How is China's increasing dominance in tech impacting the IoT sector?
China has become an influential tech hub thanks to aggressive investments and rapid innovation. Read to see how these efforts have impacted the IoT sector.
One of the primary drivers for this transformation has been the aggressive development and adoption of new technologies. Since the 1980s, China has invested heavily in research and development, digital infrastructure, and other tech-related initiatives. As a result, companies like Huawei, Tencent, and Baidu have risen to the top of the global tech market.
Numerous sectors have benefited from China's advancement in the tech industry, and the Internet of Things is no exception. The country has invested significantly in IoT and rapidly expanded its capabilities and capacity. China is also the world's biggest market for IoT-connected devices, with its vast population providing an ideal environment to deploy cutting-edge technologies rapidly.
On the other hand, China's dominance in tech has also had some adverse effects on the IoT ecosystem. Customers outside the market have become wary of buying Chinese products due to quality and compliance concerns. Meanwhile, fears of Chinese surveillance, cyber-espionage, and even state-sponsored hacking have grown increasingly common as the country's reach in the global tech space continues to expand.
Today's post will discuss China's two-faced impact on IoT's current and future outlook. But first, let's briefly debunk the nation's meteoric rise to the top of the tech sector.
How did China become a global tech power?
Forty years ago, China's per capita income was only one-third of sub-Saharan Africa's. But in the following decades, immense government investment and a focus on technological progress have enabled China to become a force in world markets.
Today, China is the world's largest manufacturing powerhouse, producing nearly 50% of the world's primary industrial goods, including crude steel, cement, coal, vehicles, and industrial patent applications. China also produces most of the world's ships, high-speed trains, robots, tunnels, bridges, highways, chemical fibers, machine tools, computers, and mobile phones.
China's industrial and technological dominance can be attributed to several factors, most notably;
- A strong government emphasis on improving education and research,
- Extensive investment in R&D,
- Reliance on a vast pool of talented engineers,
- Local firms' access to capital markets,
- A well-functioning foreign exchange system that facilitates the imported transfer of technology and know-how from abroad.
Some economists think China's economic miracle is coming to an end. The growth of its economy has declined sharply from double digits in the 2000s to less than 7% in the 2010s and 5% in the 2020s. Its stock market is in turmoil, and its currency is under attack. Nevertheless, the long-term outlook looks promising to most experts due to the country's deep technological investments and large-scale economic reforms.
How has China's dominance in tech impacted IoT?
China's technological advancements have had far-reaching implications for the global IoT sector. However, while some impacts have been positive, others have been less beneficial.
Here are five positive impacts of China's tech dominance on the IoT ecosystem.
1. Healthy competition: As Chinese tech firms have become more prominent within the global market, competition has steeply intensified for existing Western businesses. This competition has led to lower prices and higher-quality products being made available to customers across the globe.
Furthermore, the growing presence of Chinese companies has also enabled smaller businesses to break into global markets and gain a foothold. With competition set to heat up even further in the coming months, the global IoT market is expected to reach $486 billion by the end of 2023, much to the benefit of customers worldwide.
2. Improved infrastructure: In recent years, Chinese companies have made considerable investments in constructing the necessary infrastructure to develop a productive Internet of Things ecosystem.
These investments have bolstered cloud computing, data analytics, AI, machine learning, and 5G networks, resulting in an atmosphere that allows people from all walks of life to take advantage of IoT and integrate it into their daily routines.
3. Reduced costs: Thanks to China's massive manufacturing base and well-established supply chain network, IoT-related devices are now much cheaper than they used to be. This is good news for both consumers and businesses alike.
Businesses of all sizes can benefit from cheaper IoT devices and components, while consumers can now access a broader range of products than ever before.
4. Greater access to capital: The massive influx of capital into China's tech sector has enabled firms to scale their operations cheaply. Consequently, Chinese businesses have been able to rapidly expand their product range and bring a variety of solutions to the market.
This influx of capital has also made it cheaper for small-scale companies to develop IoT solutions and compete effectively. Unsurprisingly, venture capitalists in Europe and the US are increasingly showing interest in flourishing Chinese IoT ventures that seem poised for continued growth and favorable returns on investment.
5. Access to cheaper outsourced labor: Chinese companies have long enjoyed access to a large pool of low-cost labor. As a result, they have produced products at lower costs than their Western rivals.
However, with the world more connected than ever, even companies located in the West now have access to this same cost-effective labor. IoT development hubs of virtually all sizes and locations can benefit from the availability of cheaper outsourced labor online and develop their products faster and at lower costs.
Now, let's look at some negative impacts of China's tech dominance on the IoT industry.
1. Data security issues: IoT technology relies heavily on data harvesting and transfer. However, with China's reputation for data and privacy violations, many businesses have to think twice before implementing Chinese hardware or venturing into the Chinese market. With even giant companies like Huawei coming under scrutiny for potential links to the Chinese government, it is no surprise that some wary IoT developers are choosing to stay away from China.
2. Poor-quality products: While Chinese IoT products may initially seem attractive and cost-effective, primarily due to their low price point, their quality often falls short compared to more expensive Western counterparts.
For example, sensors and actuators from China are known for having shorter lifespans and poorer performance than those made in other countries. Chinese technologies also have a reputation for irregular updates and inadequate customer service, potentially increasing the risk of system downtime and security flaws.
3. Regulatory loopholes: Although Chinese companies are subject to certain regulations, they often find ways around them due to lax enforcement and other regulatory loopholes. This has caused some international IoT businesses to wonder whether or not these firms are adhering to all applicable rules and regulations, raising serious questions about the integrity and compliance of their products.
4. Patent theft: International tech companies continuously face a unique issue in which Chinese firms steal patents and trademarks from them without permission or compensation.
For instance, Apple recently had to fight a legal battle against Huawei over the latter's "MatePod" earphones, which seemed borrowed from Apple's well-established "AirPods" trademark. Such cases create concerns about the trust foreign IoT designers can place in Chinese IoT manufacturers.
5. Political interference: China has many tech giants backed by the government, enabling political influence on their business strategies. As a result, companies looking to work or compete with Chinese tech providers must be wary that these firms could easily be influenced or favored by their government.
Regarding the global IoT market, this could lead to a lack of transparency and trust in Chinese products and potentially unfair competition from heavily subsidized state-backed enterprises.
China's grip on the IoT sector will only get stronger
China holds a formidable position in the IoT industry. Yet, while this dominance has brought about numerous opportunities for global development, it has also fueled concerns about data security, product quality, compliance, intellectual property protection, and government influence.
It is difficult to ascertain whether an enhanced Chinese presence in the IoT sector ultimately accelerates or hinders progress. What is certain, however, is that China's tech dominance is only likely to increase in the future, creating both opportunities and challenges for businesses worldwide. Therefore, international companies hoping to make the most of the market must be well prepared to tackle the intricacies.
If you are an IoT developer or supplier looking to leverage China's tech capabilities, you must carefully weigh the potential risks and rewards that come with doing business in China. With a well-thought-out plan and an effective strategy, you can emerge as a successful player in the ever-expanding Chinese IoT ecosystem.