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The Internet: The New Industrial Revolution

Internet information technologies are driving innovation across broad sectors, and sparking a new global industrial revolution — attracting attention from academia, governments, and industry players. In academia, scholars have debated the “Third Industrial Revolution” and “Digitalized Manufacturing” for years, while a few pioneering companies, including General Electric (GE) and Siemens, are actively exploring the Industrial Internet and Industry 4.0.

Various political leaders have called upon their countries to capitalize on these high-tech opportunities and the United States government is promoting an American manufacturing revolution.

The Internet: A Significant Driver

Mechanization and electricity, two past industrial revolutions, spawned General Purpose Technologies (GPTs). Today, Information and Communications Technology (ICT) is the leading GPT. Since the 1970s, ICT has evolved continually, from tabulation, record keeping, and applications software to communications networks, and now an onslaught of new information technologies such as cloud computing, Big Data, and the Internet of Things (IoT). ICT is driving innovations in automation, digitalization, and connectivity; and ICT-enabled Internet technologies are taking industrial intelligence to unprecedented levels.

The following conflicts and points of focus explain the need for this industrial revolution:

  • The number-one conflict is between the increasing values of industrial strategies versus the potential for economic collapse. The 2008 financial crisis is an opportunity for developed countries to rethink the strategic significance of internal industrial development to better countermand the 15 percent falling of industrial contributions to the overall global economy. A new industrial revolution is required to revitalize industries and increase their economic contributions.
  • The second conflict is between diminishing resources — energy and other necessary raw materials — and traditional industrial technologies that have reached their full potential. A best-case result will be the introduction of new industrial technologies.

Since the advent of industrial development, the unchanging focus has remained:

  • Time: Production periods must be continually shortened.
  • Costs: Must constantly decrease.
  • Production flexibility: Rapid responses to change must improve.

Why is the Internet driving the new industrial revolution? These key technologies act as drivers:

  • Ubiquitous broadband networks: Allow large amounts of industrial data, often unstructured, to be efficiently transmitted between production locations for remote processing.
  • Cloud computing and Big Data: High-performance computing, data storage, and data analytics ensure efficient and collaborative processing of massive amounts of production, marketing, and supply chain data.
  • Sensing technology: Smart sensors and the IoT enable high-frequency, real-time data collection during production processes. Continuous production processes are divided into digital information silos and interoperation models with the ability to monitor and control physical equipment and complex production processes in real time.

Today’s Internet has vastly improved, with accurate sensing, broadband, and high-performance computing capabilities that respond to product requirements more efficiently and make industrial production more visible, well connected, and programmatically controllable.

Internet-Industry Integration is Changing Production Paradigms

The integration of the Internet with manufacturing industries is spurring the new industrial revolution by its shift from being an “external factor” to a “core, internal factor.” The influence of the Internet has shifted from being an “option” to a “key necessity” to enable the latest industrial revolution.

More open industries have a closer integration with the Internet by expanding beyond the initial utilization marketing and services into R&D and manufacturing. Ultimately, the Internet will radically change existing production practices by streamlining entire production and operating processes.

Those industries closest to consumers — the end-users — are seeing the deepest integrations and have been impacted the most by the Internet. Not unrelated, the rate of growth in the consumer goods industry has increased as the Internet has gained a foothold — and more — on the upstream markets for heavy equipment and specialized materials.

Internet-industry integration creates the following new trends:

  • Service-centric manufacturing: By using the Internet to provide smart, real-time services, independent of time and place, enterprises are expanding services to fit full product lifecycles. This approach achieves a shift from product-centric manufacturing to service-centric manufacturing. Examples include remote monitoring and services for mechanical engineering by China’s leading machinery manufacturers Zoomlion and XCMG, as well as value-added smart home appliances from China’s home appliance giants Haier and Gree.
  • Personalized products: Combined with intelligent computing and flexible manufacturing, the Internet enables mass production of customized products to meet an array of personalized demands. Examples include Quigdao Red Collar Clothing Co., Ltd., and SPZP, in the custom cloth, shoe, and hat sectors, and the benchmark company IDX, in the custom furniture industry.
  • Decentralized organizations: Due to geographical constraints, traditional industries would not have survived independent of their specific locations; however, the Internet has changed that requirement. The Internet gathers resources (such as capital, creativity, tools, and services) required for production, and allows industrial links become decentralized and spread new production patterns. Typical new distributed production cells include collaborative R&D, crowdsourcing, crowdfunding, and networked manufacturing.
  • Cloud-based manufacturing resources: Assi s ted by the Internet , decent ral ized manufacturing resources have migrated to cloud service platforms. These resources are allocated and used on-demand, from a central source. The industrial cloud project in Beijing, one of a series of pilot projects instituted by the government of China, achieves multi-party manufacturing collaborations by sharing tools and resources, such as software and production capacity. In June 2013, a company used this industrial cloud platform to manufacture and sell an electric car designed specifically for children. The product was launched quickly, in just three months, and achieved excellent sales results.

Finding the Right Entry Points

The new industrial revolution is gaining global momentum. Developed countries are increasing strategic investments, and receiving great praise from enterprises of all sizes.

In February 2012, the United States released an Advanced Manufacturing Partnership (AMP) program. GE then proposed the concept of an “Industrial Internet” in November 2012. Followed by the National Institute of Standards and Technology (NIST) publishing an Industrial Internet framework in 2013. Later, in March 2014, GE, Cisco, IBM, AT&T, and Intel announced the formation of the Industrial Internet Consortium. Government and major industry players continue to interact and collaborate frequently.

Germany is vigorously tapping into the potential of Industry 4.0 — an initiative that emphasizes “smart manufacturing” and the use of Cyber-Physical Systems (CPS) to achieve horizontal and vertical integration of manufacturing systems, and the end-to-end integration of engineering and production. Members of the German government, academia, and major industries continue to form collaborative alliances, including in April 2014, the release of a standardized roadmap for Industry 4.0 by the VDMA, ZVEI, and BITKOM professional associations.

South Korea is also actively pursuing IT integration initiatives, where the government has introduced legislation to promote inter-industry integration. Samsung and ten representatives of key industrial sectors, including automobiles and shipbuilding, have set up innovation centers focused on IT integration.

China, a proven growth economy, expects to combine its industrial and Internet advantages to pioneer a new industrial revolution. Having the world’s largest manufacturing economy, with the highest industrial output in the world, China intends to build upon a well-established infrastructure, and further exploit domestic Internet capabilities that are second in capacity only to the United States. Of the top 10 global Internet companies (by market value), China hosts three of four companies for medium- and long–term outlooks, and the country’s huge domestic application market is driving a strong culture of innovation.

China’s Ministry o f Industry and Information Technology (MIIT), the national organization responsible for regulating major industries, has made initial progress in Internet-industry integration. In August 2013, MIIT released the Special Action Plan on Boosting the Deep Integration of Informatization and Industrialization , listing Internet-industry integration as a key task. In June 2014, MIIT announced a list of 24 pilot enterprises. The industry also actively responded to MIIT’s advocacy. In July 2014, six organizations, including the former Academy of Telecommunication Research under MIIT, set up the China Integration and Innovation Alliance of Internet and Industry (CIIAII), dedicated to building a platform to promote Internet-industry integration.

Expectations and Requirements

Internet-industry integration focuses on grafting innovative Internet approaches onto standing industries — a strategy that requires collaboration between governments, academia, Internet companies, and a host of major industry players. Governments and academia must accelerate the pace of their research and formulation of technical architectures, standards, and mechanisms, including laws and regulations. Using the same guidelines, Internet companies and industry players must focus on their respective tasks, collaborate with old and new partners, and make a sincere, concerted effort to drive innovation. In addition, a range of diverse professional services must be defined, developed, and applied in key enterprises across multiple industries to speed Internet-industry integration.

By Xin Yongfei

Vice President, Policy and Economy Research, China Academy of Information and Communications Technology