China’s ZTE jumping into US$16 billion ‘smart city’ business after signing up 100 local governments
Local governments in China are scrabbling to upgrade to “smart cities”, and Chinese tech titans like telecoms firm ZTE, e-commerce giant Alibaba and internet service portal Tencent aim to cash in on this US$16 billion business.
Scholars introduced the concept of smart cities over a decade ago. Although lacking a standardised definition, they use integrated information technology systems to make life more convenient for residents.
Moving into this area is a logical next step for these growing Chinese companies, which have already left their footprint in smartphones, mobile payment services and other internet- and mobile -related sectors.
“We’re talking about a 100 billion yuan [US$16.11 billion] business,” said Pang Shengqing, head of ZTE’s enterprise business, at the firm’s global analyst conference in Shanghai on Monday.
ZTE, one of the largest world’s largest telecom equipment makers, recently expanded into the smart car business by providing wireless charging solutions for electric cars.
It also announced this week that it shipped 26 million smartphones in the first half of 2015, and will launch a "secret product" developed by former Blackberry staffers that it claims could change the landscape of the global smartphone business.
According to Dr. Zhao Xianming, ZTE’s chief technology officer, the company has already signed up over 100 Chinese cities to launch smart city projects.
The concept has gained ground in China as the government faces an economic slowdown after decades of unchecked growth.
It is a part of the “internet plus” programme that Premier Li Keqiang has made a centrepiece of his economic policy, and Beijing and Shanghai are among the biggest Chinese cities clamouring to jump on the bandwagon.
“The smart city concept covers everything, big and small,” said Pang.
“It could be about how to make your city’s traffic lights smarter, and how to get them connected with the internet,” he said.
“It could also be about big things such as how to connect the city’s medical services, education services and so on to the internet, and create a centralised system to manage local residents’ files and information.”
Zhao used the example of Yinchuan, the provincial capital of Ningxia in western China, to illustrate how ZTE can work with a local government, enterprises and, ultimately, customers for their mutual benefit.
He also drew attention to the challenges that lie ahead, especially the bureaucratic delays that occur when trying to get various government departments, each with their own interests, to coordinate.
Another sticking point is the weak technological infrastructure in many Chinese cities, and concerns about the high cost of upgrading their facilities, he said.
Many local governments in China are “internally isolated”, which makes the public services they offer "very inefficient", he said.
“The central government is fully aware of the problem,” Zhao added.
In a climate of increasingly fierce market rivalries, ZTE’s Pang said there were times to compete, and times to cooperate. The company is already working with Tencent on a number of smart city projects.
“In many cases, ZTE focuses on systems and infrastructure, while Tencent has an advantage in providing terminal services to customers,” said Pang, giving the example of Tencent’s social media app, WeChat.
WeChat has grown from a basic chatting and file-sending tool into a much broader platform encompassing online stores, ticket-booking services and more.
“The ultimate goal for many local governments in China is to build a ‘smart city super app’,” said Pang.
“This would connect the government with its people, once the infrastructure and systems are in place.”