By Brenda Goh

SHANGHAI (Reuters) - General Electric Co <GE.N> on Wednesday said it would partner with Huawei Technologies Co Ltd [HWT.UL] to develop smart machines designed to boost productivity, part of a drive to promote its "industrial internet" business in China.

The U.S. industrial giant announced the partnership as it launched an $11 million digital space in Shanghai, where it plans to incubate start-ups and have developers work on new software applications to make machines more intelligent.

The move is part of GE's ambitious plans to lead a productivity revolution in global industry by combining machinery with analytics, after selling off its financial assets and embarking on a major restructuring.

Chief Digital Officer Bill Ruh said the world's biggest maker of jet engines and diesel locomotives had already made $500 million in productivity savings for itself this year by using smarter machines, and he expected this to grow to $1 billion in total by 2020.

"Once we got it right for ourselves we take it to our customers ... We're bringing this to China, we're open for business in China today to be able to do this," he said at a company event in Shanghai.

GE is investing $500 million annually in software as part of the digital drive, and Ruh said the company expected the products to bring in about $6 billion in revenue this year.

In September, it said its portfolio of software-related products would yield more than $5 billion in revenue in 2015, swelling to more than $15 billion by 2020. The company posted about $150 billion in revenue in 2014.


GE says it is crucial for industrial firms to digitise their production lines to remain competitive at a time when productivity has fallen from 4 percent to 1 percent globally.

The technology promises to connect machines and produce data that can be analysed, for example, to reduce carbon emissions, lower maintenance costs or improve safety.

GE Vice Chairman John Rice said it was difficult to calculate the potential size of the "industrial internet" market.

"It's potentially bigger than any estimates I've seen, because these capabilities are all going to be developed," he told Reuters in an interview.

The tie-up with Huawei would see the Chinese communications technology firm adopt GE's Predix operating system, which is already used by China Eastern Airlines Corp <600115.SS>, China Telecom <0728.HK> and on Tianjin city's street lamps grid.

GE would in turn "leverage" Huawei's product portfolio and "co-create end-to-end applications for customers", the companies said in a statement.

(Reporting by Brenda Goh; Editing by Stephen Coates)