Policies are hot, but enterprises are cold. Industrial Internet is a trend in the long run, but it is still a tough nut to crack at present.

In the post-epidemic era, the domestic epidemic has been gradually brought under control. How to prevent imported cases from abroad, resume work and production in an orderly manner, and restore normal economic growth has become the focus of attention of the country and the public.

The term "new infrastructure" appeared in such a background. It not only had a presence in the news broadcast, but also carried the tempting words "a high investment scale of 24 trillion yuan", just like Sun Wukong suddenly jumping out of a stone, shocking the world and disturbing the three realms.

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Looking at the seven major areas proposed by the new infrastructure, the industry roughly summarizes them into three directions, namely, intercity high-speed railways and urban rail transit belonging to the transportation network, ultra-high voltage and new energy vehicle charging piles belonging to the energy network, and 5G infrastructure, big data centers, artificial intelligence, and industrial Internet belonging to the information network. After these seven areas were demarcated, the capital market and the media were instantly boiling, which is not a bad thing, because people can take this opportunity to form a full judgment and thinking on macroeconomic policies, and everyone will eventually understand that the new infrastructure is not created today, but is based on changes in the internal and external environment, such as the downward pressure on the domestic economy, the Sino-US trade war, and the impact of the global epidemic. Therefore, the attitude of implementation is more determined, the intensity is more obvious, and the progress is more advanced. Therefore, the media can trace back to the Central Economic Work Conference at the end of 2018, which pointed out that the focus of future infrastructure is no longer real estate, but intercity transportation, logistics, municipal infrastructure, and new infrastructure construction such as 5G, artificial intelligence, and industrial Internet.

The tone of the policy points out the future direction, but just like the number of five-year plans, it does not mean immediate success. Industrial Internet companies have a say in this regard, because since 2017, the industrial Internet has been the focus of policy attention, but until now, if we want to evaluate the development status of domestic industrial Internet companies, perhaps it is more likely to be described as "working hard to gain a foothold." In other words, eating the dividends of the industrial Internet is like chewing a hard bone, which is actually not that easy.

1. Policies support the development of industrial Internet

The Industrial Internet was not proposed in 2017. GE, an industry pioneer, proposed the concept as early as 2012. The Industrial Internet Alliance, which integrates government, industry, academia and research institutions, was established in February 2016. However, the Industrial Internet did not develop rapidly in China until after 2017, and the policies at that time played a major role in promoting it.

In November 2017, the State Council issued the Guiding Opinions on Deepening the Development of Industrial Internet through "Internet + Advanced Manufacturing", proposing three-stage development goals:

• During the three-year initial stage from 2018 to 2020, a low-latency, highly reliable, and wide-coverage industrial Internet network infrastructure will be initially built, an industrial Internet platform system with different focuses and coordinated development will be initially formed, and an industrial Internet security assurance system will be initially established.
• By 2025, an infrastructure and industrial system with international competitiveness will be basically formed, and 3-5 industrial Internet platforms that meet international standards will be formed.
• By 2035, an internationally leading industrial Internet network infrastructure and platform will be built, the industrial Internet will be fully and deeply applied and will form innovation leading capabilities in advantageous industries, the security assurance capabilities will be comprehensively enhanced, and international leadership will be achieved in key areas.

After the main theme was promoted, by 2018, local governments and major ministries including Guangdong, Shanghai, Hebei, Hunan, Chongqing, Zhejiang, and Jiangsu successively introduced supporting policies and measures for the Industrial Internet, such as building an industrial Internet industry supply resource pool, standardizing the infrastructure standard system, and providing project subsidies for enterprises that go to the cloud and platform.

The intensive policy benefits at that time gave rise to a large number of enterprises gathering in the industrial Internet. After nearly two or three years of market selection, some enterprises that fished in troubled waters, failed to bring high value to customers, and had unclear business models gradually fell behind, and the subdivided industries began to show the top groups.

2. Large investments tend to be made in companies with clear business models

According to incomplete statistics, in 2018, at least more than 40 industrial Internet companies obtained financing, more than doubling compared to 2017. Among them, 10 companies obtained financing of more than 10 million yuan, namely, Shugen Internet, Zhongke Yunchuang, Winut, Shanghai Huicheng, Jiexun China, Xuanyu Technology, Quanying Technology, Moore Yuanshu, Jiyun Technology, and Changyang Technology. These companies have their own business development focuses, technical capabilities and good market performance, so they were recognized by capital at the time.

In 2019, the flow of capital in the industrial Internet continued to show two major characteristics:

• First, financing events with a value of more than 100 million yuan are beginning to increase;
• Second, more than half of the financing still belongs to Series A and before. The enthusiasm for entrepreneurship and investment in the industrial Internet has not diminished. On the contrary, the companies that seize the niche market or have a clear business model have a greater chance of being selected by capital.

The following is an incomplete collection of financing events with or close to 100 million yuan in 2019:

• In May, Heihu Intelligent Manufacturing, an industrial process collaboration and data analysis software company, announced the completion of a RMB 150 million Series B financing, which was the largest financing in the domestic industrial SaaS field at that time. According to the information, this round of funds will be used for talent introduction, product innovation and business expansion.
• In June, Shugen Internet announced the completion of a RMB 500 million Series B financing round, stating that this round of funds will continue to focus on investing in platform research and development, continuously expanding the industrial Internet industry ecosystem layout, and increasing the research and development and application of technologies such as artificial intelligence, big data, and edge computing in the industrial Internet platform.
• In July, Xuelang Digital, a general industrial Internet platform, announced the completion of nearly 100 million yuan in Pre-A round of financing. The company focuses on the three elements of "data, communication, and computing" in industrial scenarios, and has built the "Xuelang OS" industrial data operating system to build a factory brain for each factory, providing industrial enterprises with cross-industry, cross-regional, and full-life cycle data intelligence services.
• In December, XCMG Hanyun Industrial Internet Platform announced the completion of a RMB 300 million Series A financing, stating that this round of financing will be used for the company's research and development of key industrial Internet technologies, investment in industrial Internet infrastructure and the construction of a marketing system.

In addition to the companies mentioned above, start-up companies such as Changyang Technology, which focuses on industrial Internet security, situational awareness and security big data applications; Chuanglian Technology, which mainly provides industrial Internet products and services to customers in the mining/textile industry; Rong'an Network, which focuses on industrial control security; Jiyun Technology, an industrial Internet platform company; and Mushroom IoT, which is positioned as a one-stop AIoT SaaS service provider for general industrial equipment, have all obtained financing of more than 10 million yuan at different times.

3. Market demand is the long-term driving force for development

Driven by policies and capital, there is one question that can be answered affirmatively, that is, the correctness of the direction of the entire industrial Internet industry. Unlike the smart hardware startup boom in 2014 and the unmanned retail that suddenly emerged in the past two years, the industry does not need to debate whether the industrial Internet is valuable, because the trend of industrial information upgrading has already taken place, and the value brought by industrial Internet application services can be calculated, including how much investment and how much additional return is generated. That is why some companies say: In the next 20 years, the largest industry is the industrial Internet. Miao Wei, Minister of Industry and Information Technology, recently emphasized the "80/20 rule" on the future development and application scenarios of 5G, that is, 20% is used for traditional consumer Internet of Things, and the remaining 80% is used for Internet of Things, especially industrial Internet, which is the biggest "blue ocean" in the 5G era.

However, this does not prove that companies that join the Industrial Internet can sit back and reap the benefits.

In fact, in the past few years of development, the industrial Internet has not gained the expected market recognition, especially in small and medium-sized enterprises, where the application coverage is relatively low. Although the industry has already clearly sorted out the characteristics of the demand for the industrial Internet:

For example, large industrial enterprises pay more attention to the integrated innovation of the entire factory, while other small and medium-sized manufacturing enterprises, without even solving the problem of digitalization, pay more attention to the popularization of single-point applications; for example, no matter what the difference in enterprise size is, their most common demand is to move from products to services, with the fundamental goal of reducing costs, improving quality, and optimizing services.

4. Challenges faced by the Industrial Internet

In the "Decoupling Industrial Internet, Enabling Transformation and Upgrading - Industrial Internet Artificial Intelligence Application White Paper" co-authored by Microsoft and the Integration of Industrialization and Informationization Services Alliance last year, it was pointed out that industrial enterprises are facing four major problems in embracing the industrial Internet: insufficient willingness, weak foundation, insufficient funds, and unclear path, which hinder the actual deployment of applications.

Source: "Decoupling Industrial Internet, Enabling Transformation and Upgrading - Industrial Internet Artificial Intelligence Application White Paper"

In addition, not only industrial enterprises are facing problems, but industrial Internet service providers also have their own pain points.

Although the industry has been subdivided into data collection and integration, network and edge computing, industrial Internet platform, software and application, industrial safety, industrial APP, and industrial ecology, and the policy has sorted out that the domestic industrial Internet will focus on the development of the three major systems of network, platform, and security to point out the direction, but because industrial scenarios have high technical barriers, long product development iteration cycles, large system project implementation difficulties, and decentralized markets are difficult to generate large enough revenue, most service providers are still groping in the state of technical level, business capabilities, and business models, and the industry has not yet seen a real "killer" application. Taking the industrial Internet platform as an example, currently more services are concentrated on equipment status monitoring and alarm, and production and manufacturing optimization, and progress in achieving social resource collaboration is limited.

Industrial Internet industry structure, source: Internet

According to the survey conducted by IoT Media reporters with industrial Internet companies, the construction of industrial Internet application services is currently at the "point" stage, with most of the pilot projects in a single region. Only by building replicable benchmark cases can the task of moving from point to line and then to surface be realized. This process of laying out "points" is the most critical to the development of enterprises, and in the process of laying out "points", the key is to achieve "industrial Internet of Things", because manufacturers need to continue to strengthen the number and depth of understanding of industrial protocols in order to cope with large-scale connection services of different types of equipment, and only after the realization of industrial Internet of Things will there be future data analysis and AI applications, which are what enterprises ultimately want to achieve.

Here we might as well compare the Industrial Internet with the Consumer Internet to illustrate the characteristics of the Industrial Internet:

• First, the demands raised by consumer Internet users are not very different. It is easy to design a set of software for everyone to use, and it is not difficult for users to accept the software. However, the demands raised by industrial Internet users are diverse and have industry characteristics. A single set of software cannot achieve universal application. Moreover, companies usually do not reorganize all internal processes for a single set of software.
• Second, the consumer Internet focuses on short-term explosions. For example, smart speakers are a typical explosive product, and mainstream manufacturers have fought on a large scale for market share. However, the industrial Internet emphasizes targeted features and the integration of OT and IT. Companies do not have the concept of short-term shipments of millions of speakers, but hope to have calculable long-term sustainable returns after investment.

This also proves that the industrial Internet is more technical and emphasizes the co-construction of the ecosystem. Otherwise, it is difficult for a single company to provide complete application services that satisfy customers. Among the majority of industrial Internet companies interviewed by IoT Media, most of them provide services in the "platform + SaaS + ecosystem" model.

5. Conclusion

In an interview, a company mentioned that 2020 will be a critical stage for the industrial Internet platform, and the phenomenon of reshuffle or focus on subdivided fields will be more obvious. The author believes that from 2018, the first year of the industrial Internet, to now, this situation is inevitable, just like only when the tide passes can you find out who is swimming naked. In 2020, the policy wind of the industrial Internet has not stopped, but the companies in it have long calmed down and cultivated their internal strength.