Engaging with Early Adaptors and Winning Market Position• Sell-through via telecom operators and service

providers• Leverage existing customer base (such as financial

industry) and solution (i.e. server, cloud)• Invest on high-potential mid-size vendors in the

high priority vertical industries • Focus on the most active/important regions

THANKS!THANKS!

Android V.S. Java Embedded• From layer prospective, Android is competing with Java Embedded in the

Perception Layer– Android is leading: Smartphone, Car Gateway, Smart TV– Java Embedded is leading in the small footprint area: Feature Phone, Java Card, module,

Mobile Payment Card, RTOS system, RFID reader• From Vertical Markets point of view

– Java embedded has more references in vertical markets such as finance, smart grid– Java embedded has more references in vertical markets such as finance, smart grid• End to end solution

– Java has much better capability of delivering End-2-end Solution– Android focus more on the terminal

• Operating Experience– Java system has been deployed in all the layers and the operators and services providers have

gained lots of experiences

China Standard/Regulation Authorities

Regulation Related

CCSA and TCs

• Standardization Process

Standardization Process

Identifying Potential Alliance

Building Alliance is Important• From standard prospective• From winning government project prospective• From end to end solution prospective

Potential Alliance

• From end to end solution prospective

The list of Potential Alliance (TBC)• Perception Layer: yuanwangu, ZTE, Huawei…• Transport Layer: CU/CMCC/CT• Platform/Service Layer: UnionPay• Application Layer: Neusoft, Tencent…

Identifying Focus Area

• Government driven projects

Vertical Industries

• Government driven projects• Intelligent Transportation• Intelligent City• Mobile Payments Terminal