On July 7, U.S. multinational General Electric (GE) announced a partnership with China Telecom Group to integrate GE’s Predix industrial Internet platform—essentially an operating system for industrial equipment—with China Telecom’s comprehensive information services. As a result, the U.S. industrial Internet will now enter China’s cloud storage, telemedicine, smart manufacturing, and cloud computing sectors.

　　A few days later, the China Industrial Internet Association was established in New York, marking a major breakthrough in international cooperation between the industrial and information-communication sectors of China and the United States, following the establishment of the China–Germany Dialogue on Industry 4.0.

　　According to reports, GE has launched 12 industrial Internet pilot projects in China and is currently working to implement more than 40 big-data analytics applications. The industrial Internet, hailed as the hallmark of the Third Industrial Revolution, has begun to play a substantive role in and exert a significant influence on the implementation of the “Internet Plus” initiative within China’s industrial sector.

　　Before the large-scale adoption of the Industrial Internet in China’s industrial sector, it is essential to conduct a thorough examination of its origins, its intended objectives, its underlying purposes, and whether it may entail any adverse side effects.

　　Industrial Internet

　　Reinventing American Manufacturing

　　Following the 2008 financial crisis, the U.S. government’s most significant realization was the critical importance of the real economy to the national economy, with industry recognized as the single most important component of national competitiveness. In response, the administration has consecutively launched a series of national initiatives, including the “Framework for Revitalizing American Manufacturing,” the “Advanced Manufacturing Partnership,” and the “National Strategic Plan for Advanced Manufacturing,” all aimed at implementing the national strategy of “reindustrialization.”

　　In 2012, GE, the leading U.S. manufacturer, pioneered the concept of the “Industrial Internet.” By leveraging connectivity among machines and equipment and advanced analytics software, GE moved beyond the traditional model centered on standalone intelligent devices. Through a combination of high-performance equipment, low-cost sensors, the internet, and big-data collection and analysis technologies, the Industrial Internet has dramatically enhanced the efficiency of existing industries and given rise to entirely new ones.

　　This line of thinking has a long history. As early as 2005, when GE’s aircraft-engine business was reorganized into GE Aviation, the company began transforming its business model. Previously, its core activity was solely the manufacture of aircraft engines; today, by equipping aircraft with numerous sensors to collect real-time flight data and leveraging big-data analytics, GE provides airlines with end-to-end solutions for maintenance and operations management, capability assurance, operational optimization, and financial planning. In addition, it offers a range of services such as safety controls and flight-path prediction, gradually evolving into a full-fledged software company.

　　Take Alitalia as an example: GE has installed hundreds of sensors on each of its aircraft, enabling real-time collection of extensive data such as engine operating conditions, temperature, and fuel consumption. By leveraging GE’s software to perform massive-scale analytics, the system precisely identifies optimal operational strategies. Thanks to this single measure alone, Alitalia’s 145 aircraft have saved US$15 million in fuel costs over the course of a year. Moreover, this wealth of data allows for the proactive prediction of potential engine failures, facilitating preventive maintenance before issues arise. Such proactive measures help avoid flight delays, increased costs, and even more serious safety incidents caused by mechanical failures.

　　It is precisely through this deep integration of IT technologies and equipment that GE has gradually transformed from an equipment manufacturer into an intelligent services provider, with its business model evolving from a pure-play equipment seller to a comprehensive smart systems supplier offering integrated solutions encompassing smart devices, intelligent analytics, and data-driven decision-making.

　　Experts generally agree that the value of the Industrial Internet will be realized primarily in three ways: first, by enhancing equipment utilization efficiency, thereby reducing energy waste and contributing to GDP growth; second, by improving the efficiency of system and equipment maintenance and shortening maintenance downtime, which effectively boosts productivity; and third, by optimizing and streamlining operations, thereby freeing up more valuable human resources.

　　GE predicts that if the Industrial Internet can boost productivity by 1% to 1.5% annually, it will increase average U.S. incomes by 25% to 40% over the next two decades; and if other regions of the world can achieve half of the U.S. productivity gains, the Industrial Internet could add US$10 trillion to US$15 trillion to global GDP over the same period.

　　To this end, GE established an Industrial Internet R&D center in Silicon Valley in 2011, and its R&D team has since grown to over 1,000 employees. In 2013, GE announced that it would invest $1.5 billion over the next three years in developing the Industrial Internet. This April, GE announced that it would spin off most of its $363 billion financial business over the next two years, with a goal that by 2018, 90% of GE’s earnings will come from high-return industrial businesses—up from 58% last year.

　　From this, we can see that the value of the Industrial Internet lies not only in driving primary manufacturers to transform into smart manufacturing systems and service providers, but also in potentially creating a new high-end real-economy business model with profit margins even higher than those of the financial sector.

　　Open Platform

　　Building an “Apple”-Style Smart Manufacturing System

　　The United States is the birthplace of the Internet, and from the very outset, the Industrial Internet has borne a distinct digital imprint: openness. Compared with the traditional Internet, the Industrial Internet not only needs to foster openness across ICT domains such as telecommunications networks, data storage, and data transmission, but also must achieve open integration and convergence between manufacturing technologies and IT technologies.

　　This is an R&D consortium that spans “two IT domains.” In March 2014, GE crossed industry boundaries to join forces with IT giants such as IBM, Cisco, Intel, and AT&T in establishing the Industrial Internet Consortium (IIC). The IIC operates on an open membership model and is committed to enabling data sharing among devices from different vendors. This encompasses not only Internet network protocols but also a wide range of performance metrics related to data storage capacity, connectivity, and non-connected devices within IT systems. The overarching goal is to break down technological barriers by developing common standards, leverage the Internet to transform traditional industrial processes, and further promote the seamless integration of the physical and digital worlds—“with the aim of accelerating the development, collection, and widespread deployment of connected machines and equipment, fostering intelligent analytics, and empowering workers.” Today, the IIC boasts 167 members.

　　This is an open system in ecological terms, rather than in the context of industrial value chains. In October 2014, GE announced that its Industrial Internet platform, Predix—essentially an operating system for industrial equipment—would be made available to all companies worldwide, bringing the collaboration model between platform providers and application developers from the internet sector into the industrial realm. This approach ensures that users can rapidly develop custom industry-specific applications at scale. Such an industrial ecosystem, highly analogous to Apple’s in the smartphone space, will significantly accelerate the adoption and integration of the Industrial Internet across various sub-sectors of manufacturing.

　　This is a standardized collaborative organization aimed at the global market. Currently, Chinese enterprises and institutions such as China Telecom, Haier, Huawei, the China Academy of Information and Communications Technology, and the Shenyang Institute of Automation of the Chinese Academy of Sciences have joined the IIC, where they will share cutting-edge technologies and resources in tandem with the global industrial internet community.

　　We believe that the primary objective of companies such as GE in establishing the Industrial Internet Consortium is to leverage the United States’ strengths in information technology and, through deep integration with manufacturing, gain a leading position in the development of technical and industry standards, thereby securing a dominant role in global competition. To date, the Industrial Internet has not yet been designated as a national strategy in the United States, a stark contrast to Germany’s nationwide push to advance its Industry 4.0 initiative. However, given that many U.S. firms within the consortium bear responsibility for the country’s “reindustrialization” efforts and that one of the core technologies underpinning the initiative is the Cyber-Physical System (CPS), numerous scholars treat the Industrial Internet as an industrial strategy on par with Industry 4.0.

　　The collaboration with China Telecom can be seen as the first step in extending an olive branch from the industrial internet to Chinese enterprises. But hold on—what exactly does China stand to gain by participating in this new industrial initiative aimed at revitalizing U.S. manufacturing?

　　Let us now turn our attention back to the first ecosystem of intelligent manufacturing—the smartphone platform. Nokia, which for 15 consecutive years held the top global market share during the feature-phone era and once invested in R&D at a level five times that of Apple, ultimately faltered in its debut battle within the smartphone ecosystem, eventually collapsing in 2013 and changing hands. This is the poignant tale of the first manufacturing giant unable to adapt to the intelligent age. In this story, China clearly played the role of observer, learner, and beneficiary. Soon after Apple, a new, more open-minded platform—Android—emerged. Through collaboration with Apple, a large number of Chinese small and medium-sized developers reaped billions of yuan in app revenue shares, thereby cultivating a substantial pool of software and hardware development teams that have since paved the way for the advent of the “Internet Plus” era. Meanwhile, leveraging cooperation with Android and driven by the relentless drive of Chinese mobile-phone manufacturers, companies such as Huawei, ZTE, Xiaomi, and Coolpad have truly broken into the global top tier of smartphone shipments.

　　The smart manufacturing sector is highly likely to see a competitive landscape emerge that mirrors the dynamics of the smartphone industry. Germany’s Industry 4.0 and the U.S. Industrial Internet are poised to become the two most important global platforms for smart manufacturing in the years ahead. The author urges China’s industrial community and the information and communications technology sector to place great emphasis on the historic opportunities these initiatives present, to move in concert, to join forces in pooling global innovation resources, and to accelerate the intelligent transformation of China’s industrial economy. By comparison, the China–Germany Industry 4.0 dialogue, being government-led, has progressed at a relatively slow pace and has yet to reach the stage where major corporations from both sides join each other’s industry collaboration organizations to jointly advance policy discussions and co-develop standardization frameworks. In contrast, the Industrial Internet, with its focus on open, market-driven cooperation among enterprises, has already “leapt ahead” in its localization journey.

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　　Through our examination of GE’s transformation toward smart manufacturing via the Industrial Internet, we have observed that world-class manufacturing giants have moved beyond single-equipment intelligence to system-level intelligence. They have evolved from leveraging automation and information technology to drive intelligence to achieving deep integration between ICT and equipment to unlock further intelligent capabilities, thereby giving rise to a suite of new industrial-intelligence services—including device connectivity, data acquisition, big-data analytics, and intelligent decision-making. Although GE has championed and established the Industrial Internet Consortium and was among the first to open its Predix platform, a major manufacturer with a relatively homogeneous business model—primarily concentrated in sectors such as aerospace, energy, and healthcare—is not necessarily poised to emerge as a unified industrial-application-platform operator on par with Apple. The fragmentation across industry sub-sectors and the inherent complexity of manufacturing technologies will only make the platform competition in smart manufacturing—and the broader geopolitical contest among major powers—ever more intricate and hard to predict.

　　As U.S. manufacturing giants boldly abandon their once-lucrative financial divisions and plunge headlong into the tidal wave of smart manufacturing, intelligent transformation is undeniably a new wave of industrial change that will reshape the future landscape. Meanwhile, we observe that Chinese listed companies are raising massive amounts of capital by leveraging numerous new concepts—yet the vast majority of these funds are flowing into real estate, finance, and especially the stock market. This stark contrast between the two approaches should serve as a wake-up call! (Hu Hu, Zhu Duoxian)