The semiconductor forecast for the internet of things (IoT) has been scaled back due to lower revenue projections for connected cities, according to the latest update from IC Insights. However, the total market growth for semiconductors in IoT applications is still projected to grow in the double digits over the forecast period of 2015 to 2020.
The semiconductor sales forecast for system functions related to the IoT has been scaled back by about $920 million in 2020, primarily “because of lower revenue projections for connected cities applications,” according to the IC Insights report. These applications include smart electric meters and infrastructure supported by government budgets.
IC Insights still expects the total 2017 sales of IoT semiconductors to increase by 16.2 percent, reaching $21.3 billion. This is up from $18.3 billion in 2016, which was initially forecast to reach $18.4 billion. The compound annual growth rate (CAGR) forecast has been reduced from 15.6 percent to 14.9 percent over the forecast period.
Semiconductor sales for IoT system functions is now forecast to reach $31.1 billion in 2020 compared with the previous projection of $32.0 billion, down by about $920 million. This translates into a CAGR of 8.9 percent for connected cities over the forecast period, down from the original forecast of 9.7 percent.
“The lower growth projection in chip sales for connected cities systems is a result of anticipated belt tightening in government spending around the world and the slowing of smart meter installations now that the initial wave of deployments has ended in many countries,” said IC Insights.
IC Insights also slightly lowered its forecast for wearables. IoT semiconductor sales for wearable systems is projected to grow at a CAGR of 17.1 percent, compared with the previous forecast of 18.8 percent, over the forecast period.
“Slower growth in semiconductor sales for wearable systems is primarily related to IC Insights’ reduced forecast for smartwatch shipments through 2020,” according to the report.
The updated outlook also slightly lowered the forecast for connected homes and connected vehicles. Semiconductor sales for connected homes was reduced to 21.3 percent CAGR from 22.7 percent, while IC sales for connected vehicles dropped to 32.9 percent CAGR from 33.1 percent.
The only end-market segment to get a slight boost is the industrial market. Semiconductor growth for industrial IoT increased from 24 percent to 24.1 percent CAGR.
The distribution industry expects big opportunities in connected devices and together with their vendor partners expect to leverage IoT growth across verticals, particularly industrial and transportation, where they expect the biggest growth.
In 2016, the top 50 distributors derived 28 percent of their revenues from the industrial sector, and 29 of them expect the industrial market to fuel growth in 2017. Among emerging applications, the IoT is expected to be the biggest growth driver this year, according to nearly half of the top 50 distributors.
The IoT is expected to be the biggest growth driver among emerging applications, according to 22 respondents, up from 17 respondents last year.