China vs. Rest of the World: Parallel Universes Evolving for the Internet of Things as Well as the Broader Internet

Posted by Michael Campbell on October 26, 2018

Google’s Former Executive Chairman, Eric Schmidt, made waves last month by predicting that the world would eventually have two distinct Internets. One led by China and one led by the United States. The Chinese version would be more centralized, having more censorship and controls. An entirely parallel ecosystem will evolve around this separate Internet from eCommerce, Social Media, Search, Advertising and all the infrastructure to support it.

The same thing is likely to happen with the Internet of Things ecosystem and infrastructure in China. I think it is unlikely that the IoT pioneers and ‘leaders’ in the United States and Europe will make a major dent in the Chinese IoT market. This occurred to me as I read about Terminus Technologies raising $172M in a Series B financing this week. It is one of dozens of Chinese companies raising vast sums of money to manage the connected world of enterprise and consumer connected products and businesses in China.

The Chinese telecommunications revolution is a classic example of Leapfrogging that is repeating itself with the IoT. In the past twenty years, the Chinese leaped from pre-historic, non-pervasive communications infrastructure to one of the most advanced digital societies in the world. The same is taking place now as the government is investing aggressively in AI technologies, making them a part of every smart connected ‘thing’ in China. IoT technologies - hardware, networking, software, and services seem to be leapfrogging all over again.

As American industries wrestle with “Digital Transformation” initiatives and whether there is value in imbuing products with intelligence, Chinese industries embrace “Digital DNA”. Almost every product, network, building, road, bridge, plane train, and automobile are born with intelligence, connectivity and even interconnectedness. Software to help manage these smart products and orchestrate their interactions with the broader ecosystem are table stakes.

American businesses may feel safe now because these are emerging as parallel and distinct Internets. But the reality is that we live in a global, connected and competitive market. Even California-based Qualcomm can’t ignore the leadership and innovation coming out of China. In 2017 Qualcomm Ventures announced that they have, or soon will have, almost 50 distinct investments in Chinese technology, including 9 new IoT and AI startups.

Individual companies can and should leapfrog just as centrally managed economies can - and it should be a little easier I think. It starts at the most fundamental level - every product made, every system built should be conceived of as a service that can and will communicate with the thousands of other product based services in its ecosystem. Ponder that as you contemplate your next ‘leapfrog’ move.