Currently, China's water meter industry is in a phase where mechanical meters coexist with smart water meters. Smart water meters are represented by two generations: Smart Meter 1.0, including prepaid IC card meters, photoelectric direct-read remote meters, and wireless remote transmission meters; and Smart Meter 2.0, including ultrasonic water meters and electromagnetic water meters. Mechanical meters still hold a significant share, while the proportion of smart meters is increasing year by year. Smart meters themselves have undergone an upgrade process from prepaid IC card meters and wired remote transmission meters to wireless remote transmission meters. In recent years, guided by policies from the Ministry of Industry and Information Technology, the market space for NB-IoT has accelerated its release, driving the rapid promotion of NB-IoT water meters. It is expected that NB-IoT water meters will continue to penetrate rapidly over the next five years, significantly reducing the areas relying on manual meter reading. In the medium term, driven by the needs for pipe network leakage control, cost reduction and efficiency improvement in water utility operations, and smart operations, smart meters will undergo further upgrades. Smart Meter 3.0, capable of measuring comprehensive pipe network water parameters, is expected to emerge.

Factors Influencing Smart Water Meter Adoption

The promotion of smart electricity meters and smart gas meters began gaining momentum during the "12th Five-Year Plan" period. However, the adoption of smart water meters lagged behind until 2017, primarily due to several factors:

Dispersed downstream customers for water meters. Unlike the gas and electricity industries, which are dominated by large state-owned enterprises with high market concentration, the downstream customers for the water meter industry are over 4,000 waterworks nationwide. This industry is highly fragmented with strong regional characteristics, making widespread promotion challenging.

Lack of unified technical routes and standards. Inconsistent quality and service led to poor application outcomes in early stages. The national water system is highly decentralized, lacking a unified management entity like State Grid Corporation. Consequently, technical capabilities are not as "dominant" as in the electricity sector, leaving the revision of standards and systems to the water meter industry association. Unlike electricity meters, which network access certificates and have their communications monitored under a well-established system, no entity is responsible for water meter network access, and concentrators also lack monitoring.

Financial constraints of waterworks. Most waterworks operate as public institutions with lower profitability compared to gas and electricity companies. They also bear substantial pipeline operation and maintenance costs, resulting in relatively tight budgets for meter replacement projects.

Under the Tripartite Drive

The penetration of smart water meters accelerated significantly from 2017 onwards, driven by three key factors: policy guidance, demand release, and technological maturity. This is evidenced by:

(1) Policy Guidance:

In June 2017, the Ministry of Industry and Information Technology issued the "Notice on Comprehensively Promoting the Construction and Development of the Mobile Internet of Things (NB-IoT)." The notice explicitly identified smart metering for water, electricity, and gas, public parking management, and environmental monitoring as entry points to accelerate the application of NB-IoT in urban public services and management. Following the commercial launch of China Telecom's NB-IoT network on July 17, 2017, the infrastructure and supporting elements gradually improved under policy guidance, allowing NB-IoT smart meters to thrive.

(2) Demand Release:

For years, the water supply industry faced numerous management challenges. On one hand, manual meter reading incurred increasing operational cost pressures due to rising labor costs, along with drawbacks like long settlement cycles and error-proneness. On the other hand, water utilities suffered from persistently high leakage rates. According to the "Urban Water Supply Statistical Yearbook," the average production and sales difference rate for 603 established city water utilities in 2015 was 20.7%. In January 2017, the "Guidelines for District Metered Area Management in Urban Water Supply Networks - Building Leakage Control Systems (Trial)" set a target to control the leakage rate of public water supply networks in towns nationwide within 10% by 2020. This policy intensified the urgency for leakage control. Adopting smart meters not only replaces manual reading and improves operational efficiency but also forms the foundation for water utilities to undertake pipe network leakage control. Furthermore, in March 2017, the world's first NB-IoT smart water management commercial project was launched, deploying over 1,200 NB-IoT smart meters in multiple residential communities in Yantian and Futian districts, Shenzhen. This successful demonstration case alleviated industry concerns and accelerated the release of smart meter demand.

(3) Technological Maturity:

NB-IoT remote transmission water meters feature wide coverage, low cost, low power consumption, massive connections, and low data rates. Compared to wired remote meters, NB-IoT meters offer the convenience of eliminating wiring and line maintenance, requiring no prior installation, thus saving installation and maintenance costs. Compared to other wireless remote meters, NB-IoT meters utilize licensed spectrum and the mature technology of narrowband IoT, overcoming issues faced by other wireless meters such as small base station user capacity, high power consumption, poor signal, and security vulnerabilities.

Future Development Opportunities for Smart Water Meters

The future looks promising for industries related to smart water meters, driven by three major factors ushering in a golden development period:

(1) Effectively Solving Industry Pain Points:

Smart meters can effectively address three core problems inherent in traditional mechanical meter systems: high leakage rates, difficulties in meter reading, and high personnel costs.

(2) Mature Business Models Ready for Large-Scale Promotion:

IoT technology is maturing. NB-IoT meters better meet market demands and fit residential application scenarios, with economic costs already reduced to below 20 RMB per module.

(3) Strong Policy Support:

The implementation of tiered water pricing is a crucial institutional foundation for the "one house, one meter" transformation. Infrastructure intelligence is also one of the six key directions for smart city construction, with strong national support in this regard.

Against the backdrop of increasing smart meter penetration, China's water meter industry is currently in a period of rapid development. In 2019, the market size of China's water meter industry was approximately 11.1 billion RMB. In terms of unit price, LoRa smart meters cost about 260 RMB, NB-IoT smart meters range from 280 to 350 RMB, while the average price of traditional mechanical meters is 77 RMB. IoT water meters are priced over three times higher than traditional mechanical meters. Currently, the penetration rate of smart meters is around 30%, with IoT meters accounting for only 30% of that share. As the penetration rate of higher-priced IoT meters like NB-IoT increases, the overall water meter industry is expected to maintain a growth rate of 15% to 20% over the next three years, with the smart meter segment growing at 25% to 30%.

Smart meters combine hardware and software, presenting relatively high technical barriers. Customers also subsequent services such as maintenance, technology upgrades, and software updates post-use. Large water meter enterprises possess faster-response after-sales service. As smart meter penetration increases and smart water management is promoted, leading enterprises are expected to benefit from rising industry concentration. The evolution of concentration in the water meter industry has followed a "high-low-high" trajectory. Due to an increase in the number of manufacturers, competition intensified significantly from 2014 to 2017, leading to price wars where low-quality, low-price products eroded the market share of leading companies. Subsequently, as quality issues with low-price products surfaced, coupled with the accelerated promotion of NB-IoT smart meters from 2017, downstream customers placed greater emphasis on brands. The industry returned to healthy competition, and concentration rebounded.

The pure hardware market size for the water meter industry is relatively small. For industry leaders to break through the market capitalization ceiling, they must extend downstream into smart water management platforms or build a second growth curve in other related areas. In future competition among water meter enterprises, those possessing brand strength, channel advantages, the ability to integrate hardware and software, and the capability to provide comprehensive smart water management solutions are poised to further expand their market share. Simultaneously, companies with a second growth point beyond water meters are likely to gain sustained growth momentum in the long term.