Intel Tops Q1 Chip Sales; Semiconductor Market to Decline 7.2% in 2019
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The industry’s next white knight has taken many forms, though none has proven as resilient as PC-refresh cycles. Great expectations now rest with the Internet of Things (IoT), which the electronics industry hopes will build into a crescendo of “Things” that will provide demand for components, networking infrastructure, and so forth. This scenario, of course, would support significant volumes of diverse components that enable existing product lines to be incorporated into the “Things” of the IoT and enable the “Smart Life.”
Unfortunately, this Jetsons scenario has yet to occur; while there are some occasional swells that rise and fall, no real wave of significant demand for Things has mounted. On the event horizon, though, may be the real precursor to the IoT dream. There are a few drivers behind this reasoned optimism: the steady adoption rate for industrial automation, as discussed by EPS’ Bolaji Ojo (further detailed in this McKinsey & Co. research); and on the enterprise/consumer side, the rise of millennials into upper management positions (as discussed in this CIO article).
The case for the IoT in industrial automation is very strong and has been mounting for a number of years. The caveat is that the pace, while steady, will continue to be slower than in consumer or enterprise sectors. According to recent IHS research as cited by Bloomberg, the estimate is for “a $185 billion global market for gear to automate industrial production.” Meanwhile, similar opportunities for significant growth are seen in the consumer and enterprise IoT realm, particularly as the youngest generation of managers, the Millennials, are now reaching into upper management positions and bringing with them the expectations of immediate access to diverse data; the assumption of constant connectivity; and visibility into any topic they wish to pursue. As CIO magazine underscores: “For IT departments, this means a shift towards warp-speed and agile development processes.” To satisfy the demands of this new, young management generation, the adoption of IoT becomes a necessity.
Interestingly, behind the push for automating industrial and manufacturing centers are those who have been the leaders in the sector, the global chipmakers themselves: Intel, Texas Instruments and their peers. The greatest opportunities for industrial IoT include the improvement of industrial functioning, the optimization of factory floors, manufacturing plans and schedules; and the assurance that peak capacities are managed effectively (see this InformationWeek article).
The return on investment (ROI) is significant for industrial and manufacturing, yet the process is slow and costly to shift from traditional factory floors to even a semblance of the fully automated chip manufacturing fab. Important to note is that re-outfitting industrial facilities to join the IoT is bifurcated, covering both non-specific equipment and operations, such as HVAC, lighting, etc., as well as industry-specific devices.
On the business/enterprise side of IoT, the barriers to adoption are not as high as on the factory floor. However, in the enterprise domain there is a web of departments that must also change and adapt to new processes. Gartner’s recent research underscores the growth potential for IoT in 2016: “Gartner estimates that the Internet of Things (IoT) will support total services spending of $235 billion in 2016, up 22 percent from 2015. Services are dominated by the professional category (in which businesses contract with external providers in order to design, install and operate IoT systems); however connectivity services (through communications service providers) and consumer services will grow at a faster pace.”
Regarding the ROI for IoT adoption in business and consumer sectors, there are similar benefits as for industrial and manufacturing cases: improved energy efficiencies, maximized productivity and effectiveness, the coordination of activities, and so forth. Additionally, the continued rise of and demand for customizable services and dedicated solutions for both business and personal spheres relies on the synthesis of data, preferences, and the interconnection of devices to share data. IoT is the network upon which the continued sophistication of services will be built.
There is always the question of reliability of visions offered. One point of optimism is that the growth and diversity of IoT not only will increase volume demand within the semiconductor and electronics industry but also the opportunity to improve services, efficiencies, and ROI.
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