The essence of the Internet of Things is to fully utilize information technology in various industries and carry out informationization to the end. Its large-scale application effectively promotes the integration of industrialization and informationization, and promotes the transformation and upgrading of traditional industries. The Internet of Things is a highly integrated and comprehensive application of the new generation of information network technology, which is an important direction and driving force for the new round of industrial revolution. It is of great significance for cultivating new economic growth points and promoting industrial structural transformation and upgrading. With the continuous increase of labor costs, various industries in China are facing the problem of industrial upgrading and efficiency improvement. The Internet of Things is an effective means to improve production and management efficiency, which can transform and upgrade traditional industries, enhance production and management efficiency, improve the intelligence level of social management, public services, and family life, and help economic transformation. Through the deep integration of IoT technology with other industries, the economic development mode can be transformed, truly achieving green growth and low-carbon economy. The Internet of Things industry will lead the sustainable development of China's future economy and society, and provide China with an advantageous position in the next round of international economic competition.

Development and dynamics of the primary industry

With the popularization of high-speed broadband networks and the development of big data and cloud computing, as well as the growth of IoT platform enterprises and the promotion of industry standards, the demand for the IoT industry has also upgraded. Starting from basic object recognition and network information transmission, it has upgraded to higher-level requirements such as platform management and data analysis. The information loop of the cloud, management, and end of the IoT will gradually be opened up with the development of the industry. The cost of key components such as sensors, RFID electronic tags, cloud storage, and network transmission equipment has decreased, and the overall hardware cost of the IoT industry has significantly decreased. In addition, the related storage, sensing, and other hardware devices in the IoT industry are becoming increasingly miniaturized, which brings great convenience to the development of IoT products. These are the driving forces behind the rapid development of the IoT industry.

The Internet of Things is undergoing an upgrade from basic devices such as hardware and sensors to software platforms and vertical industry applications, and the industrial ecosystem of the Internet of Things is just beginning. It is expected that there will be 50 billion connections worldwide by 2020, which is 6-7 times the current number of connections. The size of China's IoT market will exceed 2 trillion yuan, which is twice the current scale of telecommunications operations. The scale and frequency of data generated by the Internet of Things are far greater than that of the Internet. According to relevant forecasts, the amount of data generated by the Internet of Things will exceed 10ZB by 2020, accounting for about 25% of the total global data. Most of these data are unstructured, diverse and noisy. Traditional methods cannot meet the data processing needs arising from the rapid development of the Internet of Things. Therefore, the Internet of Things needs to be deeply integrated with cloud computing and big data to promote the development of the Internet of Animals industry.

图1 物联网的应用领域

Figure 1 Application Fields of the Internet of Things

As the Internet of Things enters a stage of substantial development, large enterprises are competing to lay out IoT service platforms, actively promoting industry application solutions, expanding industry application fields, and gradually achieving scale expansion. Enterprises achieve transformation through IoT industry applications, enhance traffic value, and monetize industry applications. The application of the Internet of Things has penetrated into various fields of economic life, with specific ways and methods in transportation, manufacturing, logistics and retail, anti-counterfeiting and security, and medical fields (see Table 1).

表1 物联网涉及领域的应用项目

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Table 1 Application Projects in the Fields Involved in the Internet of Things

（1） Industrial scale

The global IoT market continued to steadily expand in 2016, with a more complete industrial system. In 2015, the global IoT market reached 62.4 billion US dollars, and it is expected to reach 70 billion US dollars in 2016, an increase of 12% over the previous year. The Internet of Things has entered a stage of rapid development. The Internet of Things equipment and service integrators, telecom operators, Internet enterprises, IT enterprises, platform enterprises, etc. rely on traditional advantages, compete to layout the Internet of Things system or platform, gather advantageous resources to provide systematic and comprehensive Internet of Things solutions, and create an open source ecosystem. The competition in the Internet of Things market has shifted from product competition to platform competition and ecosystem competition, and the market pattern has moved from fragmentation to aggregation.

Figure 2: Global IoT Market Size and Growth Rate from 2013 to 2018

With the continuous expansion of the IoT market, the number of IoT related products and devices has surged. In 2015, the number of IoT related products and devices reached 4.9 billion, and it is expected to increase by 30% in 2016. It is expected that by 2018, the number of IoT devices will exceed the total inventory of PCs, tablets, and smartphones. It is expected that by 2020, the total number of IoT devices worldwide will reach over 20 billion. According to relevant calculations, the per capita number of connected devices will increase from the current 1.7 to 4.5 in 2020, with the main increase in IoT related products and devices being consumer wearable devices such as smart switches and medical and health equipment.

Figure 3: Global New IoT Device Access from 2013 to 2019

At present, China regards the Internet of Things industry as one of the strategic emerging industries for national key development. The 13th Five Year Plan clearly states that we should actively promote the development of cloud computing and the Internet of Things, advance the planning and layout of IoT sensing facilities, and develop IoT open-loop applications. With the vigorous development of the application demonstration project of the Internet of Things, the promotion of national strategies such as "Internet plus" and "Made in China 2025", and the driving force of technologies and markets such as cloud computing and big data, the scale of the Internet of Things market in China will continue to expand.

According to relevant data, the scale of China's Internet of Things industry is expected to reach 930 billion yuan in 2016, an increase of 24.0% compared to the scale of 750 billion yuan in 2015. The Internet of Things, as an emerging application in the communication industry, will further expand its market size under the trend of the Internet of Things. The China Internet of Things Research and Development Center predicts that by 2020, the scale of the Internet of Things industry will approach 2 trillion yuan, with a compound annual growth rate of 15% in the next five years.

Figure 4 Overall scale and growth forecast of China's Internet of Things from 2011 to 2020

In 2015, the number of M2M connections in China exceeded 73 million, a year-on-year increase of 46%. The RFID industry has a scale of over 30 billion yuan, and the sensor market has a scale of nearly 100 billion yuan. China's Internet of Things industry has basically formed a complete industrial chain. China has certain advantages in industries such as M2M services, mid to high frequency RFID, and QR codes. However, the industrial advantages are mainly concentrated in the mid to low end hardware field, and are relatively weak in industries such as basic chip design, high-end sensor manufacturing, and intelligent information processing. IoT big data processing and public platform services are still in their infancy, and IoT related terminal manufacturing, application services, and platform operation management are still in the growth and cultivation stage.

（2） Regional layout

1. Global layout

At the national level, the development of the Internet of Things industry is highly valued, and governments around the world actively layout the Internet of Things industry, establish relevant IoT industry alliances and industrial ecosystems. At present, the ecological layout of the Internet of Things industry has been fully launched, the Internet of Things industrial chain has been initially established, the development of information technology has extended from the Internet and mobile Internet to the Internet of Things, and the new informatization led by the Internet of Things is deeply integrated with traditional fields.

At the level of device manufacturers, chip giants and device manufacturers from various countries rely on their core technological capabilities to actively layout the IoT ecosystem and seize opportunities for industry development. Giants have established industry alliances to stabilize the IoT industry ecosystem and build competitive advantages, with industrial, vehicle networking, smart home and other fields becoming hotspots for layout.

At the operator level, international operators are developing IoT layouts around three major areas: new connections, new devices, and new platforms. In the field of new connectivity, operators are actively exploring new network layouts, developing narrowband IoT technology, and promoting multi network collaboration. In the field of new equipment, operators are trying various development models. In the field of new platforms, operators build an IoT industry ecosystem, where the platform layer is not only the most valuable layer in the industry chain, but also the data distribution center and the concentrated area for business model innovation.

2. Domestic layout

Under the promotion of policies related to the Internet of Things industry, China's IoT industry has made great progress in areas such as technical standard research, application demonstration and promotion, industrial cultivation and development. With the vigorous development of IoT application demonstration projects, the promotion of national strategies, and the driving force of technologies and markets such as cloud computing and big data, the demand for the IoT market in China is constantly stimulated, and the IoT industry is showing vigorous vitality.

In addition, local governments are actively promoting the development environment of the Internet of Things industry through various policy measures such as land incentives, tax incentives, talent incentives, and special fund support, and have established a series of industry alliances and research centers.

In terms of the number of enterprises, there are over 30000 IoT and related enterprises in China, with small and medium-sized enterprises accounting for over 85%. There are over 2000 enterprises engaged in the research, production, and application of sensors, and more than 50 enterprises engaged in the research and production of microsystems. There are a total of more than 6000 types of products, with an annual output of over 4 billion units. But small sensor enterprises in China account for over 70%, with low-end products being the main focus. High end product imports account for a large proportion, with sensors accounting for about 60%, sensor chips accounting for about 80%, and MEMS chips being basically 100% imported.

表2 国内各地区物联网产业优势行业概览

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Table 2 Overview of Advantageous Industries in the Internet of Things Industry in Various Regions of China

图5 国内物联网布局

Figure 5 Domestic IoT Layout

From the perspective of spatial distribution, China has established industrial alliances and research and development centers around eight major cities including Beijing, Shanghai, Wuxi, Hangzhou, Guangdong, Shenzhen, Wuhan, and Chongqing, and has initially formed four regional industrial clusters: the Bohai Rim, the Yangtze River Delta, the Pearl River Delta, and the central and western regions. Each regional industrial agglomeration has its own characteristics, and the development of IoT applications has its own focus. The coordinated development of industrial sectors and public services is maintained.

（3） Enterprise News

The development of the Internet of Things industry requires collaboration and cooperation between industries, the development of common standards, and the integration of multi-party cross-border solutions at the application end. In terms of intelligent manufacturing, it is necessary to deeply connect the five levels of the Internet of Things, namely the device layer, control layer, information layer, enterprise management layer, and cloud, and deepen the application of industries in various vertical fields. Developing IoT projects is a huge undertaking, and it is very difficult to develop a comprehensive IoT system alone. Therefore, it requires various types of enterprises to accelerate integration, continuously deepen industry applications in various vertical fields, cover from point to line, cultivate new economic growth points, and enhance sustainable development capabilities and competitiveness (see Table 3).

表3 2016年物联网产业行业合作情况

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Table 3 Industry Cooperation in the Internet of Things Industry in 2016

In 2016, chip manufacturers in the upstream of the Internet of Things were actively integrating, and downstream terminal manufacturers also began to "unite and warm up". From upstream chip supply to downstream intelligent hardware production, the entire industry was undergoing a wide-ranging integration (see Table 4). Under such integration, the IoT industry will enter a period of rapid development, with more intelligent hardware entering people's daily lives, ultimately making the "Internet of Things" a reality.

表4 2016年物联网产业行业并购情况

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Table 4: Mergers and Acquisitions in the Internet of Things Industry in 2016

Technological progress in the secondary industry

（1） Technological progress abroad

In recent years, the European Union, the United States, Japan, South Korea, and others have conducted extensive research in the field of IoT industry technology, and have made certain progress in promoting open IoT development system architecture research and platform product development. The focus of these technological research has gradually shifted from early industry IoT applications to the top-level architecture of IoT, proposing various forms of system architectures aimed at guiding IoT system design and achieving unified data collection, processing, and services. Representative examples include the networked automatic identification system architecture Networked Auto ID proposed by the Auto ID Laboratory at the Massachusetts Institute of Technology in the United States, the uID based IoT architecture proposed by the uID Center in Japan, the ubiquitous sensor network architecture USN proposed by the Institute of Electronics and Communications Technology in Korea, Physical net proposed by the University of Virginia in the United States, the M2M architecture proposed by the European Telecommunications Standards Organization, IOT-A and SENSEI proposed by the European Union's FP7 program, CPS proposed by the National Natural Science Foundation of the United States, and the autonomous architecture AOA proposed by Paris VI University in France. Different modes have their own advantages in different application scenarios.

In terms of platform product development, foreign companies have already developed IoT platforms for sensors and smart devices, such as Xivel, Arrays, Yeelink, and Thingspeak. Most of them are positioned as open universal IoT platforms and cloud platforms, attempting to solve problems such as device access, data storage, and display. Overall, these IoT platforms all utilize cloud computing technology and establish unified data formats and access methods; All are integrated with third-party applications and interact with them for data exchange; Most cloud platform companies adopt a strategy of combining software and hardware, while allowing third-party hardware to access the platform.

（2） Domestic technological progress

The development of the Internet of Things in our country not only has some common characteristics of international IoT development, but also presents some distinct Chinese characteristics and stage features. The technological maturity of China's Internet of Things is different at all levels, and sensor technology is the key to tackle key problems. The application and innovation of consumer electronics, mobile terminals, automotive electronics, robots, biomedicine and other Internet of Things fields put forward higher requirements for sensors, which is also the underlying foundation for the construction of the Internet of Things. The layout of China's sensor industry has basically taken shape, not only with a basic complete range of product categories, but also with certain improvements in design, research and development, and application levels. A relatively complete industrial system has been formed, and some sub sectors have entered the world's leading level. However, the overall technological level is relatively low, especially the technical difficulties of intelligent and miniaturized sensors have not yet been overcome. The lag in independent research and development of sensors not only leads to high costs of IoT systems and hinders the promotion of IoT applications, but more importantly, its potential security risks. Among the various technologies of the Internet of Things, sensor technology is the foundation and core of the Internet of Things, and it is also the biggest bottleneck restricting the development of the Internet of Things in China.

At present, the domestic Internet of Things industry, drawing on the technology, mode and channel of mobile Internet, has begun to penetrate from the industry to the people's livelihood field, and integrated applications based on mobile intelligent terminals are emerging. For example, the smart city information system opens up urban management data and capabilities, providing convenient services such as public payment, weather warning, and traffic guidance to users through mobile intelligent terminals. At present, numerous IoT applications such as smart cities, smart healthcare, environmental monitoring, and intelligent transportation have appeared in the application store. The gradual integration of smart home and mobile Internet will promote the smart home industry to form a platform based operation mode of "hardware+software+data services". From vertical to horizontal, from closed to open, from private to standardized, and using the successful experience of mobile Internet for reference, IoT applications will achieve large-scale development.

In recent years, China's Internet of Things technology has shown a good development trend, but currently the Internet of Things is still in the stage of accumulation and has great potential for development. Open development is the catalyst for the further development of the technology of the Internet of Things and the development trend of the Internet of Things. The two industries of the Internet of Things and mobile Internet, through mutual technology reference, mode learning and resource utilization, will integrate in various forms at various levels such as terminals, networks, platforms, and have a huge impact on the production and life of the whole society. Market demand, cost, standardization, technological maturity, and business model are the main factors affecting the large-scale promotion of IoT applications. The M2M and vehicle networking markets have strong endogenous driving forces, and relevant technical standards are becoming increasingly mature. The basic conditions for comprehensive promotion are basically met, which will become the first breakthrough direction for IoT applications.

表5 物联网技术发展方向

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Table 5 Development Direction of Internet of Things Technology

Problems and Countermeasures in the Development of the Third Industry

（1） Existing issues

In recent years, China's Internet of Things industry has developed rapidly, and has achieved certain results in the research and development of key technologies for the Internet of Things, the formulation of standards for the Internet of Things industry, the cultivation of the Internet of Things industry, and specific industry applications. However, it still faces several key problems, such as the need to break through the core technologies of some Internet of Things industry related equipment and the lack of an effective industrial chain for the Internet of Things industry.

Firstly, the key technologies and equipment level of the Internet of Things need to be further improved. At present, China's Internet of Things has achieved numerous results in various technological fields such as chips and cloud computing, but the related core technologies still have a gap with developed countries. Sensing technology, as the core of Internet of Things technology, is the key to obtaining and processing information at the basic application layer. As an important component of the perception and recognition layer, sensors are a crucial prerequisite for the establishment of the Internet of Things. But currently, the development of sensing technology and related equipment in China lags behind, and core sensing components are subject to human control, which has become the main obstacle to the development of the Internet of Things in China. A few developed countries such as the United States, Japan, and Germany occupy more than 70% of the global sensor market share. With the support of national policies, China's sensor industry has formed a complete industrial system from technology research and development, design, production to application. Middle and low-end products basically meet market demand, but from the perspective of industry product structure, the proportion of old products is relatively high, and new products are obviously insufficient, with even fewer high-tech products. At the same time, digital, intelligent, and miniaturized products are seriously lacking. The future development of the Internet of Things industry requires even more progress in key technologies and equipment.

Secondly, the Internet of Things industry has not formed an effective industrial chain. The Internet of Things industry has a wide coverage, involving multiple fields such as household life, production logistics, medical and health public safety, and transportation. Each field has huge development space. To promote the development of the industry, it is necessary to establish a sound industrial chain and form a linked upstream and downstream enterprise relationship. The Internet of Things industry chain includes eight links: chip providers, sensor suppliers, wireless module manufacturers, network operators, platform service providers, system and software developers, intelligent hardware manufacturers, and system integration and application service providers. With the increasing demand for the Internet of Things in social development, the industry chain will continue to extend and develop, and it is more necessary for all links in the industry chain to cooperate with each other, strengthen the exchange and learning of information and technology, and drive the development of the entire industry through the linkage of the industry chain.

Thirdly, the Internet of Things industry needs to seek endogenous development drivers. At present, the infrastructure of the Internet of Things in China is mainly invested and constructed by the government, and most of the achievements are mainly driven by the government. However, there are relatively few real development achievements in the commercial field of the Internet of Things. The initial stage of the Internet of Things requires a huge amount of capital investment, mainly relying on the investment and guidance of national special funds in the public sector. However, in the commercial field, the Internet of Things belongs to a high-tech industry with many uncertain factors, which requires enterprises to develop in market competition and promote the development of the entire industry of the Internet of Things. Although the overall development momentum of the Internet of Things industry cluster is good, its service capabilities are weak, and its application level is still in a relatively low position. In the commercial field of the domestic IoT industry, the government should gradually focus on guiding industry development, allowing the market to determine industry development, and using the endogenous power of the IoT industry to promote industrial progress.

（2） Development ideas and countermeasures suggestions

At present, China's Internet of Things industry is still in its early stages of development. The government needs to strengthen guidance to enhance weak links such as key technologies and equipment products in the Internet of Things industry, and timely formulate relevant policies that are in line with the development trend of the Internet of Things industry, in order to cope with the fierce competition between the Internet of Things industries of various countries. On the basis of the existing policies on China's Internet of Things industry, and in response to the international development trend of the Internet of Things industry, we will strengthen support for the Internet of Things industry from the following aspects and promote its comprehensive development.

Firstly, promote the development of key technologies and equipment products in the Internet of Things industry at multiple levels. The Internet of Things belongs to an emerging technology industry, and some key technologies and equipment products are not mature enough. It is necessary to focus on supporting the research and development of core technologies and equipment for the Internet of Things, breaking through common key technologies such as object access, object management, and object interaction, and fully leveraging the role of common level technologies in promoting the large-scale development of the Internet of Things. Develop universal software and hardware equipment products, build an IoT operation support environment, and create a convenient, easy-to-use, secure, and reliable IoT level common support platform. Breaking through multiple core and key technologies, creating a new operating support environment for the Internet of Things, and building new operational, application, and business models, requires increased investment in innovation. Through industry university research cooperation, it is necessary to enhance the technological innovation capabilities of enterprise technology centers, universities, and research institutes.

Secondly, promoting the formation of a stable business model for the Internet of Things industry in multiple fields. The Internet of Things industry has a wide coverage, involving multiple fields such as home life, production logistics, medical and health public safety, and transportation. Each field contains huge development space. Currently, the economic benefits of China's Internet of Things industry are mainly reflected in sensor devices and RFID technology. The economic benefits in multiple fields such as the Internet of Vehicles and wearable devices still need to be developed for a period of time before they can be realized. The formation of a stable business model in the Internet of Things industry is extremely crucial for its development. The economic benefits brought by a stable business model promote the stable development of the Internet of Things industry, and gradually develop from a stable business model to a stable business ecosystem, ultimately driving the development of the entire industry.

Finally, the government will strengthen the top-level design of the Internet of Things industry and the formulation of relevant standards. Overall, the development of China's Internet of Things industry is still in its early stages, and the industrial foundation is not solid enough. Compared with developed countries, there is still a certain gap. Therefore, the government needs to strengthen the top-level design of the Internet of Things industry, carry out overall planning, connect the Internet of Things industry system, achieve interconnection between application systems, and timely formulate policies that are in line with the development characteristics of China's Internet of Things industry. Accelerate the development of cross industry and cross domain IoT standards, including overall standards for IoT system architecture, basic common standards for IoT identification resolution, information security, network management, and industry application standards.