Foreword –
Osborne Clarke

Adrian Bott
Osborne Clarke
T: +852 2535 0126
adrian.bott@osborneclarke.com

Osborne Clarke has, like so many other major Western businesses, moved eastwards over recent years. The ability to provide an integrated offering that services the US, European and Asian markets is something that many of our clients value highly regarding their legal requirements.

As a sector-specialist law firm, we have published market-leading reports over recent years on a variety of tech-related topics, which aim to look ahead and open up conversations with our clients. This report is intended to do the same: to take a point in time and see how, in an Internet of Things (IoT) context, the Asian markets are working towards an increasingly connected future for manufacturing, logistics and supply chains.

For me, one of the key elements in this report is that the maturity of the Asian markets means that the default position is no longer “R&D in US or Europe, build in Asia”. Far from it. The report looks in some depth at the differing approaches of Hong Kong, mainland China, India and Singapore in adapting to IoT innovation and identifying their own roles in it as they head towards the mid-century.

The change in dynamic for China, for example, which involves no longer being primarily a manufacturing base but now being a centre of innovation, is going to force US and European companies to think again about their business strategies. What is the role of a German operation of a multinational IoT manufacturer in 2025? Will US tech companies typically remain head-quartered in Silicon Valley? Will European telecommunications businesses need to have a base in Shanghai? Where will logistics companies have to be based to take full advantage of China’s Belt and Road Initiative (BRI)?

The findings are not conclusive – the opportunities are there to be taken, but corporates need to act before the chance to be part of an IoT-driven future is lost.

The report observes that the interplay between the Asian nations is set to play out in a very interesting way. The twin strategies of “Made in India” and “Made In China” are going to see winners and losers in due course. Both countries have attractive qualities for both inward investment and outward investment, but culturally are so different as to ask the question: do you have to choose between India and China as your Asia hub?

To complement our European and US teams, we’re fortunate to have hired some first-class Asian legal talent over recent years: advisors that have a great track record in delivering country-specific or regional strategies and results. So, if IoT is (or will be) at the heart of your future business model, please allow me to introduce you to some of them.

Finally, this report would not have been possible without the time and insights so generously contributed by the leading individuals who agreed to be interviewed. On behalf of all at Osborne Clarke, I would like to thank them, along with our chief researcher, Andrew Kemp, and Osborne Clarke’s supporting partner in this collaboration, Stephen Lai at Conventus Law.

We hope you find this report an interesting read, whether involved in IoT or not. No matter which way your business is oriented, we hope we may have the opportunity to help you succeed in the future. There are, inevitably, myriad new or untested legal and regulatory issues being thrown off by many of the components of industrial IoT – whether AI, robotics, data or M2M – but it is here that OC’s sector expertise thrives.

Foreword –
Conventus Law

Stephen Lai
Managing Director, Conventus Law, Hong Kong
T: +852 6621 1608
stephen.lai@conventuslaw.com

I was still at university when the term ‘Internet of Things’ or ‘IoT’ was first coined by Kevin Ashton in 1999. In fact, this idea was first mooted by Nikola Tesla as far back as 1926 when he said, “When wireless is perfectly applied the whole earth will be converted into a huge brain, which in fact it is, all things being particles of a real and rhythmic whole. We shall be able to communicate with one another instantly, irrespective of distance.” In 1950, Alan Turing questioned whether machines will develop thinking skills: “It can also be maintained that it is best to provide the machine with the best sense organs that money can buy, and then teach it to understand and speak English. This process could follow the normal teaching of a child.” Back then, all this seemed very much like science fiction.

My first exposure to IoT was in Stroud, England of all places! In 2001, a family friend who was an executive at IBM was talking enthusiastically about the concept of the “smart home” and how IBM at the time were prototyping the use of RF technology. After that conversation, the idea of IoT was no longer science fiction to me.

When I moved back to Asia in 2006, the region was in the middle of the manufacturing boom. China was known as the ‘workshop of the world’. Since then, the Asia market has really matured, echoing Adrian’s comment, “the maturity of the Asian markets means that the default position is no longer R&D in US or Europe, build in Asia.”

It has been a great pleasure to be involved in putting this report together. For me, the report really underlines the maturity of the Asia manufacturing sector and I hope it will generate conversations about IoT in this space. Will Hong Kong utilise technology to realise its vision of the smart city and revive its manufacturing industry? Will Singapore continue to lead the way in R&D and attract more world-class companies such as Dyson to move their HQs there? What will ‘Made in China’ look like? What is the potential for India once they are fully embracing industrial IoT technologies? Will all these developments change the dynamics for businesses in North America and Europe who rely on Asia to produce their products? Finally, what does all this mean for you? Will these developments change the way you work?

I sincerely hope you will find this report interesting and that it will give you plenty to think about.

Introduction

The Internet of Things (IoT) is changing the face of global business forever. The rise of low-powered, always-connected devices opens the door to the convergence of information and operational technologies (IT/OT), creating opportunities in automation, smart manufacturing and predictive asset management.

IoT, in a nutshell, is both the hardware and software that allows ‘things’ to gather, transmit and analyse data. It is the devices that connect to one another using unique IP addresses as well as the network that enables that connectivity. It includes sensor-equipped assets, communication electronics as well as data capture and exchange software.

While machine-to-machine (M2M) communication is not new, with M2M networks dating back to the 1990s, IoT is much more than this. It builds upon M2M and mobile networks, incorporates radio-frequency identification (RFID) technologies and increasingly uses artificial intelligence (AI) and big data to make sense of the information gathered.

The realisation of IoT in the industrial space, referred to as ‘industrial IoT’ (IIoT), will be key to realising the fourth industrial revolution. IIoT itself falls under the umbrella of Industry 4.0, which broadly refers to the digitalisation of industrial markets. The German Ministry of Education and Research (BMBF) coined the term ‘Industry 4.0’ in 2011 as part of its smart manufacturing strategy. Since then the term has spread across the globe to Asia, with governments striving to stay ahead of this latest revolution.

This report focuses on four territories from the Asia-Pacific region – China, Hong Kong, India and Singapore – in order to provide greater insight into how the manufacturing and logistics sectors within each are embracing IIoT technologies. Greater industrial connectivity offers up unique opportunities for each of these four economies.

China perceives Industry 4.0 to be the answer to fundamental demographic and economic shifts that might otherwise spell long-term trouble for its manufacturing sector. Hong Kong, meanwhile, has launched its own ‘reindustrialisation’ campaign that will rely on IIoT to breathe new life into its manufacturing sector. India is embracing Industry 4.0 technologies in the hope of turning the country into an advanced manufacturing hub, delivering on the central government’s economic targets. Singapore, already a technological leader in the Asia-Pacific region, sees IIoT as a means of attracting new industrial investment and is positioning itself as a thought leader in the field.

As IIoT slowly penetrates Asia’s manufacturing sectors, factory owners will be presented with the choice of whether to invest now, later or not at all. Given the scope of change that greater device connectivity promises, those that opt not to enter the race at all are not just risking being left behind, but could vanish altogether in time.