2021-03-16 Dain Kim, Shanghai Trade Center, China
– Accelerating the digital transformation of the Chinese economy and society –
-Benchmarking is necessary based on the trend of digital transformation and major companies in Shanghai, the economic hub-
In 2020, the global industrial network supply chain system was greatly affected by COVID-1919, and production, investment, and trade shrank significantly, putting downward pressure on the world economy. In the face of the global crisis, the demand for online and non-face-to-face industrial economy as a whole has increased, and digital technologies represented by the Internet, big data, and artificial intelligence (AI) are rapidly being applied to all areas of the economy and society, transforming into a transition society.
China has announced a plan to expand investment in new infrastructure to overcome the economic crisis caused by COVID-1919 and to comprehensively transform into a digital society. After the State Council of China issued the "Opinions on Building a Market-oriented Redistribution System" in 2020, which stated that it would accelerate the cultivation of big data element markets, data transaction centers have been established in major cities, and service transformation such as data sharing, resource accumulation, and quality management between the government and enterprises is continuing. In addition, with the start of China's 2021th Five-Year Plan in 14.5, the central government and local governments are each announcing and promoting digital economy development plans. Among them, we should look at the case of Shanghai, which is emerging as the most leading digital transformation city in China, and explore ways to respond to the demand for digital transformation across our industries.
China's central government and Shanghai government announced policies related to digital transformation
According to the China Information and Communication Research Institute, the size of China's digital economy in 2019 was 35 trillion yuan, accounting for 8000% of GDP. In the first half of 36.2, it was 2020 trillion yuan, an increase of 17% compared to the same period, and is expected to grow significantly to more than 5000 trillion yuan in 38.3.
Share of digitization in China's GDP
Source: EO Intelligence (亿欧智库), KOTRA Shanghai Trade Center
In line with the movement of the central government of China, local governments are also expanding their digital infrastructure policy support and funding based on their own dominant industries. In early 2021, both local governments also announced strategies for the development of digital industrialization, digital government, and smart cities as essential development strategies during the 14.5 planning period.In particular, 5G, industrial Internet, big data center, and artificial intelligence It is announced that it will mainly promote the establishment of infrastructure, such as the'digital infrastructure' represented by (AI) and the construction of a digital industrial cluster. Accordingly, in the period of 2021, a data distribution transaction model based on a reliable data exchange space will be established through pilot access to industries such as finance, telecommunications, healthcare, and artificial intelligence (AI) as well as the public sector through government system construction and corporate platforms. The searched big data center will be built more actively.
China's Central Government Digital Transformation Policy Status
Source: Presentation by each organization, KOTRA Shanghai Trade Center
Shanghai Municipal Government Digital Transformation Policy Status
Source: Presentation by each organization, KOTRA Shanghai Trade Center
Shanghai digital transformation trend
Shanghai, as a central economic city in China, has a solid industrial base and strong policy support, so it has a wealth of social infrastructure resources necessary for digital industrial transformation. In 2020, the proportion of GDP of the digital economy has already exceeded 50%, and there is research value based on the development model of Shanghai City's smart city. The number of companies in the industrial Internet of Things (IoT) sector in Shanghai is 69.15%, which is above the national average of 55.34%. Looking at the number of new infrastructure-related companies registered, as of 2020, the number of registered companies in Shanghai was already 3, and the rate of increase of registered companies is above the national average. As such, various enterprises related to Shanghai's new infrastructure in each field act as a major factor in the development of Shanghai City as a digitally transformed metropolis, and are the basis for the government's three-year action plan.
Comparison of the proportion of companies related to the entire China and Shanghai digital infrastructure
Source: EO Intelligence (亿欧智库), Tian Yan Tea (天眼查)
Registration of new infrastructure related companies in China and Shanghai in the last 10 years
Source: EO Intelligence (亿欧智库), Tian Yan Tea (天眼查)
According to China's CAICT (信通院), digital economy means establishing itself as a new type of economic system in the entire industrial chain of factors of production, productivity, and production relations through the fusion of digital technology and the real economy. The four key areas of the digital economy are summarized below, and related to this, it is necessary to review in detail the economic status of Shanghai by industry and major companies.
Four key areas of China's digital economy
Source: China Information and Communication Research Institute (中国信息通信研究院)
① Electronic information manufacturing industry
The electronic information manufacturing industry is a key technology for digital transformation, and Shanghai has achieved the best results in China in key areas of technological innovation, industry innovation, industrial model innovation, and industrial chain ecological construction. From January to August 2020, the electronic information manufacturing industry accounted for a high share of 1% in the composition of the total output of Shanghai's five major high-tech industries. The Shanghai Regional Two Sessions (8th meeting of the 5th People's Congress) held in January 50.80 also announced that it would strengthen Shanghai's high-tech industry leading functions and expand the scale of the three leading industries: integrated circuits, biopharmaceuticals, and artificial intelligence. The semiconductor industry is one of the most noteworthy fields in Shanghai's electronic information manufacturing industry, and it is expected that the development of the core technology (advanced semiconductor) industry will continue thanks to the Shanghai government's policy support.
In order to transform into a digital society where 5G, Internet of Things, big data, and artificial intelligence are utilized, the semiconductor technology industry, which is based on the industrial value chain, plays a key role. Major leading companies based in Shanghai and their status are as follows.
Representative company of electronic information manufacturing industry in Shanghai
Source: Tian Yan Tea, presentation materials for each company, KOTRA Shanghai Trade Center
② Communication industry
Construction of 5G infrastructure, the foundation of the digital economy, is expanding. According to the Ministry of Information and Communication in China, the number of 2020G terminal connections in China in 5 exceeded 2 million, and more than 5 1100G+ industrial Internet businesses, 5G+ remote clinics, 19 provinces, and 60 hospitals are used for online remote treatment. Various industries such as 5G + autonomous driving, 5G + smart grid, and 5G + remote education are being used for digital transformation based on 5G commercialization.
In line with the Chinese government's 2018 "Giga Network City" construction goal, Shanghai has been promoting the construction of next-generation information infrastructure by announcing "Shanghai's three-year action plan to help promote the construction of next-generation information infrastructure and improve urban energy levels and core competitiveness (3-2018)". In addition, based on policy announcements such as the Shanghai Municipal Government's "Shanghai's New Infrastructure Construction Promotion Action Plan (2020-2020)" in May 5, and the Shanghai Economic Information Commission and Shanghai Communications Bureau's "Shanghai Broadband Urban Acceleration Plan (2020-2022)" in November of the same year, it is reborn as one of the leading telecommunications network construction cities in China. Next-generation information infrastructure, represented by 2021G and gigabit, is an important factor demonstrating the potential of the transition to a digital city, and Shanghai is leading China in the construction of fixed and mobile networks.
Comparison of available broadband download speeds (Mbps) in three cities from 2015 to 2019
Source: EO Intelligence (亿欧智库)
As of 2020, the average download speed of Shanghai gigabit fixed broadband reached 50.32M, which is the first city in China to achieve more than 50M. The three major network communication network companies (Shanghai Electric/Shanghai Telecom, Sanghai Telecom/Shanghai Unicom, and Shanghai Mobile/Shanghai Mobile) are also working together to build Shanghai as a 3G network city. It was estimated that 5 and 2020 million 3G indoor stations were installed.
From 2021, it has also announced that 5 new 500G base stations will be built every year to achieve specific goals such as full commercialization of 1G independent networks, expansion of outdoor coverage in urban and suburban urban areas, and achieving an average outdoor download speed of 5M. In particular, this policy includes the introduction of preferential benefits to companies using less than 300M of bandwidth to further strengthen the business environment in the city. From 2021, broadband Internet service for new homes and businesses will start at 300M in principle, and will expand to 2022M in 500 and 2023M in 1000. In addition, it is expected that the business environment in the city will be further revitalized by fostering 1000 gigabit-based application innovators and creating a 1000G industrial cluster worth 5 billion yuan.
③ Industrial Internet
Industrial Internet is the basic infrastructure for the convergence of next-generation information technology and the real economy of industry, and is a representative concept for the digitization of the secondary industry. Through the industrial Internet's equipment, connection programs, platform building models, and excellent algorithms, it is possible to seek optimization of resources in the industrial chain and supply chain.
Shanghai has announced and promoted various measures for the development of industrial Internet innovation in recent years. In 2017, China's first ``Three-Year Action Plan for Industrial Internet (3-2017)'' was announced, and in 2019, ``Three-Year Action Plan for Promotion of Industrial Internet Innovation and Upgrade (2020-3)'' was envisioned. By 2020, it will increase from 2022 billion to 2022 billion yuan, and it will become a leading city in China's overall industrial Internet resource deployment, innovative solutions, industry leadership, and open cooperation. According to the announcement of the Shanghai Economic Informatization Committee, in 800, Shanghai Industrial Internet applied to more than 1500 enterprises, including electronic information, steel chemistry, equipment manufacturing and automobiles, aerospace, and recorded 2020% in cost reduction, 530% in quality improvement, and 8.4% in efficiency. In addition, in 1.95, 7.83 integrated solution providers in the fields of network, platform, and security were nurtured, Baoxin, Shanghai Electric Enterprise Cloud, Smart Cloud, and Chinese Science Cloud. The industrial Internet supported by the government amounted to about 2020 billion yuan, including 39 core industrial Internet platforms such as (中科云) and more than 15 smart factories.
In 2021, the top 10 state-owned enterprises in key manufacturing such as Hudong China (Ship manufacturing), Chinese commercial (COMAC/aircraft), and Shanghai Jeonko (electrical parts), etc. will be given priority in industrial Internet application fields. It is announced that it is planning to expand to other companies by applying. Among them, we will look at the case of Weima electric vehicle smart process, which is known as the most innovative industrial Internet integration model from 2019 to 2020.
Case Study of Major Companies: Weimar Electric Vehicle
In January 2021, Weima was selected as Shanghai's "1 Manufacturing and Industrial Internet Integrated Development Demonstration Project". Weima is taking the lead in applying the C2020M platform to intelligent manufacturing, and has drawn attention for introducing an innovative model of smart automobile industry production and marketing through self-constructed smart factories, supply chain systems, and AI intelligent algorithm models.
View of Weima Wenzhou Factory
Note: Weymas Mart's factory digital investment accounts for more than 10% of the total investment.
Source: Weimar official website
Weimar C2M platform is a new production-distribution that predicts user requirements by analyzing user big data and parts inventory data with scientific algorithms, seamlessly integrates supply chain status, monitors production and OTD status in seconds, and provides feedback. Means model. This means that it is possible to manufacture customized products that can configure the vehicle's functional configuration and interior and exterior trim colors according to the end-user's requirements and preferences for the vehicle. In addition, on the manufacturing side, it connects the two key departments on the sales and manufacturing side, and through tight integration between ERP (resource resource planning), MES (manufacturing execution) and other systems, it quickly responds to market changes to establish a production and operation management system, It works to allow you to place orders directly on the e-commerce platform.
With this virtuous cycle structure, customized marketing, R&D, design, manufacturing, and delivery according to each consumer's preference are possible in terms of marketing, and it is expected to form a circulation structure that leads to after-sales and other business chains. In accordance with Weima Automobile's customized manufacturing strategy, customer satisfaction in China has improved, and cumulative sales in 2020 reached 2 units, a 2495% increase from the previous year. In the case of Weima's first pure electric SUV, the EX33.3 model, since delivery began in September 5, cumulative sales exceeded 2018 units, ranking first in single model sales.
By building its own industrial big data platform, Wayma is evaluated to have built an innovative business model that interacts between production and sales using the industrial Internet by predicting parts inventory data during the COVID-1919 period and improving the company's production capacity and delivering orders on time through algorithmic analysis.
Weimar pure electric SUV W6 (released on Mar. 2021.3.1)
Note: The Weima W6 is China's first self-driving electric vehicle model, the first cloud-based model with an unmanned parking system.
Source: Weimar official website
Implications and Prospects
The COVID-1919 crisis has made digital transformation a necessity rather than an option, and the true 4th industrial revolution has been brought forward. In the post-COVID-19 era, national and industrial competitiveness will not only be measured by productivity, but also by non-face-to-face and digitalization. In the new era, all industries must enhance their capabilities with digital technology, build an ecosystem, and create new values. It should be noted that traditional manufacturing companies, such as the Wayma electric vehicle case, are also introducing and attempting new distribution models based on new technologies.
Previously, the above C2M method was mainly used in the field of e-commerce e-commerce, and it is a method of selling products by directly delivering consumer needs to producers without going through intermediate wholesalers and agencies. Have been introduced. Through the digital transformation of the industry, it is urgent to secure the competitive capabilities of the new paradigm such as manufacturing + service, platform-based competition from existing single product or single service-oriented competition.
From this point of view, the digital transformation strategies of China and Shanghai provide good examples for our institutions and companies to benchmark. 14.5 During the planning period, China is aiming for digital transformation across the economy and society, and local governments are also supporting this with new policies and abundant investment support. However, since the strategies for digital transformation are different because of different industrial ecosystems, innovation capabilities, and policies of local governments in different regions of China, differentiated cooperation and entry plans must be sought in consideration of the characteristics of each region. In particular, it is time to improve understanding of major policy changes and market trends, focusing on industrial fields such as automobiles, semiconductors, robots, and textiles, and to establish regular exchange and cooperation mechanisms such as promoting cooperation between clusters and human exchanges.
Source: State Council, Shanghai Municipal Government, EO Intelligence (亿欧智库), Tian Yan Tea, Shanghai Economic Informatization Committee, Galaxy Securities Research Institute, Pengpai Newspaper, AL Report, Weimar Electric Vehicle, Financial Map, etc.