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China covets Japan’s IoT expertise, a missing piece in tech quest

Written by Nikkei Asia Published on   3 mins read

Automation technologies seen as key to reducing dependence on US tech.

As China strives to become a high-tech manufacturing powerhouse, it is aggressively courting Japanese companies to gain access to their “internet of things” know-how in manufacturing.

Beijing is trying to reduce the country’s reliance on American companies for high-tech devices amid the trade war, and it sees Japanese technologies, particularly in automated manufacturing, as key to realizing domestic production of state-of-the-art technologies.

The Industrial Value Chain Initiative, Japan’s largest trade group for the internet of things, received a partnership proposal from China in November last year. The overture, which included signing a memorandum of understanding, came from the China Academy of Industrial Internet, a research institute set up in 2018 to back deployment of the industrial internet of things at domestic companies.

The Chinese side wanted to work with top Japanese manufacturers in testing a production improvement system using internet-of-things technologies. Industrial Value Chain has roughly 300 members, including major machinery builders Mitsubishi Electric and Hitachi and is planning to set up Japan’s first manufacturing data exchange.

The internet of things allows for collecting and analyzing massive volumes of data to enhance business efficiency. Yaskawa Electric, for example, links about 1,000 motors inside equipment at its factories to the internet to get a down-to-the-microsecond picture of operating status.

Worldwide IoT spending in the manufacturing sector will reach about USD 280 billion in 2023, a 70% surge from 2018, US research firm IDC predicts.

Beijing invited engineers from member companies on all-paid trips to symposiums in China. “They flew us business class, put us up in a five-star hotel, and hosted us in the best way possible,” an engineer who went on a junket said. “It was clear that they desperately wanted Japanese technologies.”

The Chinese side is proposing joint research and has also asked the Japanese organization to take part in an international internet-of-things organization Beijing is preparing to launch. “We’re examining what advantages this will offer to Japan,” said an official at Industrial Value Chain. The China Academy of Industrial Internet has not responded to a Nikkei inquiry about the aim of the move.

In addition to the China Academy, missions that include senior officials from Ministry of Industry and Information Technology visited Japan twice last autumn, touring construction equipment maker Komatsu and other internet-of-things leaders in industry.

China has been leading the world in such fields as mobile payments, where Alibaba Group Holding and Tencent Holdings drove the consumer shift away from cash, as well as technologies for unstaffed convenience stores and artificial intelligence.

But the world’s second-biggest economy is behind industrialized countries in many areas of manufacturing. Beijing hammered out the “Made in China 2025” plan to turn the country into a high-tech, high-quality manufacturing powerhouse, seeking to enhance productivity and move factory operations onto cloud-based internet-of-things platforms — just as American and German industrial conglomerates General Electric and Siemens have been striving to since the 2010s.

In particular, China lacks know-how in making use of manufacturing data. And Japan has that missing piece. “With a long history of manufacturing, Japan is slightly ahead in seeing how to interpret and utilize manufacturing data,” said a senior executive at a machinery builder here.

Cooperating with China would present a double-edged sword. If the quality of Japan’s internet-of-things technologies is widely recognized, it would be a boost for Japanese machinery sales in China. But China is also home to many Japanese manufacturers’ top competitors.

“IoT deployment in China involves too great of a risk such as data leaks,” Komatsu President Hiroyuki Ogawa said. “A tie-up with a Chinese company in this field is not under consideration.”

Still with China advancing its technologies at breakneck speed, the country could soon catch up to Japan. Japanese manufacturers will have to grapple with building a strategic relationship with Chinese counterparts.

This article first appeared on Nikkei Asian Review. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei. 36Kr is KrASIA’s parent company.


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