Market Research Report : Internet-of-Things Market in China 2012

Internet of Things Market –
Internet of Things Market China
April 2012

•Introduction
•Market Overview
•Market Overview
 China
•Drivers & Challenges
•Government Initiatives
•Initiatives by Companies
•Trends
•Partnerships
•Competition
p
•Key Takeaways

INTERNET OF THINGS MARKET IN CHINA 2012.PPT 2

Executive Summary
 Internet of Things (IoT) market in China is expected to reach USD ‐ bn in 20‐ with a CAGR of x% over 20‐ ‐ 20‐
 Chinese government plans will invest in core‐technology research, industrial chain building, and application of the
Market
Internet of Things (IoT) by 20‐

Drivers: Challenges:
‐ Growth in China’s RFID Market ‐ Lack of Unified Standards
‐ Industry Applications ‐ Safety & Privacy Concerns
Drivers & ‐ Rise in Use of Smartphones ‐ High Application Cost
Challenges ‐ Wid
Widespread Usage of Internet
dU fI ‐ Lack of Understanding
‐ Cost Reduction
‐ Infrastructural Advantage
‐ Supply and Demand Drive

 Industry Growth Led by Applications
Trends  Emerging Integrated Platforms
 Emerging Business Models

 IoT Development Plan in China  IoT Standard in China
Government  Initiatives by China's Central Government and China's  IoT Initiatives by China’s Provincial Government
Initiatives Ministry of Finance  Smart City Action Plan of Shanghai (2011‐2013)
 IoT Investment Focus under China’s 12th Five Year Plan
 Major foreign players in the market include Company 1., Company 2, Company 3, Company 4 and others
Competition  Key domestic players in the market include Company 5, Company 6 and others


Internet of Things (IoT) ‐ Introduction

A world‐wide network of uniquely addressable
Internet of Things (IoT)
interconnected objects, based on standard communication

IoT integrates sensors and devices into everyday objects that
A virtual medium where "things" can communicate
are connected to the Internet over fixed and wireless to each other, to users, to computers and systems
networks, anytime, anywhere

Characteristic 6 Characteristic 1

Characteristic 5 Key Characteristics of IoT Characteristic 2

Characteristic 4
Characteristic 4 Characteristic 3
Characteristic 3

Sensor technology, IPv6, WPAN, WLAN,
3G/LTE, autocontrol technology,
Latest technologies supporting IoT
Latest technologies supporting IoT nanotechnology, embedded intelligent
technology, etc.
Note: IPv6 – Internet Protocol Version 6, WPAN ‐ Wireless Personal Area Network, WLAN ‐ Wireless Local Area Network, 3G – 3rd Generation, LTE ‐ Long Term Evolution


Internet vs Internet of Things (IoT)

Internet Internet of Things

• Feature 1 • Feature 4



Mid 1990s ‐ Spread of WWW
Mid 1990s ‐ Spread of WWW Mid 2000s Upgrade to Web 2 0
Mid 2000s ‐Upgrade to Web 2.0 Late 2000s Practical use of IoT
Late‐2000s ‐ Practical use of IoT

Significance of the Internet • Significance 1 • Significance 2 • Significance 3

Principal subject connected
• Subject 1 • Subject 2 • Subject 3
to the Internet

Principal technology • Technology 1 • Technology 2 • Technology 3


Evolution of Internet of Things (IoT)

China is one of the four founding members and dominant powers that are permitted to develop IoT together with
Germany, USA and South Korea

Ubiquitous
Concept initiation
Concept initiation ITU Report of IoT
ITU Report of IoT IBM Smart Planet
IBM Smart Planet Experience China
Experience China
Network

1999 2004 2005 2008 ‐ 09 2009 ‐10

• Development 1 • Development 3 • Development 4 • Development 5 • Development 8
• Development 2 • Development 6 • Development 9
• Development 7 • Development 10

Internet + Internet of Things = Wisdom of the Earth


Internet of Things (IoT) Network in China
RFID / Sensor Network
With RFID more and more objects
Flow communicate with each other,
slowly creating a network of
information internet of things
information ‐ "internet of things"

Access Gateway
NGN, Internet, etc..

Flow
eware
Middle

xx xx xx xx xx xx

Flow
Applications
/ Services

xx xx xx xx xx xx

Note: RFID ‐ Radio Frequency Identification Device, NGN ‐ Next Generation Network, SCM ‐ Supply Chain Management


IoT market in China is expected to grow with x% CAGR
during 20‐ ‐20 ‐ reaching over USD ‐ bn by 20‐
Internet of Things (IoT) ‐ Market Overview
• IoT market in China is expected to reach USD ‐ bn by 20‐ from USD ‐ bn in 20‐ with a compound annual growth rate
(CAGR) of x% during 20‐ – 20‐
• Chinese government plans to promote the investments in core‐technology research, industrial chain building, and
application of the Internet of Things (IoT) by 20‐
 NDRC and MIIT are expected to infuse capital in supporting the IoT industry in 20‐
 New strategic emerging industries which includes IoT is estimated to add y% to GDP in China’s 12th Five‐Year Plan
g g g y
• IoT market will make significant contribution to the China's economy by developing agriculture and promoting
industrialization
Market Size and Growth
USD bn
200
a11
150 x% a10
a9
a8
100 a7
a6
a4 a5
a2 a3
50 a1

0
20‐ 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e

Note: NDRC ‐ National Development and Reform Commission; MIIT – Ministry of Industry & Information Technology


City 1, City 2, City 3 are China’s key potential IoT hubs along
with other major cities such as City 4 and City 5
IoT Hubs of China

City 1 City 9

City 10 City 12
City 11
City 11
City 14
City 2
City 13
City 8 City 15
City 3
City 4
City 5
y
City 17
Cit 17 City 7
City 16
City 6
Major Cities
Potential Cities

• Finding 1
• Finding 2
• Finding 3


Focus Sectors
SAMPLE
Comparison in Sector Focus by IoT Market in China
Focus Applications

Application 1 Application 2 Application 3 Application 4 Application 5 Application 6

Sector A
Sector A

Sector B

Sector C

Sector D

Sector E

Sector F

Sector G

Sector H

Sector I

China Europe & America Japan & Korea

Finding


SAMPLE
IoT Market Environment in China

Pros Cons
Finding 1 Finding 5

Environment
A

Finding 2 • Finding 6
Environment
B

Finding 3 Finding 7
Environment
C

Finding 4 Finding 8
Environment
D


Drivers & Challenges – Summary

Challenges
Drivers
Lack of Unified Standards
Industry Applications

Safety & Privacy Concerns
Rise in Use of Smartphones

Widespread Usage of Internet
p g High Application Cost

Cost Reduction Lack of Understanding

Infrastructural Advantage
I f t t l Ad t

Supply and Demand Drive


Industries using mature sensor technologies will boost the
IoT market in China
Industry Applications (1/2) Impact

• Finding 1
• Finding 2

Applications in Pilot Cities in China

City 1 Application 1



RFID being one of the underlying technology of IoT finds applications in:

A B C D

E F G H

I J K L


Smartphones sales is estimated to have risen to ‐ mn units
by the end of 20‐
Rise in Use of Smartphones Impact

• Finding 1
• Finding 2
 Sub‐finding 1
 Sub‐finding 2
• Finding 3
Finding 3
 Sub‐finding 3
 Sub‐finding 4
• Finding 4
g
• Finding 5

Rising Smartphone Sales Top 5 Countries – Mobile Phone users (20‐)

mn units No. in mn China has highest mobile
x% phone user in 20‐
200 1,000 b1 b2
a2
a1
100 500 b3 b4 b5
0 0
20‐ 20‐e Country Country Country Country Country
Note: WCDMA refers to Wideband Code Division Multiple Access
1 2 3 4 5


Internet population in China is estimated to rise by x%
during 20‐‐20‐
Widespread Usage of Internet Impact

•Finding 1
Finding 1
 Sub‐finding 1
 Sub‐finding 2
 Sub‐finding 3
•Finding 2
Finding 2

Internet Population
Internet Population Top 5 Countries – Internet users(20‐)
Top 5 Countries – Internet users(20‐)
No. of users Penetration
mn % China has the largest
No. in mn internet user base in
800 a6 60
x% 600 the world
a5 c1
600 a4
a3 b6 40 400
400 a2 b5 c2
a1 b4 20
200 b3 200
b2 c3 c4 c5
b1
0 0 0
20
20‐ 20
20‐ 20
20‐ 20
20‐ 20
20‐ 20 e
20‐e Country C
C t Country C
t Country C
t Country C
t Country
t
No. of users Penetration 1 2 3 4 5
Note: Figures includes users accessing internet on PC as well as mobile devices


Low sensing costs attracts increased usage making sensing
devices widely accepted among buyers
Cost Reduction Impact
•Finding 1

Price

Finding 2

Sensing

Finding 3

Sub‐finding 1
Finding 4

Sub‐finding 2


Privacy protection must cover technical solutions, as well as
regulatory, market‐based and socio‐ethical consideration
Safety & Privacy Concerns Impact
• Finding 1
 Sub‐finding 1
 Sub‐finding 2
• Finding 2
• Finding 3

Technical

• xx

Legal / Regulatory Socio‐ethical
Privacy
•xx Protection • xx

Economic / Market

• xx


IoT Development Plan in China

Development 3 Development 5

2011‐2012
2011 2012 2013e‐2015e
2013 2015 2015e‐2020e
2015 2020

Development 1 Development 2 Development 4


Chinese government planned total investment of USD ‐ bn
to develop the country’s IoT industry by 20‐

China's Central Government China's Ministry of Finance
• Finding 1 • Finding 5
• Finding 3 Sub‐finding 1
• Finding 4 Sub‐finding 2
• Finding 7
Sub‐finding 1
Sub‐finding 2
Sub‐finding 3
Sub‐finding 4


IoT investment focus under China’s 12th Five Year Plan
A

K B

J C

IoT Investment & Development Focus
under China’s
12th Five Year Plan

I D

H E

G


USD ‐ bn will be invested in smart grid and USD ‐ bn in ITS as
per China’s 12th Five Year Plan SAMPLE
A and B are estimated to be most heavily invested sectors


USD ‐ bn Investment Plan
USD b I t t Pl

2009 ‐ 2010 2011 ‐ 2015 2016 ‐ 2020
Finding 3

• Development • Development B • Development C
A


IoT Standards in China (1/2)
IoT Standard Matrix
SAMPLE
Current IoT Related Standard Necessity and Feasibility of New IoT Standard
Global Standard Local Standard Necessity Feasibility

Data standard xx xx xx xx xx
pplication Layer

Software Frame xx xx xx xx xx
Ap

Long distance (fix
xx xx xx xx xx
line)

Short distance (fix
er

xx xx xx xx xx
Communication laye

line)

Long distance
xx xx xx xx xx
(wireless)

Short distance
xx xx xx xx xx
(wireless)
Sensing
er
laye

xx xx xx xx xx


SAMPLE
IoT Initiatives by China’s Provincial Government (1/3)

City A
• Initiatives A

City B • Initiatives B

City C • Initiatives C

City D • Initiatives D

City E • Initiatives E


Smart City Action Plan for Shanghai (20‐‐20‐)
x1 projects
Plan A

Findings

x2 projects
Plan B

Findings

x3 projects
Plan C

Findings

x4 projects Plan D

Findings


Initiatives by Companies (1/2)
Companies Initiatives

Company 1 • Initiatives taken 1




Company 5
Initiatives taken 5


Trends – Summary

Industry Growth Led by
Applications
A li ti

Key
Trends

Emerging Business Emerging Integrated
Models Platforms


Widespread enterprise and industry applications leads to
the growth in IoT market in China
Industry Growth Led by Applications (1/2)

Industry
• Finding 1
g applications
applications
boosting IoT
market in China

Finding 2

• Sub‐finding 1
Finding 3
Finding 3
• Sub‐finding 2

Finding 4


NRI allies with Beijing University of Post & Communications
to develop proposals for China’s IoT projects
Organizational structure of China and Japan Business Alliance on the IoT
Secretariat ‐ Japan Secretariat ‐ China
Nomura Research Institute (NRI) Beijing University of Posts and Telecommunications

Managing members (16 entities)

• •


•

XX Association

Presenting Proposals

A B

Note: Information above are as of Jan 14, 2011


IoT related Partnerships over the period 2010 ‐ 2012
Organizations Partnerships

Organization 1 Organization 2 • Partnership 1






Major Players in China’s IoT Value Chain
System
Sensor and Communication Network
Integrator and Service Operators
Chipset Module Operators
Middleware

• Company 1 • Company 4 • Company 8 • Company 11 • Company 14

• Company 2 • Company 5 • Company 9 • Company 12 • Company 15

• Company 3
Company 3 • Company 6
Company 16

• Company 7


Major Domestic Public Companies – Summary (1/2)
Size of the Bubble represents Market Capitalization in USD mn
Net Profit
3,000

m1
2,500

2,000

1,500

1,000

500
m2

0 Total Income
12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000 38,000 40,000 42,000 44,000

Company A
Company A Company B
Company B

Note: Total income and Net Profit figures are in USD mn for the year ending Dec 31st 2011; Market Cap figures for Company A is for Mar 29th, 2012 and for Company B is
for Mar 30th.2012


Major Domestic Public Companies – Summary (2/2)

Total Income and Profit for Major Domestic Companies

t1

Company A

n1

t2

Company B

n2

Total Income
Net Income

Note: All figures are in USD mn for the year ending Dec 31st 2011


Domestic Company – Company A
Company Information Locations – China
Company 5
Corporate Address x, y Avenue, City 5, City 5 Pin‐code,
Country
Tel No. xxx‐yyy‐zzz
Fax No. xxx‐yyy‐zzz
Website ‐
Year of Incorporation
Y fI ti 19
Ticker Symbol xx
Stock Exchange yy

Products and Services
Products and Services Headquarters
H d t

Category Products/Services

Integrated
Key People
Wireline voice, mobile voice, Internet,
Telecommunication managed data and leased line, value
managed data and leased line value‐
Services Name
N Designation
D i ti
added services, integrated information
Person 1 Chairman of the Board, CEO, General
application services, and other related Manager
services, as well as prepaid calling cards
Person 2 President, Chief Operating Officer & ED
Person 3 CFO, Executive Vice President & ED


Financial Snapshot
i i lS h Key Ratios
K i
y‐o‐y change
Particulars 2011 2010 2009 2008
Total Income Total Income Profit (2011‐10)
USD mn USD mn Profitability Ratios
Profit / Loss a4
40,000 a3 3,000 Operating Margin ‐ ‐ ‐ ‐ ‐
a2
30,000 a1 Net Margin ‐ ‐ ‐ ‐ ‐
2,000
Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐
20,000
1,000 Return on Equity ‐ ‐ ‐ ‐ ‐
10,000
Return on Capital Employed ‐ ‐ ‐ ‐ ‐
0 0 Return on Working Capital ‐ ‐ ‐ ‐ ‐
20‐ 20‐ 20‐ 20‐ Return on Assets ‐ ‐ ‐ ‐ ‐

Financial Summary Return on Fixed Assets ‐ ‐ ‐ ‐ ‐
Cost Ratios
• The company earned a net profit of USD  ‐ mn in FY 20‐, as Operating costs (% of Sales) ‐ ‐ ‐ ‐ ‐
compared to net profit of USD  ‐ mn in FY 20‐ Administration costs (% of
‐ ‐ ‐ ‐ ‐
• The company reported total Income of  USD ‐ mn in FY 20‐, Sales)
registering an increase of  x1 % over FY 20‐
registering an increase of x1 % over FY 20 Interest costs (% of Sales)
Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐
Liquidity Ratios
• The company earned an operating margin of x2 % in FY 20‐ a
Current Ratio ‐ ‐ ‐ ‐ ‐
decrease of x3percentage points over FY 20‐
Cash Ratio ‐ ‐ ‐ ‐ ‐
• The company reported debt to equity ratio of x4 in FY 20‐, a Leverage Ratios
decrease of x5 % over FY 20‐ Debt to Equity Ratio ‐ ‐ ‐ ‐ ‐
Debt to Capital Ratio
b i l i ‐ ‐ ‐ ‐
Financial Summary
‐Interest Coverage Ratio ‐ ‐ ‐ ‐ ‐
Indicators Value (29/03/2012) Efficiency Ratios
Market Capitalization (USD) x1 mn Fixed Asset Turnover ‐ ‐ ‐ ‐ ‐
Total Enterprise Value (USD) Asset Turnover ‐ ‐ ‐ ‐ ‐
x2  mn
Current Asset Turnover ‐ ‐ ‐ ‐ ‐
EPS (USD)
EPS (USD) x3 Working Capital Turnover ‐ ‐ ‐ ‐ ‐
PE Ratio (Absolute) – (30th Mar 2012) x4 Capital Employed Turnover ‐ ‐ ‐ ‐ ‐

Improved Decline


Key Business Segments Key Geographic Segments

Segment A Segment B
The company operates
100% 100% through single reportable
through single reportable
100% The company operates 100%
segment namely, Segment B
through single reportable
50%
segment namely, Segment 50%
A

0% 0%
2011 2011

Key Recent Developments

Description News
• Company A, together with its subsidiaries, provides wireline and mobile telecommunications services to
government, enterprise, and residential customers in the People's Republic of China
Overview • Company A focused on their needs and continued to improve their integrated information service
p y p g
capability to actively introduce new‐generation IT applications such as IoT, integrate informatisation and
industrialisation and promote the usage of informatisation applications of various industries

• In Feb 2012, the Chengdu municipal government in Sichuan province has signed an agreement with
Agreement
Company A to build the western China cloud computing base in Chengdu
• On Mar 28, 2012, Company A and Nokia launched the Nokia 800C, the first CDMA Windows Phone in
Launch
China and Nokia's first Lumia phone for the world's largest smartphone market


IoT market in China will witness a sharp rise owing to the
investment plans by Chinese government
Chinese government will promote core‐technology research, industrial chain building, and application of IoT by 20‐

Initiatives Taken by Market Size Trends in the Market
Trends in the Market
Government
G
USD bn
200 Increase in enterprise
Chinese government planned a11 and industry application
total investment of USD ‐bn 150 a10 leads to the growth in
x%
to develop the country’s IoT a9
9 IoT market
a8
industry until 20‐ 100 a7
a6
a4 a5
a2 a3
50 a1 Integrated platforms
By 20‐, China may have x1 IoT with the IoT concept, will
0 bring mobile devices,
technologies under the 12th
20‐ 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e 20‐e embedded devices
Five‐Year Plan
and Internet service
platforms into the
By 20‐, x2 core R&D mainstream
Challenges
g
institutions, x3 industrial
leading enterprises, x4
backbone corporations
• Lack of Unified Standards IoT technology together
and x5 small and medium • Safety & Privacy Concerns with human behavorial
sized companies in the IoT
p pattern leads to
field are expected in province • High Application Cost innovative new business
models for IoT in China
A • Lack of Understanding


Appendix (1/2)

Ratio Calculations Ratio Calculations
(Operating Current Assets / Current
Operating Margin Current Ratio
Income/Revenues)*100 Liabilities

Net Margin (Net Profit / Revenues) *100 {(Cash & Bank Balance +
Cash Ratio Marketable Securities) / Current
(Income Before Tax / Revenues Liabilities)}
Profit Before Tax Margin
*100
Total Liabilities / Shareholders
q y
Debt to Equity
(Net Income / Shareholders
(N I / Sh h ld Equity
E it
Return on Equity (ROE)
Equity)*100
{Total Debt / (Shareholders
Debt to Capital Ratio
EBIT / (Total Assets – Current Equity + Total Debt)}
Return on Capital (ROCE)
Liabilities)*100
Interest Coverage Ratio EBIT / Interest Expense
(Net Income / Working Capital)
(N I / W ki C i l)
Return on Working Capital
*100
Fixed Asset Turnover Sales / Fixed Assets
Return on Assets (Net Income / Total Assets)*100
Asset Turnover Sales / Total Assets
Return on Fixed Assets (Net Income / Fixed Assets) *100

(Operating Expenses / Sales) Current Asset Turnover Sales / Current Assets
Operating Costs (% of Sales)
*100

Administration Costs (% of (Administrative Expenses / Sales) Working Capital Turnover Sales / Working Capital
Sales) *100

Interest Costs (% of Sales) (Interest Expenses / Sales) *100 Capital Employed Turnover Sales / Shareholders Equity
/


Appendix (2/2)
Key sources of information used in the report include the
following:

• News articles
• Journals
• Business intelligence databases
• Industry associations
I d t i ti
• Government publications


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Internet of Things Market ‐ China report is a part of Netscribes’ Information Technology
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Market Research Report : Internet-of-Things Market in China 2012

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Market Research Report : Internet-of-Things Market in China 2012