Industrial Internet: Manufacturing Giants' 'Apple' Dream

　　On July 7th, General Electric (GE) and China Telecom Group partnered, integrating GE's Predix industrial internet platform (akin to an operating system for industrial equipment) with China Telecom's comprehensive information services. This marks the entry of the American industrial internet into China's cloud storage, telemedicine applications, smart manufacturing, and cloud computing sectors.

　　A few days later, the Industrial Internet China Association was established in New York. This represents a significant breakthrough in international cooperation between the Chinese and American industrial and information communication sectors, following the establishment of a dialogue on Industry 4.0 between China and Germany.

　　GE has reportedly launched 12 industrial internet pilot projects in China and is promoting the implementation of over 40 big data analysis applications. The industrial internet, considered a hallmark of the third industrial revolution, is beginning 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 into China's industrial sector, it is necessary to thoroughly examine its origins, purpose, objectives, and potential side effects.

　　Industrial Internet

　　Re-inventing American Manufacturing

　　Following the 2008 financial crisis, the US government's primary reflection was recognizing the importance of the real economy in the national economy, considering industry as the most crucial component of national competitiveness. It subsequently introduced a series of national plans, such as the "Framework for Revitalizing American Manufacturing," the "Advanced Manufacturing Partnership," and the "National Strategic Plan for Advanced Manufacturing," to achieve its national "reindustrialization" strategy.

　　In 2012, GE, as a leading figure in American manufacturing, pioneered the concept of the "industrial internet." It leverages the interconnection of machines and equipment, along with analytical software, to transform the previous model centered on 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 ones.

　　This idea has long been in development. As early as 2005, GE's aircraft engine company was reorganized into GE Aviation, marking a shift in its business model. The company's original business was solely the production of aircraft engines. Now, by installing numerous sensors on aircraft to collect real-time data, and using big data analysis to provide airlines with a complete solution for maintenance management, capacity assurance, operational optimization, and financial planning, as well as safety controls and flight prediction services, GE has gradually transformed into a full-fledged software company.

　　Taking Alitalia as an example, GE installed hundreds of sensors on each of their aircraft, collecting real-time data on engine operation, temperature, fuel consumption, and more. After massive analysis using GE's software, the ideal control methods are precisely determined. This alone saved Alitalia $15 million in fuel costs annually across its 145 aircraft. Furthermore, this data allows for the prediction of potential engine failures and proactive preventative maintenance, avoiding delays, increased costs, and potential safety incidents.

　　Through this deep integration of IT technology and equipment, GE has gradually transitioned from an equipment manufacturer to a smart service provider. Its business model has also shifted from the single sale of equipment to a provider of integrated intelligent systems encompassing intelligent devices, intelligent analysis, and intelligent decision-making.

　　Experts generally believe that the value of the industrial internet will be reflected in three main aspects: firstly, improved equipment utilization efficiency, reducing energy waste and partially increasing GDP; secondly, improved system equipment maintenance efficiency, shortening maintenance time, which is equivalent to increased productivity; and finally, optimized and simplified operations, freeing up valuable human resources.

　　GE predicts that if the industrial internet can increase productivity by 1% to 1.5% annually, it will increase the average income of Americans by 25% to 40% over the next 20 years. If other regions of the world achieve half of America's productivity growth, the industrial internet would add $10 trillion to $15 trillion to global GDP during this period.

　　To this end, GE established an industrial internet R&D center in Silicon Valley in 2011, with a current R&D team of over a thousand. In 2013, GE announced it would invest $1.5 billion in industrial internet development over the next three years. This April, GE announced it would divest most of its $363 billion financial business over the next two years, planning for 90% of GE's profits to come from high-return industrial businesses by 2018, up from 58% last year.

　　This shows that the value of the industrial internet lies not only in driving manufacturers to transform into smart manufacturing systems and service providers, but also in potentially creating a new high-end real economy sector with even higher profit margins than the financial industry.

　　Open Platform

　　Creating a Smart Manufacturing "Apple" System

　　As the inventor of the internet, the industrial internet is inherently marked by the openness characteristic of the internet. Compared to the internet, the industrial internet must not only be open in ICT technologies such as telecommunications networks, data storage, and transmission, but also in the openness and integration of manufacturing and IT technologies.

　　This is a research and development camp that transcends "two ITs." In March 2014, GE partnered with IBM, Cisco, Intel, and AT&T to form the Industrial Internet Consortium (IIC). The IIC uses an open membership system, aiming to enable data sharing between various manufacturers' equipment. This involves not only Internet network protocols but also parameters such as data storage capacity in IT systems and various parameters of interconnected and non-interconnected devices. The goal is to break down technological barriers through the establishment of common standards, leveraging the internet to activate traditional industrial processes and better promote the integration of the physical and digital worlds. Its aim is to accelerate the development, collection, and widespread use of interconnected machines and equipment, promote intelligent analysis, and assist workers. The IIC now has 167 members.

　　This is an open system in the sense of an ecosystem, not an industrial chain. In October 2014, GE announced that its Predix industrial internet platform (equivalent to an operating system for industrial equipment) would be open to all companies worldwide, introducing the internet's collaborative model between platform and application developers into the industrial sector, facilitating the large-scale and rapid development of customized industry applications.

　　This is a standardized collaborative organization targeting 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, Chinese Academy of Sciences, have joined the IIC, sharing the latest technologies and resources with the global industrial internet industry.

　　We believe that the purpose of GE and other companies in establishing the Industrial Internet Consortium is to leverage America's advantages in information technology, through deep integration with manufacturing, to take the lead in technology and industry standards, thus dominating global competition. To date, the industrial internet is not yet a US national strategy, in stark contrast to Germany's nationwide push for its Industry 4.0 strategy. However, since many US companies within the consortium are responsible for the "reindustrialization" of the US, and one of its core technologies is the CPS (Cyber-Physical System), 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 of the industrial internet extending an olive branch to Chinese companies. However, let's pause. What can China gain by participating in this new industrial process aimed at revitalizing American manufacturing?

　　Let's turn our attention back to the first ecosystem of intelligent manufacturing—the smartphone platform. Nokia, which held the top spot in global market share for 15 consecutive years during the feature phone era and whose R&D investment was once five times that of Apple, was defeated in the first battle of the smartphone ecosystem and ultimately fell in 2013, changing hands. This is a poignant story of the first manufacturing giant unable to adapt to the intelligent era. In this story, China was clearly an observer, learner, and beneficiary. Soon after Apple, a more open platform emerged—Android. Through cooperation with Apple, a large number of small and medium-sized Chinese developers earned billions of yuan in application revenue sharing, cultivating a large number of software and hardware development teams for the arrival of today's "Internet+" era. With the help of cooperation with Android, coupled with the aggressive progress of Chinese mobile phone manufacturers, manufacturers such as Huawei, ZTE, Xiaomi, and Coolpad truly broke into the first echelon of global smartphone shipments.

　　The field of intelligent manufacturing is likely to reproduce a similar competitive landscape to that of smartphones. Germany's Industry 4.0 and the US Industrial Internet will inevitably support the two most important global platforms for intelligent manufacturing in the future. The author calls on China's industrial and information and communication industries to attach great importance to the historical opportunities presented, to work together, and to integrate global innovation resources to accelerate the intelligent transformation of China's industrial economy. Comparatively speaking, the China-Germany Industry 4.0 dialogue process, being government-led, has been rather slow, and has not yet reached the stage where heavyweight enterprises join each other's industrial cooperation organizations to jointly promote the coordination of ideas and the definition of standard systems. However, due to its focus on inter-enterprise, market-oriented open cooperation, the industrial internet's Sinicization journey has achieved "latecomer advantage".

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　　Through our investigation of GE's transformation to intelligent manufacturing using the Industrial Internet, we found that world-class manufacturing giants have moved from single-device intelligence to system intelligence, and from simply leveraging automation and informationization to drive intelligence to the deep integration of ICT and equipment to drive intelligence, thus forming a series of new industrial intelligent services such as equipment networking, data acquisition, big data analysis, and intelligent decision-making. Although GE advocates and has established the Industrial Internet Consortium and has taken the lead in opening the Predix platform, a major manufacturer with a relatively single manufacturing model (mainly concentrated in aviation, energy, and medical fields) may not necessarily develop into a controller of a unified industrial application platform similar to Apple. The dispersion of various industrial sectors and the complexity of manufacturing technologies will make the platform game and great power game of intelligent manufacturing even more unpredictable.

　　When US manufacturing giants bravely abandon their lucrative financial sectors and resolutely throw themselves into the torrent of intelligent manufacturing, intelligent transformation is undoubtedly a new wave of industrial transformation that will change the future landscape. At the same time, however, we see that Chinese listed companies use numerous new concepts to raise huge sums of money, the vast majority of which flow into real estate, finance, and especially the stock market. The comparison between the two is worth our vigilance! (Hu Hu, Zhu Duo Xian)