DescriptionThe Internet of Things (IoT) provides big opportunities for technologies. The device business will reach $46B in 2024, contributing to a total IoT market of $400B.FROM $9.5B IN 2014 TO $46B IN 2024, THE IOT DEVICE MARKET WILL REPRESENT CLOSE TO 15% OF ALL DATA PROCESSING
IoT devices offer huge potential for electronic component manufacturers, but this is clearly not where the value will stop. Most of the added value in IoT solutions will come from the processing of the generated data. In fact, the ratio between electronic components and data processing can reach 1:50 in certain long-term cases! This is easily understandable, since the main purpose of the IoT is to make sensing ubiquitous at a very low cost, resulting in extremely strong price pressure on electronic component manufacturers. Nevertheless, the next five years will be extremely fruitful for device makers; the market should reach $70B by 2018, before decreasing. This period represents a key window in which manufacturers must seize the opportunity to grab a piece of the IoT business pie.
The IoT is a multi-billion dollar market emerging from several different markets (i.e. industrial sensors, wearable electronics and home automation) which will see strong convergence in the next five years. Three industrial and service sectors will be integral to the valorization of this new market:
- The electronics industry, which will manufacture the sensing devices
- The communication and cloud data storage industry, which will handle data transmission, storage and processing
- Service companies, which will valorize the data either through processing or by selling to a third party
Some companies have already started positioning themselves in these fields: for example, Oracle and Amazon are developing their cloud computing capabilities; Bosch Connected Devices and Solutions GmbH and STMicroelectronics have teams dedicated to the IoT; and Google and Facebook are continuously developing their data processing models while looking to acquire companies linked to data gathering. Of course, not all of them will be winners.
The short-term opportunity lies in the electronics industry. Indeed, very strong price pressure is expected for IoT devices, and strong volumes are expected but at very low cost. Even though the general electronics market will experience strong growth, it will be through decreased costs, increased manufacturing capabilities and reduced margins. This trend has already been seen in the MEMS field over the past few years, and will repeat itself in the future.
The same is to be expected for the cloud computing industry. Large investments in terms of data storage will be needed, but strong price pressure is expected, and an overall low value will be attributed to the physical data. Actually, the war on price has already begun between the major cloud computing companies, which are cutting data storage prices while growing their capabilities.
Meanwhile, on the data processing side, more and more information will be available, and at low cost. The more data, the higher the value, and all of this with low overall infrastructural investment. Service companies will be the big winners in this field. In order to secure some of this value, hardware and cloud companies will have no choice but to try and integrate themselves vertically in order to valorize themselves and the data they’ll be responsible for! As an example, we expect the overall IoT market to reach $400B in 2024, with $46B coming from hardware, $59B from the cloud and $296B from data processing.
This report provides a detailed analysis of applications, business models and technical challenges in order to understand the IoT market’s potential
THE INTERNET OF THINGS’ TECHNOLOGICAL EVOLUTION: IT’S ALL ABOUT HETEROGENEOUS INTEGRATION AT DEVICE AND MODULE LEVELS
The array of technologies available – and soon to be available – is immense. Nevertheless, the evolution of sensing modules for the IoT will follow a predefined trend that can be summarized in a series of seven product generations, including large industrial smart sensors, an advanced generation of sensors, and polytronics. These generations are detailed in Yole Développement’s report, but a few examples are described below:
- One of these generations, already being seen today, is actually the first generation of sensing modules dedicated to IoT application. These devices represent the integration of off-the-shelf electronic components in a single package in order to offer new functionality. Not much effort has yet been given to integration, as the main focus has been on bringing a new function to market. Today, examples of such devices are numerous; some, such as the Nest (now Google) smart thermostat, find market interest and success - while others, i.e. “smart forks”, “smart sprinklers” and other “smart” devices, don’t. Other devices are addressing domains such as wearable electronics and home & building automation. For these devices, we expect a market volume of 200M units by 2017, representing a market potential of $83B.
- One example of a future sensing generation is integrated sensors, which are expected for 2020 and which will be the one to democratize IoT. Its general description is “the integration of IoT-dedicated electronic components” – meaning very small, very low-cost, very low-power consumption components like MEMS-based sensors. The essence of such devices is to be low cost and thus ideal for high-volume applications, with low-power wireless protocols, ultra-low power electronics. One example of such a device is the integration of a hazardous chemicals sensor in an industrial worker’s gear. Another example is the integration of connected condition-monitoring sensors in a car engine. We expect a market volume of 2B units for these devices by 2021, representing a market potential of $107B.
This report provides a detailed analysis of these generations and the technical and market challenges they must overcome before reaching the market. Yole Développement’s analysis shows how these challenges can be defeated in order to strengthen market growth.
FROM HARDWARE TO CLOUD TO DATA PROCESSING: WHERE WILL THE IOT’S VALUE FLOW?
The Internet of Things is a mix of hardware, cloud and data processing; a generic concept encompassing a wide variety of applications that belong to numerous domains.
For Yole Développement, the IoT is defined as the aggregation of all the sensing modules which are linked to the Cloud – either directly or through a gateway – and with which data is processed and valorized in any manner (selling to a third party, monitoring a piece of equipment, etc.).
We focused on the analysis of technical characteristics of IoT devices such as the nature of the electronic components to use, the corresponding RF protocols, device power consumption, etc.; as well as economic characteristics, especially regarding the IoT’s value, and where market potential lies.
Our roadmap is based on analysis of:
- Current state-of-the-art electronics, and the large number of technologies in development.
- The current technological evolution of wireless transmission regarding protocols & standards.
- The recent discussions and actions pertaining to consumer privacy and data security.
- Sensor multiplicity and integrated sensor developments.
- Additional topics such as solutions costs, and where market traction comes from.
Also, it’s still unclear which technological platform will be used, which data transmission protocols will be chosen, and which business model will be proven. Many applications are striving for the blue ribbon, but only the proven ones will drive volume.
This report analyzes the strong challenges awaited regarding the identification of those applications which are expected to provide market volume, and those which are bound to fail.