Internet means challenges, opportunities for industries

Manufacturers find the Internet isn't just a tool for increasing sales-it's also a way to improve corporate management and efficiency

While many Chinese manufacturing companies see the Internet as a big challenge to their businesses, a growing number of traditional industrial manufacturers have found another tactic.

They're preparing for opportunities created by the fast-developing industry. They're cooperating with Internet service providers in a variety of ways and using the Web as a way to improve corporate management and production efficiency, not to mention selling their products online.

In a typical case, Guangdong Alpha Animation and Culture Co, which has operations ranging from animated program production to toy manufacturing and comics, announced plans in February to cooperate with Tencent Holdings Ltd, the country's largest and most visited Internet service portal, to develop online gaming products.

"The Internet has been gradually integrated into almost every traditional sector. It will pose great challenges, as well as bring about opportunities, to the traditional manufacturing industry," said Lei Jun, founder and chief executive officer of Chinese smartphone producer Xiaomi Corp.

The nation's Internet industry has grown to a huge scale, with three Chinese companies ranking among the world's top seven Internet service providers, according to Lei.

The value of China's Internet service industry increased by 42 percent last year to 647 billion yuan ($105.3 billion), and it is expected to surpass 850 billion yuan in 2015, according to the Ministry of Industry and Information Technology.

"The Internet provides symmetric information to customers and brings high efficiency to business. As a result, it develops very fast," Lei, also a deputy to the National People's Congress, said during the annual legislative session.

Xiaomi's model-focusing on product research and sales while outsourcing manufacturing-has proved successful, according to Lei.

The mobile Internet company offers high-capacity smartphones at a price below 2,000 yuan, not much above factory cost.

"We are not making ordinary phones, which are only used for calling and sending text messages," Lei said.

Lei noted that Xiaomi's profits come from broad use of online applications by customers.

"Robust Internet development in recent years has provided huge opportunities for traditional businesses. Like many other businesses, we are taking this opportunity to enter the smartphone industry," Lei said.

The business model, which relies mainly on the Internet at every stage from designing to developing applications to improving users' experience, has helped greatly boost revenues for Xiaomi, according to Lei.

"We are totally different from traditional mobile phone manufacturers, which only focus on design, production and sales while ignoring online application development and communication with users," Lei said.

Xiaomi, which was established only in 2010, has set an aggressive target of 100 billion yuan in sales next year. Sales last year rose 150 percent to 31.6 billion yuan, Lei noted.

"Our smartphones are not only developed by the company but also by an increasing number of users, who are always helping us improve the quality," Lei said.

In a proposal to the annual NPC session, Lei said the government should expand free Wi-Fi facilities and fourth-generation networks to facilitate wide use of the mobile Internet.

"From users, operators and smartphone makers to online application developers, there has already been huge market potential brought about by the mobile Internet," Lei said.

Lei also suggested the government should use the Internet industry as part of the national development strategy.

"The Internet will help upgrade the traditional manufacturing industry," Lei said.

Lei encouraged traditional Chinese manufacturers to optimize their business models by becoming actively engaged in the Internet, as "the booming industry will bring huge business growth".