Lyon, France – The Internet of Things (IoT) device market is expected to grow from $9.5 billion in 2014 to $46 billion in 2024, according to Yole Développement. While there is big potential growth for electronic component manufacturers, particularly sensor manufacturers, Yole analysts expect most of the added value in IoT solutions will come from data processing. The IoT device market will represent close to 15 percent of all data processing, according to Yole.
”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”, said Dr. Eric Mounier, senior technology & market analyst at Yole Développement. “In fact, the ratio between electronic components and data processing can reach 1:50 in certain long-term cases.”
Mounier said this is “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.” Yole expects the device market to reach $70 billion by 2018 before decreasing, providing a window of opportunity for manufacturers to position themselves in the IoT market.
Yole expects there will be a convergence of the different markets – such as industrial sensors, wearable electronics and home automation – over the next five years. This includes the electronics industry that will manufacture the sensing devices, communications and cloud data storage industry that will handle data transmission, storage and processing, as well as service companies that will valorize the data through processing or by selling to a third party.
Several companies have already started to position themselves in the IoT market. These include Bosch Connected Devices and Solutions, STMicroelectronics, Oracle, Amazon and Google. Partnerships are also forming like those between Murata and Ayla Networks, and Atmel and Mentor Graphics.
However, the Yole report, “Technologies & Sensors for the Internet of Things,” reveals a short-term opportunity in the electronics industry. Despite the strong growth, the market will be marked with strong price pressure for IoT devices, which means the only way the industry will leverage this market is through lower costs, reduced margins combined with higher manufacturing capabilities.
Yole analysts expect the same scenario in the cloud computing industry – strong price pressure coupled with low value assigned to the physical data. Yole says it’s already started with cloud computing companies cutting data storage prices while increasing their capabilities.
In the data processing market, more information will be available and at a low cost. “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,” said Dr. Guillaume Girardin, technology & market analyst, Yole Développement, in a statement. “As an example, we expect the overall IoT market to reach $400 billion in 2024, with $46 billion coming from hardware, $59 billion from the cloud and $296 billion from data processing.”