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, regarded as a symbol of the third industrial wave, has begun to substantively 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 achieve, and whether there are any side effects.

Industrial Internet

Reinventing American Manufacturing

After the financial crisis of 2008, 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 continuously introduced, such as 'Framework for Revitalizing American Manufacturing', 'Advanced Manufacturing Partnership', and 'National Strategic Plan 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 interconnectivity between machines and equipment and analytical software to change the previous model dominated by standalone 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 transforming its business model. The company's original business was solely producing aircraft engines; now it installs numerous sensors on airplanes to collect various parameters in real-time and provides airlines with a complete set of solutions for operation management, capability assurance, operational optimization, and financial planning through big data analysis technology. It can also provide safety controls, flight predictions, and various other services. GE has gradually transformed into a bona fide software company.

Taking Alitalia as an example, GE installed hundreds of sensors on each of their aircraft to collect real-time data on engine operation status, temperature, fuel consumption, and more. After conducting massive analysis using GE's software, it accurately provided ideal control methods. Just this one measure 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 due to machine failures, increased costs, or even larger safety incidents.

GE is gradually transforming from an equipment manufacturer to an intelligent service provider through this deep integration of IT technology with equipment. The company's business model is also shifting from solely selling equipment to becoming a supplier of integrated intelligent systems that include smart devices, smart analysis, and smart decision-making.

Experts generally believe that the value of the industrial internet will be reflected in three main aspects: first is improving equipment utilization efficiency, thereby reducing energy waste and partially increasing GDP; second is enhancing system equipment maintenance efficiency and shortening maintenance time, which equates to increased productivity; finally is optimizing and simplifying operations, which liberates more valuable human resources.

GE predicts that if the industrial internet can increase productivity by 1% to 1.5% annually, then over the next 20 years it will raise average incomes for Americans by 25% to 40% compared to current levels; if other regions of the world can ensure achieving half of America's productivity growth, then during this period the industrial internet will add $10 trillion to $15 trillion to global GDP.

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

Thus we can see that the value of the industrial internet lies not only in promoting major manufacturers' transformation into intelligent manufacturing systems and service providers but also potentially creating a new high-end entity economy with profit margins higher than those in finance.

Open Platform

Creating an Intelligent Manufacturing 'Apple' System

The United States is the birthplace of the internet; from its inception, the industrial internet has been marked by a distinct emphasis on openness. Compared with the internet itself, not only does the industrial internet need to achieve openness among ICT technologies such as telecommunications networks and data storage/transmission but also needs to realize openness and integration between manufacturing technology and IT technology.

This is a research camp that spans 'two ITs'. In March 2014, GE collaborated with IT companies such as IBM, Cisco, Intel, and AT&T to establish a global Industrial Internet Consortium (IIC). The consortium adopts an open membership system aimed at enabling data sharing between devices from different manufacturers. This involves not only Internet network protocols but also various parameter indicators related to data storage capacity within IT systems for interconnected and non-interconnected devices. Its goal is to break down technical barriers by establishing common standards that activate traditional industrial processes through the internet while better facilitating integration between physical and digital worlds. 'It aims to accelerate development, collection, and widespread use of interconnected machines and devices while promoting intelligent analysis and providing assistance for workers.' Currently, there are already 167 members in the Industrial Internet Consortium.

This is an open system with ecological significance rather than just an 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 globally. This introduced collaboration models between platform developers in the internet field and applications into industry while facilitating users' rapid large-scale development of customized industry applications. This ecosystem highly resembles that found in smartphones like Apple's and will greatly accelerate the establishment of industrial internet across various segments within manufacturing.

This is a standardized cooperative organization targeting global markets. Currently, Chinese enterprises and institutions such as China Telecom, Haier, Huawei, China Academy of Information Communications Technology (CAICT), and Shenyang Institute of Automation under Chinese Academy of Sciences have joined IIC to share cutting-edge technologies and resources synchronously with global players in the industrial internet sector.

We believe that companies like GE establishing an Industrial Internet Consortium aim to leverage America's advantages in information technology through deep integration with manufacturing industries while taking initiative on technical standards and industry standards so as to maintain a dominant position in global competition. So far, however, industrial internet has not yet become a national strategy for America; this sharply contrasts with Germany's vigorous promotion of its Industry 4.0 strategy. However, many American companies within this consortium bear responsibility for America's 're-industrialization', one core technology being CPS (Cyber-Physical Systems), leading many scholars to study industrial internet as an industry strategy equivalent to Industry 4.0.

The cooperation with China Telecom can be seen as an olive branch extended by the industrial internet towards Chinese enterprises. But hold on; 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. Nokia, which held the number one global market share for 15 consecutive years during the feature phone era 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 a manufacturing giant that could not adapt to the smart era. In this story, China is clearly an observer, learner, and beneficiary. Soon after Apple, a new platform with a more open spirit - Android - emerged. 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 and the enterprising spirit of Chinese mobile phone manufacturers, companies like Huawei, ZTE, Xiaomi, and Coolpad have truly entered the first tier of global smartphone shipments.

The field of intelligent manufacturing is likely to see a 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 presented, work together to integrate global innovation resources, and promote the accelerated realization of intelligent transformation in China's industrial economy. In comparison, the dialogue process between China and Germany on Industry 4.0 is relatively slow due to government leadership and has not yet reached a level where heavyweight enterprises join each other's industrial cooperation organizations to jointly promote conceptual negotiations and define standard systems. The Industrial Internet, on the other hand, is positioned for open cooperation between enterprises and markets, and its journey in China has already 'arrived ahead after starting late.'

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

When American manufacturing giants bravely abandon their lucrative financial sectors and unhesitatingly invest in the tide of intelligent manufacturing, it is undoubtedly an industrial transformation wave that will change future patterns. Meanwhile, we see that Chinese listed companies are borrowing many new concepts to attract huge amounts of capital, most of which flow into real estate, finance, especially the stock market. The comparison between these outcomes is worth our attention! (Hu Hu, Zhu Duo Xian)