Telecom equipment maker Datang Telecom on Wednesday said it plans to set up a 5 billion yuan ($732.18 million) private equity (PE) fund for investments in the booming Internet of Things (IOT) industry.

Datang will partner with the Wuxi New District Venture Investment Group, the Chinese Academy of Sciences (CAS) and Wuxi Guolian Development (Group) Co to set up the PE fund with a corpus of 1 billion yuan in the first stage.

The company will invest 200 million yuan during the first stage of fundraising and hold a 40 percent equity stake in the fund management company being set up to manage the private equity fund.

IOT refers to networks of real-world objects linked to the Internet that interact through web services. The technology is based on the concept that all real-world objects can be identified and managed by computers if they are equipped with radio tags and linked to the Internet. Technologies such as radio frequency identification and sensors form the cornerstones of the network.

According to reports from domestic research firm Great Wall Strategy Consultants, the turnover of China's IOT industry will reach 100 billion yuan in the next five years. The figures will surpass 500 billion yuan by 2020, the research firm said.

Many small- and medium-sized enterprises in the sensors industry are facing difficulties in raising funds, Shi Erwei, vice-president of CAS, said in a China News Service report.

Like players in other emerging industries, these companies also have to invest heavily in research and development, but their businesses face many uncertainties in terms of profitability, Shi said.

The IOT concept has its origins in 1999 when a research center at the Massachusetts Institute of Technology developed the technology for identifying items in the supply chain of companies. Many have since hoped that the technology could be widely used in daily life, such as connecting refrigerators online so that when you run out of milk, it would order milk online, debit the bill to your bank account and arrange home delivery automatically.

Last year, the Standardization Administration of China approved the establishment of a sensor network standards working group under the China National Information Technology Standardization Technical Committee.

The working group brings together institutions involved in research and application of sensor networks, including the standardization administration and China Mobile to expand standardization in the field and to participate in international standardization efforts.