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How Alibaba Is Trying to Speed Up Growth in IoT Market

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Oct. 2 2018, Published 7:58 a.m. ET

Renesas to create AliOS Things chips

Alibaba (BABA) has entered into an agreement with Japanese semiconductor company Renesas Electronics to create chips to power devices running AliOS Things, its Internet of Things operating system.

The partnership with Renesas is expected to make it easier for manufacturers to build devices that are compatible with AliOS Things and connect through Alibaba’s cloud platform.

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$218.3 billion opportunity in China’s IoT market

China is one of the most promising IoT markets. It was worth $173.2 billion in 2017 and is on pace to hit $218.3 billion in 2018, according to China Economic Information Service. That presents an enormous revenue opportunity for China’s technology giants such as Alibaba, especially as they look to diversify into new businesses to keep their top lines and profits growing.

Alibaba’s revenue soared 61% YoY (year-over-year) to $12.2 billion in its first quarter of fiscal 2019, which ended in June. Baidu (BIDU), JD.com (JD), and Tencent (TCEHY) grew their revenues 32%, 31.2%, and 30% YoY, respectively, in that period. Revenue rose 18.4% YoY that quarter for Chinese online discount retailer Vipshop (VIPS).

5G and industrial automation

The arrival of 5G (fifth-generation) network technology could further expand the IoT market in China by driving industrial automation in the country. China is one of the countries vying to lead in 5G development.

China Mobile, the world’s largest mobile operator by subscribers, plans to start commercializing 5G service in 2020. Spending on industrial IoT in China is forecast to hit $127.5 billion by 2020, according to IDC (International Data Corporation).

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