Smart Industry 1/2019


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Smart Business Title Story: IoT Made in China

source ©: Global Corporate Venturing

merce giants – was world-leading.

To see ZTE humbled due to a lack of

local semiconductors was a wake-up


The ZTE incident exposed the technological

weakness underlying China’s

ambitions. Much of the recent progress

has been based on parts and

equipment designed abroad. China’s

world-leading smartphones cannot

function without cutting-edge foreign

microchips. The Android operating

system powering them, almost

exclusively, comes from Google. And

the rapid strides being made in manufacturing

depend on German and

Japanese industrial robots.

Zhang Jun, Dean of the School of

Economics at Fudan University, says

China is not the fierce competitor for

global technological supremacy that

many Western observers imagine.

Writing for Project Syndicate in July

2018, he commented, “China is really

nowhere near the cutting edge

of IoT technology. In fact, the distance

separating it from that frontier is far

greater than most people recognize.”

Zhang argues that digital technologies

may be transforming China’s

economy, but it reflects the implementation

of “mobile Internet-enabled”

business models rather than

the development of cutting-edge

technologies, and it affects consumers

more than manufacturing.

This transformation is not unique to

China and there is little evidence that

the changes have anything to do with

No Chips in the


To see a giant like

ZTE humbled due

to a lack of local

semiconductors was

a wake-up call for


China and the

U.S. are the

principal competitors

in IIoT

but the West

still has the


Saman Farid,

Baidu Ventures

the government’s industrial policies.

“On the contrary, the growth of China’s

Internet economy has been driven

largely by the entrepreneurship

of privately owned companies like

Alibaba and Tencent,” Zhang says.

The ZTE incident and the ongoing

trade war with the United States

have underlined to Beijing the importance

of reducing dependence

on foreign companies for core technologies.

China’s leaders now see chip

dependency as a national security

threat, especially in a time of heightened

tensions with America.

Made in China

Given the strategic importance of the

semiconductor industry, they may be

right to worry. “You need semiconductors

for everything,” Roger Sheng,

an industry analyst for Gartner, told

CKGSB Knowledge magazine last year.

“On every digital, connected device,

all information is transmitted on ICbased


Weaning the country off foreign technology

is a central aim of the Made in

China 2025 strategy, the latest take on

its plan to become a leading player in

virtually all high-tech sectors. Besides

tax breaks, the strategy calls on public

institutions to pursue IoT projects as

a path to becoming a global player.

However, the government reportedly

scrapped the contentious economic

plan last December, after it drew the

ire of US President Donald Trump and

other officials and became a central

focus of the ongoing trade war. The

strategy was controversial abroad because

it set specific goals for raising

the market share of domestic companies

in many industries.

Zhang argued in his Project Syndicate

article that the industries targeted

by Made in China 2025 are precisely

the ones in which China lags furthest

behind the West. “There is a big difference

between applying digital technologies

to consumer-oriented business

models and becoming a world

leader in developing and producing

hard technology.”

His conclusion was: “China probably

remains 15–20 years away from

matching the R&D input of, say, Japan

or South Korea, and when it comes to

output – the more important factor –

it is much further behind.”

Rui is not so sure as the Chinese have

shown themselves to be quick studies.

Since China began opening to the

West, its manufacturers have proved

adept at seizing opportunities to emulate

and adapt technology. “ZTE is a

catalyst for China to develop its own

chip industry,” she says. “But developing

R&D capacity is not like copying,

especially for products like semiconductors.

Still, they are determined and

if there is one lesson the West should

have learned it is not to underestimate

the Chinese.”

In May, while ZTE’s future still hung

in the balance, President Xi Jinping

called for self-reliance in IC. “The initiatives

of innovation and development

must be securely kept in our

own hands,” he said. Officials and

CEOs scrambled to answer his call

and more than 11 local governments

source ©: Reuters


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