market research report : internet-of-things market in china 2012

Internet of Things Market ChinaInternet of Things Market – China

April 2012

•Introduction•Market Overview•Market Overview China

•Drivers & Challenges•Government Initiatives•Initiatives by Companies •Trends•Trends•Partnerships •Competitionp•Key Takeaways

2INTERNET OF THINGS MARKET IN CHINA 2012.PPT

Executive Summary

Market

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 Internet of Things (IoT) by 20‐

Drivers & Challenges

Drivers:

‐ Growth in China’s RFID Market

‐ Industry Applications

‐ Rise in Use of Smartphones

Wid d U f I

Challenges:

‐ Lack of Unified Standards

‐ Safety & Privacy Concerns

‐ High Application Cost Challenges ‐ Widespread Usage of Internet

‐ Cost Reduction

‐ Infrastructural Advantage

‐ Supply and Demand Drive

‐ Lack of Understanding

Trends

Industry Growth Led by Applications

Emerging Integrated Platforms

Emerging Business Models

Government Initiatives

IoT Development Plan in China

Initiatives by China's Central Government and China's

Ministry of Finance

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

IoT Standard in China

IoT Initiatives by China’s Provincial Government

Smart City Action Plan of Shanghai (2011‐2013)

3

Competition

INTERNET OF THINGS MARKET IN CHINA 2012.PPT

Major foreign players in the market include Company 1., Company 2, Company 3, Company 4 and others

Key domestic players in the market include Company 5, Company 6 and others

Internet of Things (IoT) ‐ Introduction

A world‐wide network of uniquely addressableinterconnected objects, based on standard communication

Internet of Things (IoT)

IoT integrates sensors and devices into everyday objects that are connected to the Internet over fixed and wireless

networks, anytime, anywhere

A virtual medium where "things" can communicate to each other, to users, to computers and systems

Characteristic 6 Characteristic 1

Key Characteristics of IoT Characteristic 2


Characteristic 5


Latest technologies supporting IoT

Sensor technology, IPv6, WPAN, WLAN,3G/LTE, autocontrol technology,

4

Note: IPv6 – Internet Protocol Version 6, WPAN ‐Wireless Personal Area Network, WLAN ‐Wireless Local Area Network, 3G – 3rd Generation, LTE ‐ Long Term Evolution

Latest technologies supporting IoT nanotechnology, embedded intelligent technology, etc.


Internet vs Internet of Things (IoT)

• Feature 1

Internet

• Feature 4

Internet of Things

• Feature 2 • Feature 5

• Feature 3 • Feature 6

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

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

Principal subject connected

to the Internet• Subject 1 • Subject 2 • Subject 3


Principal technology • Technology 1 • Technology 2 • Technology 3

Evolution of Internet of Things (IoT)

Concept initiation Ubiquitous ITU Report of IoT Experience China

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

IBM Smart Planet

1999 2004 2005 2009 ‐10

Concept initiation NetworkITU Report of IoT Experience China

2008 ‐ 09

IBM Smart Planet

• Development 1

• Development 2

• Development 3 • Development 4 • Development 5

• Development 6

• Development 7

• Development 8

• Development 9

• Development 10


Internet Internet of Things Wisdom of the Earth+ =

Internet of Things (IoT) Network in China

RFID / Sensor Network

FlowWith RFID more and more objects

communicate with each other, slowly creating a network of

information ‐ "internet of things"

Access Gateway

NGN, Internet, etc..

information internet of things

eware

Flow

Middle xx xx xx xx xx xx

Flow

App

lications

/ 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‐

• 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‐

Internet of Things (IoT) ‐Market Overview

• 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 Plang g g y

• IoT market will make significant contribution to the China's economy by developing agriculture and promoting industrialization

Market Size and Growth

150

200

USD bn

x%

a11a10

a9a8

0

50

100a8

a7a6a5a4a3a2a1


20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐

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 1City 12

City 11City 10

City 9

City 3City 15

City 4

City 2

City 8

City 5Cit 17

City 11

City 13City 14

City 7

Major Cities

yCity 17

City 6City 16

Potential Cities

• Finding 1

• Finding 2


• Finding 3

SAMPLE Comparison in Sector Focus by IoT Market in China

Focus Sectors Focus Applications

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

Sector ASector A

Sector B

Sector C

Sector D

Sector E

Sector F

Sector G

Sector H

Sector I

China Europe & America Japan & Korea

10

Finding


SAMPLE IoT Market Environment in China

Finding 1 Finding 5

Pros Cons

EnvironmentA

EnvironmentB

Finding 2 • Finding 6

EnvironmentC

Finding 3 Finding 7

EnvironmentD

Finding 4 Finding 8

11

D


Drivers & Challenges – Summary

Drivers

Industry Applications

Challenges

Lack of Unified Standards

Rise in Use of Smartphones

Widespread Usage of Internet

Safety & Privacy Concerns

High Application Costp g

Cost Reduction

I f t t l Ad t

Lack of Understanding

Infrastructural Advantage

Supply and Demand Drive


Industries using mature sensor technologies will boost the IoT market in China

Industry Applications (1/2) Impact

•Finding 1

Applications in Pilot Cities in China

•Finding 2

Application 1

Application 2

City 1

City 2

Application 3City 3

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

A

E

B

G

DC

HF


KI LJ

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• Finding 5g

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

100

200

mn unitsx%

a2a1

500

1,000

No. in mn

b5b4b3

b2b1

China has highest mobile phone user in 20‐


Note: WCDMA refers to Wideband Code Division Multiple Access

020‐e20‐

0Country

5Country

2Country

4Country

3Country

1

Internet population in China is estimated to rise by x% during 20‐‐20‐

•Finding 1

Widespread Usage of Internet Impact

Finding 1Sub‐finding 1

Sub‐finding 2

Sub‐finding 3

Finding 2•Finding 2

Internet Population Top 5 Countries – Internet users(20‐)Internet Population

600

800 60

Penetration%

No. of usersmn

x%a6

a5

Top 5 Countries – Internet users(20‐)

c1600

No. in mnChina has the largest internet user base in

the world

0

200

400

600

0

20

40a4

20‐e

b6

20‐

a5

b5

20‐

b4

20‐

a3

b3

20‐

a2

b2

20‐

a1

b1 c5c4c3

c2

c1

0

200

400

C tC tC t C tC t

15

Note: Figures includes users accessing internet on PC as well as mobile devices

PenetrationNo. of users20 e2020202020 Country

5Country

4Country

2Country

3Country

1


Low sensing costs attracts increased usage making sensing devices widely accepted among buyers

•Finding 1

Cost Reduction Impact

Finding 2

Price

Sensing

Finding 3

Finding 4Sub‐finding 1

16

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

PrivacyLegal / Regulatory Socio‐ethical

•xx • xx

PrivacyProtection

Economic / Market

17

• xx


IoT Development Plan in China

Development 3 Development 5

2011 2012 2013 2015 2015 20202011‐2012 2013e‐2015e 2015e‐2020e

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 2• Finding 3

• Finding 4

• Finding 6Sub‐finding 1

Sub‐finding 2

• Finding 7Sub‐finding 1

Sub‐finding 2

Sub‐finding 3

Sub‐finding 4


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

K B

A

J C

IoT Investment & Development Focus under China’s

12th Five Year Plan

I D

H E


G

SAMPLE USD ‐ bn will be invested in smart grid and USD ‐ bn in ITS as per China’s 12th Five Year Plan

A and B are estimated to be most heavily invested sectors

• Finding 1

USD b I t t Pl

• Finding 2

2009 ‐ 2010 2011 ‐ 2015 2016 ‐ 2020

USD ‐ bn Investment Plan

• Development A

• Development B • Development C

Finding 3


SAMPLE IoT Standards in China (1/2)

IoT Standard Matrix Current IoT Related Standard Necessity and Feasibility of New IoT Standard

Global Standard Local Standard Necessity Feasibility

Data standard xx xx xx xx xx

Software Frame xx xx xx xx xx

pplication Layer

Long distance (fix line)

xx xx xx xx xx

Short distance (fix xx xx xx xx xx

Ap

er line)xx xx xx xx xx

Long distance (wireless)

xx xx xx xx xx

mun

ication laye

Short distance (wireless)

xx xx xx xx xx

Com

ng er

22

xx xx xx xx xx

Sensi

laye


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‐)

Plan A

Findings

x1 projects

Plan Bx2 projects

Plan C

Findings

x3 projects

Findings

Plan D

Findings

x4 projects


Initiatives by Companies (1/2)

Companies Initiatives

Company 1 • Initiatives taken 1





25

Company 5 Initiatives taken 5


Trends – Summary

Industry Growth Led by A li tiApplications

Key Trends

Emerging BusinessModels

Emerging Integrated Platforms


Widespread enterprise and industry applications leads to the growth in IoT market in China

•Finding 1

Industry Growth Led by Applications (1/2)

Industry applicationsg applications boosting IoT

market in China

Finding 2

Finding 3• Sub‐finding 1

Finding 3• Sub‐finding 2

Finding 4


NRI allies with Beijing University of Post & Communications to develop proposals for China’s IoT projects

Secretariat ‐ Japan Nomura Research Institute (NRI)

Secretariat ‐ China Beijing University of Posts and Telecommunications

Managing members (16 entities)

Organizational structure of China and Japan Business Alliance on the IoT


• •


•

XX Association

A B

Presenting Proposals

28

Note: Information above are as of Jan 14, 2011


A B

IoT related Partnerships over the period 2010 ‐ 2012

Organizations Partnerships

Organization 1 Organization 2 • Partnership 1






Major Players in China’s IoT Value Chain

Sensor and Chipset

Communication

Module

Network

Operators

System Integrator and Middleware

Service Operators

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

• Company 2

• Company 3

• Company 5

• Company 6

• Company 9

• Company 10

• Company 12

• Company 13

• Company 15

• Company 16Company 3 Company 6 • Company 10 • Company 13

• Company 7

• Company 16


Major Domestic Public Companies – Summary (1/2)

3,000

Net ProfitSize of the Bubble represents Market Capitalization in USD mn

2,000

2,500m1

1,500

500

1,000

0

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

m2

Total Income

Company BCompany A


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

Company BCompany A

Major Domestic Public Companies – Summary (2/2)

Total Income and Profit for Major Domestic Companies

n1

t1

Company A

t2

Company B

n2

t2

Net Income

Total Income


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

Domestic Company – Company A

Company Information Locations – China

Corporate AddressCompany 5

x, y Avenue, City 5, City 5 Pin‐code, Country

Tel No. xxx‐yyy‐zzz

Fax No. xxx‐yyy‐zzz

Website ‐

Y f I ti 19

Products and Services

Year of Incorporation 19

Ticker Symbol xx

Stock Exchange yy

H d t

Key People

Products and Services

Category Products/Services

Integrated Telecommunication

Wireline voice, mobile voice, Internet,

managed data and leased line value‐ N D i ti

Headquarters

Servicesmanaged data and leased line, value

added services, integrated information

application services, and other related

services, as well as prepaid calling cards

Name Designation

Person 1 Chairman of the Board, CEO, General Manager

Person 2 President, Chief Operating Officer & ED

33

Person 3 CFO, Executive Vice President & ED


i i l S h K i


Financial Snapshot Key Ratios

Profit / Loss

Total Income

a4a3a2

40,000 3,000

ProfitUSD mn

Total Income USD mn

Particulars y‐o‐y change (2011‐10)

2011 2010 2009 2008

Profitability RatiosOperating Margin ‐ ‐ ‐ ‐ ‐

a2a1

0

10,000

20,000

30,000

0

1,000

2,000

20‐20‐20‐20‐

Net Margin ‐ ‐ ‐ ‐ ‐

Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐

Return on Equity ‐ ‐ ‐ ‐ ‐

Return on Capital Employed ‐ ‐ ‐ ‐ ‐

Return on Working Capital ‐ ‐ ‐ ‐ ‐

Return on Assets ‐ ‐ ‐ ‐ ‐

Financial Summary

• The company earned a net profit of USD ‐mn in FY 20‐, as compared to net profit of USD ‐ mn in FY 20‐

• The company reported total Income of USD ‐mn in FY 20‐, registering an increase of x1 % over FY 20

Return on Fixed Assets ‐ ‐ ‐ ‐ ‐

Cost RatiosOperating costs (% of Sales) ‐ ‐ ‐ ‐ ‐

Administration costs (% of Sales)

‐ ‐ ‐ ‐ ‐

Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐registering an increase of x1 % over FY 20‐

• The company earned an operating margin of x2 % in FY 20‐ a decrease of x3percentage points over FY 20‐

• The company reported debt to equity ratio of x4 in FY 20‐, a decrease of x5 % over FY 20‐

Interest costs (% of Sales)

Liquidity RatiosCurrent Ratio ‐ ‐ ‐ ‐ ‐

Cash Ratio ‐ ‐ ‐ ‐ ‐

Leverage RatiosDebt to Equity Ratio ‐ ‐ ‐ ‐ ‐

b i l iFinancial Summary

Indicators Value (29/03/2012)Market Capitalization (USD) x1 mnTotal Enterprise Value (USD) x2 mnEPS (USD)

Debt to Capital Ratio ‐ ‐ ‐ ‐

‐Interest Coverage Ratio ‐ ‐ ‐ ‐ ‐

Efficiency RatiosFixed Asset Turnover ‐ ‐ ‐ ‐ ‐

Asset Turnover ‐ ‐ ‐ ‐ ‐

Current Asset Turnover ‐ ‐ ‐ ‐ ‐

34

EPS (USD) x3PE Ratio (Absolute) – (30th Mar 2012) x4

Improved Decline

Working Capital Turnover ‐ ‐ ‐ ‐ ‐

Capital Employed Turnover ‐ ‐ ‐ ‐ ‐



Key Business Segments Key Geographic Segments

100%

Segment A

100%

Segment BThe company operates

through single reportable

50%

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

A50%

100%through single reportable

segment namely, Segment B

Key Recent Developments

0%2011

0%2011

Description News

Overview

• 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

• Company A focused on their needs and continued to improve their integrated information service p y p gcapability to actively introduce new‐generation IT applications such as IoT, integrate informatisation and industrialisation and promote the usage of informatisation applications of various industries

Agreement• In Feb 2012, the Chengdu municipal government in Sichuan province has signed an agreement with Company A to build the western China cloud computing base in Chengdu

35

Launch• On Mar 28, 2012, Company A and Nokia launched the Nokia 800C, the first CDMA Windows Phone in 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 G

Market Size Trends in the Market

Chinese government planned

total investment of USD ‐bn

GovernmentTrends in the Market

Increase in enterprise and industry application leads to the growth in 150

200

USD bn

x%

a11a10

9to develop the country’s IoT

industry until 20‐IoT market

By 20‐, China may have x1 IoT Integrated platforms with the IoT concept, will

0

50

100

a9a8

a7a6a5a4a3a2a1

ChallengesBy 20‐, x2 core R&D

technologies under the 12th Five‐Year Plan

bring mobile devices, embedded devices and Internet service platforms into the mainstream

020‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐e20‐

ginstitutions, x3 industrial leading enterprises, x4 backbone corporations and x5 small and medium sized companies in the IoT

• Lack of Unified Standards

• Safety & Privacy ConcernsIoT technology together with human behavorial pattern leads to


pfield are expected in province A

• High Application Cost

• Lack of Understanding

innovative new business models for IoT in China

Appendix (1/2)

Ratio Calculations

Operating Margin (Operating Income/Revenues)*100

Ratio Calculations

Current RatioCurrent Assets / Current Liabilities

Net Margin (Net Profit / Revenues) *100

Profit Before Tax Margin (Income Before Tax / Revenues *100

(N I / Sh h ld

Cash Ratio{(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}

Debt to Equity Total Liabilities / Shareholders E it

Return on Equity (ROE) (Net Income / Shareholders Equity)*100

Return on Capital (ROCE) EBIT / (Total Assets – Current Liabilities)*100

(N I / W ki C i l)

q yEquity

Debt to Capital Ratio{Total Debt / (Shareholders Equity + Total Debt)}

Interest Coverage Ratio EBIT / Interest Expense

Return on Working Capital (Net Income / Working Capital) *100

Return on Assets (Net Income / Total Assets)*100

Return on Fixed Assets (Net Income / Fixed Assets) *100

Fixed Asset Turnover Sales / Fixed Assets

Asset Turnover Sales / Total Assets

Operating Costs (% of Sales) (Operating Expenses / Sales) *100

Administration Costs (% of Sales)

(Administrative Expenses / Sales) *100

Current Asset Turnover Sales / Current Assets

Working Capital Turnover Sales / Working Capital

/

37

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• Journals

• Business intelligence databases

I d t i ti• Industry associations

• Government publications


Thank you for the attentionInternet of Things Market ‐ China report is a part of Netscribes’ Information Technology Industry Series. For more detailed information or customized research requirements please contact:Phone: +91 33 4064 6214Phone: +91 33 4064 6214E‐Mail: [email protected]

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39

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market research report : internet-of-things market in china 2012

Technology

e 20e20e

s upgradetoweb2

cagr during20

a10 a9a8

ngn nextgenerationnetwork

wlan wirelesslocalareanetwork

ipv6 internetprotocolversion6

a7a6a4 a5a2 a350 a10