M2M in China

Opportunities to build on global leadership

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The Chinese machine-to-machine (M2M) market is set for explosive growth. China is already the market leader worldwide, accounting for a third of the global M2M connections at the end of 2014. A number of factors have contributed to this initial success, with economies of scale topping the list. The sheer number of telecoms subscribers creates a large addressable market for newer services such as M2M, and China’s market boasts a strong partnership between the public sector and the leading mobile operators. Support from the Government has been crucial to building the necessary critical mass for M2M in a short time.

Having established a leadership role in M2M, China is all set to capitalize on the Internet of Things (IoT) opportunity. Mobile networks are forming the backbone of IoT service delivery in China, in addition to industrial proprietary networks, the internet, and other forms of low-range wireless connectivity, such as Bluetooth, Wi-Fi and ZigBee.

At the end of 2014, China had 74 million cellular M2M connections, according to GSMA. Chinese operators and the Government have allowed the market to grow dramatically in a relatively short time, laying the foundation for further expansion and accelerated development of the IoT. With China’s mandate to become a nation of smart cities, demand for M2M solutions is surging, and healthy growth rates are expected to continue for years to come.

Current market landscape

The Government’s proactive support of IoT development has benefited the M2M industry. Since 2011, the Ministry of Industry and Information Technology (MIIT) and the Ministry of Finance (MOF) have allocated a special fund of RMB500 million annually to support IoT in technological R&D, industrialization, application models, standard design and public service.

The Government has selected 202 cities, including Beijing, Guangzhou, Hangzhou and Shanghai, to pilot smart-city projects with applications in vertical sectors such as transportation, electricity, public safety and environmental protection. Multiple connected Government services and city initiatives are also playing a significant role in leading the country’s appetite for IoT solutions.

Over the next five years, we will see large-scale deployment of IoT, supported by new use cases and improvements to the customer experience. Increased investment in IoT will fuel more demand for M2M services, which will boost overall market growth. With that, M2M will become one of the key drivers of the future mobile internet era in China, forming an important part of the IoT.

Addressing market challenges

Connected devices are growing at an unprecedented rate: internet-connected machines will surpass the online population in the next 10 years. Yet one of the by-products of high growth rates is the fragmented nature of the M2M ecosystem, where a number of different entities are competing and collaborating against a backdrop of changing customer needs. In this environment, there are both short-term and long-term challenges that need to be addressed, including:

  • Security and privacy issues
  • Less standardization at various levels
  • M2M modules
  • Restrict tax or nontax charge-related local incentives

Key success factors to grow the market

An efficient interconnected environment is vital to M2M development. This demands a dedicated mobile networks, improved coverage and bandwidth availability, increased usage of smart devices, and supportive government policies. To customers, the applications must be compatible with different device types, configurations and operating systems, and they must be supported by different wireless networks to gain real value.

The M2M market development represents a complex set of interrelated elements. Designing an M2M business involves optimizing all these elements, including business model, supply chain, vertical applications and ongoing support challenges. All players in the M2M ecosystem must have the flexibility to position themselves for upcoming opportunities. Other key success factors to grow the market include:

  • Revamping the organizational model
  • Finding the appropriate position along the value chain
  • Driving partnerships in different dimensions
  • Bold acquisition strategies to generate more value from M2M
  • Moving toward a complete-solution business model
  • Forming alliances to deliver cross-border solutions
  • Unlocking the potential of big data

To learn more, please download our full report, China M2M: Opportunities to build on global leadership