Internet of Things boosts embedded systems growth

USA: Since 2006, there have been more embedded systems, industrial equipment, sensor devices, instruments, meters, cameras, animals, and other objects connected to the Internet than humans using computers, smartphones, and other electronics for information technology.

Until recently, steady increases in Internet-connected things have been overshadowed by major market battles in smartphones and the emergence of tablet computers, but with growth rates easing in those end-use systems segments, the enormous potential of the Internet of Things (IoT) has become the hottest topic in electronics and the IC industry.

More than a half-dozen initiatives have been launched to create market standards for IoT and to put the Internet of Things on par with the Internet of Humans in terms of wide-scale availability, ease of connection, and compatibility across platforms in different industry sectors.

Assuming that missing IoT standards are developed in the next several years, web-connected things are forecast to account for 85 percent of nearly 29.5 billion Internet connections worldwide by 2020, according to IC Insights’ new 2015 edition of IC Market Drivers—A Study of Emerging and Major End-Use Applications Fueling Demand for Integrated Circuits. In 2010, about 74 percent of the 7.7 billion Internet connections were to things, based on market data in the new IC Market Drivers report.

IC Insights estimates that sales generated by the IoT portion of systems (meaning the functions for Internet communications and sensor subsystems) will total $48.3 billion in 2014 and grow 19 percent in 2015 to $57.7 billion.

By 2018, the market value of IoT subsystems in equipment and Internet-connected things is projected to reach $103.6 billion worldwide, which represents a CAGR of 21 percent from $39.8 billion in 2013.

More importantly, IoT functionality designed into equipment and web-enabled objects will become a pivotal factor in the sale of nearly half of all end-use systems by the end of this decade as connections to the Internet of Things becomes more common and expected by consumers and businesses.

The new IC Market Drivers report shows IoT-related semiconductor sales growing 19 percent to $5.6 billion in 2015 and rising by a CAGR of 24.3 percent in the 2013-2018 period, reaching $11.5 billion in the final year of the forecast. About 65 percent of the projected 2018 IoT semiconductor revenues are expected to come from ICs and 35 percent from optical, sensors/actuators, and discretes (O-S-D).

In 2013, about 71 percent of the $3.9 billion in IoT-related semiconductor sales were generated by ICs ($2.7 billion) vs. a little over 29% from O-S-D ($1.1 billion, most of which was for sensors).

According to the 2015 report, the largest IoT semiconductor market segment through the forecast period will continue to be connected cities (which includes “smart” electric grids, roads and streetlights, and other public infrastructure applications) with sales reaching $4.2 billion—a CAGR of 15 percent between 2013 and 2018.

The second-largest semiconductor IoT category—the industrial Internet—will nearly catch up with the connected cities group, primarily due to high growth in factories, logistics, and medical systems applications. Semiconductor revenues for the connected homes category will push past the $1 billion mark in 2018 with a CAGR of 32.8 percent from just $275 million in 2013.

Connected automotive systems—mainly in passenger cars—represent a high growth potential between 2013 and 2018 with annual semiconductor sales forecast to reach $1.5 billion worldwide, which represents a CAGR of 43.8 percent through 2018.

Semiconductor sales for wearable systems that connect to the Internet are projected to climb by a CAGR of 46.9 percent to $528 million in 2018 from about $76 million in 2013.

While IoT is expected to see strong growth in the next fives years, ICs used in connections to the Internet of Things represented only 1 percent of total integrated circuit sales in 2014. In 2018, IoT-related ICs are expected to account for about 3 percent of the total $348.1 billion IC market that year, according to the new report’s forecast.

Beyond embedded IoT subsystems in connected applications, the proliferation of the Internet of Things will expand the use of cloud computing and web servers as well as require upgrades to the overall Internet infrastructure in order to handle growing amounts of data coming from attached systems and things by 2020. The impact of IoT on servers and the Internet is also covered in the IC Market Drivers 2015 report.