The global internet of things (IoT) market has undergone revolutionary advancements, transforming consumers’ lives and the way industries function. Telecom markets across the globe are tapping into the big IoT opportunity through significant investments. While regions such as North America and Europe have been the pioneers in terms of IoT adoption, others like the Asia Pacific region are fast catching up. However, the world is yet to truly harness the endless potential that the technology offers.

A look at the global trends in IoT adoption and the economic potential that the technology presents…

Key global trends

According to the Ericsson Mobility Report, released in June 2019, global IoT connections are expected to grow from 8.6 billion in 2018 to 22.3 billion in 2024, witnessing a compound annual growth rate (CAGR) of 17 per cent.

Some of the key trends driving the uptake of IoT across the globe are:

  • Declining cost of equipment: A major factor driving the growth in IoT devices is the declining cost of hardware equipment, owing to large-scale deployments that are driving down the cost of chipsets and sensors. As a result, devices with sensors are becoming ubiquitous even for the most basic applications.
  • Focus on security: As per a survey conducted by Gartner, almost 20 per cent global organisations faced at least one IoT-based attack during the past three years. In order to increase protection against such threats, Gartner estimates that global spending on IoT security will increase from $1.93 billion in 2019 to $3.11 billion in 2021. Of the total spending on IoT security in 2019, approximately $1.22 billion will be spent on professional services, $459 million on end-point security and $251 million on gateway security. Gartner predicts that by 2021, regulatory compliance will become the primary factor driving IoT security uptake.
  • Convergence of AI, big data and IoT: When combined with IoT, technologies such as artificial intelligence (AI) and big data analytics can enable enterprises to leverage the data collected from IoT devices to gain valuable insights that can be used to improve business efficiency and decision making. Therefore, the convergence of these technologies is driving the adoption of IoT devices.

Regional uptake

According to the International Data Corporation (IDC), the Asia Pacific region is set to emerge as the global leader in terms of IoT spending in 2019. It will account for around 35.7 per cent of the worldwide spending on IoT technology. China is expected to be the top spender in the region, accounting for $168.6 billion spending, followed by South Korea and India with a spending of $26.2 billion and $20.6 billion, respectively. The increase in IoT spending in the region is being driven by considerable support and mandates from governments of countries such as South Korea, China, Taiwan, Hong Kong and Singapore. Governments of these countries are playing an active role in promoting the development of IoT across all major industries, particularly energy, transportation, manufacturing, agriculture, government, healthcare and retail.

Asia-Pacific will be followed by the United States (US) and Western Europe, accounting for 27.3 per cent and 21.2 per cent of the total IoT spending in 2019. In fact, the US has become one of the largest and most advanced machine-to-machine (M2M) markets in the world and is leveraging IoT solutions and services in many different sectors of the economy. Europe will also emerge as an important market for IoT with an expected 4.3 billion active IoT connections by 2021. Of these, 420 million are expected to be served by cellular networks.

In terms of revenue, Asia-Pacific is expected to generate $386 billion from IoT services in 2025, as per GSMA Intelligence. The region will be followed by North America and Europe, which are expected to generate revenues of $337 billion and $242 billion, respectively.

Industry-wide adoption scenario

The three commercial industries that will spend the most on IoT solutions in 2019 are discrete manufacturing, process manufacturing and utilities. Together, they will account for nearly 40 per cent of the total worldwide spending in 2019. The key IoT use case for the two manufacturing industries will be modernising manufacturing operations and enabling production asset management.

The spending in the utilities space will largely be directed towards smart electricity grids. For instance, IDC estimates suggest that more than half of IoT spending in the utilities domain will be undertaken towards smart electricity grids, followed by smart gas grids. However, the industries that will witness the fastest CAGR over the 2019-23 period are construction, telecommunications and healthcare. The three industry verticals will witness a CAGR of 15 per cent, 14.2 per cent and 13.6 per cent between 2019 and 2023, respectively.

The consumer market will also be a large source of IoT spending in 2019. The key use cases in this domain will be smart homes and connected vehicles. It will witness a CAGR of 17.8 per cent between 2019 and 2023, the highest across all industries. The consumer market is expected to overtake process manufacturing to become the second-largest source of IoT spending by 2023.

Economic potential

The adoption of IoT is leading to an increase in economic productivity across regions. The deployment of connected devices enables businesses to monitor the performance and location of equipment and stock, undertake predictive maintenance, track volume,  and reduce production waste by assessing and acting on product quality. As per GSMA Intelligence, the world economy benefited by about $175 billion in 2018 due to productivity benefits enabled by the use of IoT in businesses. Around 50 per cent of the total global productivity impact is from the manufacturing sectors, which form a large share of the total global economic output. However, the transport, utilities and healthcare sectors can further the productivity gains if IoT adoption in these sectors increases significantly.

On a global scale, North America remains the main beneficiary as productivity gains from IoT in the region are expected to increase from 0.26 per cent of gross domestic product (GDP) in 2018 to 0.46 per cent of GDP by 2025. The productivity gains in Asia-Pacific are expected to increase from 0.2 per cent of GDP to 0.34 per cent of GDP during the same period. Other developing regions such as Middle East and North Africa, and Sub-Saharan Africa are also likely to witness significant growth.

The way ahead

With the dawn of the 5G era, global IoT connections are expected to head north. Both the technologies when implemented together can deliver substantial value for enterprises. In fact, the advent of 5G would facilitate several use cases that were previously limited due to lower throughput and performance. Net, net, the integration of 5G and IoT is going to be the next big step towards establishing a strong digital ecosystem. That said, stakeholders in the global technology space will need to work in collaboration to capitalise on this upcoming opportunity.