CSCO Cisco Systems Inc

By Don Clark 

China plans to spend heavily on technology to help cities cope with headaches like air pollution and traffic jams -- and perhaps unruly mobs and outlaws. Silicon Valley companies are teaming up to seize the opportunity, a trend that could raise the profile of players like Sensity Systems Inc.

The closely held company, whose investors include Cisco Systems Inc. and General Electric Co., on Friday is announcing a joint venture with a spinoff from China's Academy of Sciences to help build new-wave data networks with features that could include video surveillance and sensors to monitor traffic and air quality.

Sensity and its new partner, as well as some of their competitors, have backed the idea of packing sensors, wireless communications and computing technology on light poles. They hope to exploit conversions some cities are making to adopt light-emitting diode technology, which can generate energy savings to help pay for networks that could provide benefits beyond lighting.

Such networks are part of a broader movement to create what backers call smart cities, long seen as a potential gold mine for technology suppliers. Navigant Research estimates $174.4 billion will be spent on smart city projects between 2014 and 2023, with China accounting for a major share.

More than 500 Chinese cities are considering building urban sensor networks, estimated Feng Yuan, director of CAS Smart City, the Chinese company forming the venture with Sensity.

China's efforts are likely to be scrutinized for potential threats to privacy, as well as the country's willingness to let foreign vendors supply sensitive components of the country's technology infrastructure.

Sensity ordinarily operates cloud-based services to manage data gathered by networks it has established. As part of the Chinese venture, however, the company agreed that information gathered by the networks must be stored and processed on domestic server systems, preferably owned by the Chinese government, said Hugh Martin, Sensity's chief executive.

"You have to manage the information carefully," added CAS Smart City's Mr. Yuan. He stressed the need to balance the desire for privacy with benefits such technologies can provide to citizens. "I think there should be a trade off."

An agreement cementing the venture is expected to be signed on Friday at a New York event hosted by Hu Chunhua, Communist Party secretary of China's Guangdong province, who is leading a trade delegation to the U.S.

The partners will face plenty of competition from large and small companies working on their own and in partnerships. One example is Silver Spring Networks Inc., a Silicon Valley company that in March announced a joint venture with the Chinese LED lighting specialist Guangdong Rongwen Energy Science and Technology Group.

Sensity, founded in 2010 under the name Xeralux, builds networks using a combination of commercially available components and internally developed technology. One particular selling point, Mr. Martin said, is the way it handles data from video cameras.

Instead of streaming images from cameras to central collection points, Sensity networks typically store data and analyze it at each light pole, sending only selected data; say, an alert about a package detected in suspicious circumstances, Mr. Martin said. The approach can save on data storage costs and can be more accurate than other approaches, he said.

Sensity has offered sensors for purposes such as detecting temperature, vibration, motion, ambient light and gunshots. Mr. Yuan said many cities in China already have networks of video cameras, so the most likely initial applications for the joint venture's technology include lighting control, public Wi-Fi and charging electric vehicles.

CAS Smart City will own 51% of the new joint venture, with Sensity holding the remaining 49%. The partners hope to attract software developers to create add-on programs that can be marketed both inside and outside China.

Sensity's financial backers, which have pumped $74 million into the company, said it has a solid chance to carve out a niche in China. "The ball has started to roll," said Munish Khetrapal, managing director for Cisco's smart cities efforts and a Sensity board member. "We have to see that converted into business."

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

May 12, 2016 15:53 ET (19:53 GMT)

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