The potential market growth for the Internet of Things (IoT) is huge for the semiconductor market. IoT-related semiconductor sales is expected to grow 19 percent, reaching $5.6 billion in 2015, according to the 2015 IC Insights IC Market Drivers report. The market research firm projects the market will reach $11.5 billion in 2018, translating into a compound annual growth rate of 24.3 percent over the forecast period of 2013 to 2018.
The report, IC Market Drivers—A Study of Emerging and Major End-Use Applications Fueling Demand for Integrated Circuits, reveals that 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) compared to about 29 percent from O-S-D. The majority of the $1.1 billion generated by O-S-D came from sensor sales.
The largest IoT semiconductor market segment will continue to be connected cities, including “smart” electric grids, roads and streetlights, and other public infrastructure applications, reported IC Insights. Sales for this segment is projected to reach $4.2 billion with a CAGR of 15 percent over the forecast period. Industrial Internet follows with a projected $4.1 billion in sales. The reports expects industrial Internet to nearly catch up with connected cities primarily due to high growth in factories, logistics, and medical systems applications.
Semiconductor revenues for the connected homes is expected to surpass the $1 billion mark in 2018 with a CAGR of 32.8 percent, up from $275 million in 2013. Connected automotive systems—mainly in passenger cars—offers a high growth potential between 2013 and 2018 with a CAGR of 43.8 percent, reaching $1.5 billion in 2018. Semiconductor sales for wearable systems that connect to the Internet are forecast to reach $528 million in 2018 with a CAGR of 46.9 percent over the forecast period.
However, ICs used in connections to the IoT represents only one percent of total IC sales in 2014 despite forecasted strong growth over the next five years, reported IC Insights. In 2018, IoT-related ICs will account for about three percent of the total $348.1 billion IC market.
“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,” according to the report.
IC Insights forecasts that web-connected things will account for 85 percent of nearly 29.5 billion Internet connections worldwide by 2020 as long as “missing IoT standards” are developed over the next several years, adding to the more than half-dozen existing initiatives for IoT around availability, ease of connection, and compatibility across platforms in different industry sectors. That’s up from about 74 percent of the 7.7 billion Internet connections to things in 2010.
IC Insights estimates that sales generated by the IoT portion of systems (i.e., the functions for Internet communications and sensor subsystems) will total $48.3 billion in 2014 and grow 19 percent to $57.7 billion in 2015. By 2018, IoT subsystems in equipment and Internet-connected things is forecast to reach $103.6 billion worldwide, up from $39.8 billion in 2013, translating into a CAGR of 21 percent over the forecast period.
“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,” according to the report.