Forecasts for the Internet of Things. Are we prepared?

The IOT continues to develop at great speed as expected. But it is necessary to begin to establish analysis from various points of view to assess its evolution in its proper measure. We start from the basis that it has been normally recognized as a source of growth for the semiconductor industry and its customers, but it would also be interesting to assess it in terms of the opportunities and limitations that it may pose for component manufacturers. Aware of this potential, at Logitek we have been working on this line for some time especially since the commitment to Sigfox technology was formalized.

The latest innovations and the data that emerge from recent studies reaffirm our certainty that the path undertaken is the right one

How far can IoT go?

The semiconductor industry has been able to overcome the consequences of the global financial crisis due, in part, to the boom in smartphones and tablets that have led to increased demand for mobile and wireless applications. The average annual growth of the industry between 2010 and 2013 was approximately 5 percent. Could a similar percentage of growth occur as a result of the widespread adoption of the Internet of Things? Several aspects would have to be analyzed:

The Internet of Things refers to the interconnection of physical objects through the use of embedded sensors, actuators and other devices that can collect and transmit information about the objects. The data accumulated from these devices can be analyzed to optimize products, services and operations. Perhaps one of the oldest and best-known applications of this type of technology has been in the area of energy optimization: sensors deployed throughout the electrical grid can help remotely monitor energy use and adjust generation and distribution flows during peak hours or downtime.

But applications are also being introduced in other industries. Some insurance companies, for example, now offer plans that require drivers to install a sensor in their cars, allowing insurers to base premiums on driving behavior on real data rather than projections. Just as doctors can use information obtained from wireless sensors in their patients’ homes to improve their management of chronic diseases.

Specific data, according to the McKinsey Global Institute for Research: Through continuous monitoring instead of periodic tests, doctors could reduce their treatment costs by between 10 and 20 percent. This translates into savings of hundreds of millions of dollars in patients with heart failure problems alone.

In each of these cases, connected devices that transmit information through the relevant networks rely on semiconductor design innovations with integrated microchips, and on the functions of certain applications. Semiconductor companies that can develop these and other innovations for original equipment and device manufacturers will have a lot of ground to gain. This market will certainly play an important role in the growth for semiconductor “players”.

In fact, according to a survey of semiconductor company executives in June 2014, they said that the Internet of Things will be the most important source of growth for them in the coming years, more important, for example, than trends in wireless connections or BIg Data.

Research by the McKinsey Global Institute supports that belief, estimating that the impact of the Internet of Things on the global economy could be as high as $6.2 trillion in 2025. At the same time, company executives surveyed admit that they lack a clear perspective of the concrete business opportunities in the Internet of Things, given the breadth of applications being developed, the various potential markets in terms of consumers in addition to the fact that the trend is still emerging.

The definitive impulse?

Three years ago, industry experts and analysts predicted that, in 2020, the market for connected devices would be between 50 billion and 100 billion units. Today, the forecast is not so much, but it is still at a not inconsiderable 20 billion to 30 billion units. This stabilization of expectations is in line with what we have seen in recent introductions of new technologies. Throughout the 1990s and early 2000s, for example, there was much discussion in the semiconductor industry about the potential benefits and implications of Bluetooth technology, but the tipping point for Bluetooth did not come until 2003 or 2004, when a sufficiently large number of industry members adopted it as a standard and drove the development of new Bluetooth-based devices and applications in the market. The Internet of Things market in terms of devices, products and services seems to be accelerating towards a similar tipping point if we consider four key indicators:

Supplier attention: IOT tools and products are already available to developers. Apple, for example, has launched HealthKit and HomeKit developers as part of its most recent operating system update, and Google acquired Nest to catalyze the development of an Internet of Things platform.

2. Technological advances. Some of the semiconductor components that are fundamental to most Internet of Things applications are proving to be very practical and functional with lower prices. Newer processors, such as the ARM Cortex M, use only about one-tenth of the power of the most energy-efficient 16-bit processors used just two years ago. For example, this leap in technological capability is very evident in the evolution of the market for smart watches. The first of these products launched in 2012 boasted the use of individual 400 megahertz processors and simple three-axis accelerometers. Now, a typical smart watch includes dual-core 1 gigahertz processors and six-axis devices that combine gyroscopes and accelerometers. In parallel, the prices of the chipsets used in these products have decreased by 50 percent over the last two years (25% each year).

3. Increased demand: Demand for the first generation of Internet of Things products (fitness wearables, smart watches and smart thermostats, for example) will evolve and improve in technologies while decreasing their cost. A similar dynamic occurred with the increase in the use of smartphones. Demand for phones increased from 170 million devices sold annually just four or five years ago to more than one billion devices in 2014. The increase in orders coincided with a sharp drop in the price of smartphone components.

4. New legislation. Over the past two years, semiconductor players have joined forces with hardware, software or networking companies, and with a number of industry associations and business consortia to develop formal and informal standards for IOT applications: AT & T, Cisco, GE, IBM and Intel, for example, were co-founders of the Industrial Internet Consortium, whose main objective is to establish interoperability standards in industrial environments so that data on machines and facilities can be accessed and shared more reliably. Other groups have focused on standardizing application programming interfaces (APIs) that enable basic commands and data transfer between Internet of Things devices.

What will all this mean for semiconductor players?

Analysts have predicted that Internet of Things devices will grow from 10 billion connected devices today to a maximum of 30 billion devices in 2020, with growth of nearly 3 billion new devices per year. Each of these devices will require, at a minimum, a microcontroller to add intelligence to the device, one or more sensors to enable data collection, one or more chips to enable connectivity and data transmission, and a memory component. For semiconductor players, this represents a direct growth opportunity that goes far beyond almost all other recent innovations, with the exception, perhaps, of smartphones.

These are data that will have to be endorsed with facts. At Logitek we are part of the ecosystem of solution facilitators SIGFOX Ready^TM and we expand our data collection and real-time analysis solutions with the new SIGFOX connectivity. For what may happen in the coming years, and answering the question we asked in the title of this post, YES, WE ARE PREPARED.