IoT connections market update—May 2023
The latest IoT Analytics “State of IoT—Spring 2023” report shows that the number of global IoT connections grew by 18% in 2022 to 14.3 billion active IoT endpoints. In 2023, IoT Analytics expects the global number of connected IoT devices to grow another 16%, to 16.7 billion active endpoints. While 2023 growth is forecasted to be slightly lower than it was in 2022, IoT device connections are expected to continue to grow for many years to come.
The insights from this article are based on the recently published “State of IoT – Spring 2023” report, a 137-page research report on the current state of the Internet of Things, including a market update and forecast, a discussion of the latest trends, and much more.
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IoT connections forecast
According to our analysis, by 2027, there will likely be more than 29 billion IoT connections. Compared to our last IoT device market update a year ago, we lowered our five-year IoT market outlook for two important reasons:
1. Chipset supply to remain constraint for years to come in the face of surging demand
Chipset supply chains have considerably improved in 2023 as demand has weakened in the face of a slowing economy. Despite the demand slump, current chip lead times remain elevated compared to pre-COVID-19 levels. We believe that once the economy recovers and a new demand wave kicks in, chipset supply will become much more constraint again. While it is true that a lot of chip manufacturing capacity is being planned as we speak, fueled by government initiatives such as the US Chip and Science Act (2022) and the EU Chips Act (2022), it may take many years until supply matches or surpasses demand for the majority of different types of chipsets.
Make no mistake, the investments into new chip manufacturing capacity are enormous. TSMC has increased its capital expenditure from approximately $15 billion in 2019 to $42–$44 billion in 2022. Similarly, in 2023, Samsung announced that it plans to invest $230 billion in South Korea over the next 20 years to build new chip production capacity. However, these investments take time to materialize. Semiconductor plant constructions typically take three to four years to complete, and it can take another three to four years for facilities to reach full capacity.
2. China uncertainties
In the last years, China was the leading country for new IoT device connections, with active cellular IoT connections in China alone surpassing two billion in 2022. However, the high growth years may be coming to an end with the country facing a number of issues, including technological supply shortages on the back of renewed US–China trade tensions, most notably in the semiconductor industry. In October 2022, the US placed an export ban on China, causing significant disruption to these industries. Consequently, chip companies are relocating their facilities outside of China. Some companies, such as Infineon, TSMC, AMAT, and ASML, have announced that they are moving parts of their production out of China.
The leading IoT connectivity technologies: three technologies making up nearly 80% of the market
Global IoT connectivity is dominated by three key technologies: Wi-Fi, Bluetooth, and cellular IoT.
- Wi-Fi. Wi-Fi makes up 31% of all IoT connections. In 2022, more than half of Wi-Fi-enabled devices shipped worldwide were based on the latest Wi-Fi 6 and Wi-Fi 6E technologies, which promise faster and more reliable wireless connectivity. The adoption of these technologies has made communication between IoT devices more efficient, leading to improved user experiences and overall performance. Wi-Fi technology is leading IoT connectivity in sectors such as smart homes, buildings, and healthcare.
- Bluetooth. 27% of global IoT connections rely on Bluetooth. Bluetooth Low Energy (BLE), also known as Bluetooth Smart, has been continuously developed to allow IoT devices to maintain reliable connectivity while consuming limited power. As a result, BLE is now the preferred option for battery-powered IoT devices such as smart home sensors and asset tracking devices. Even the industrial sector is starting to show increasing interest in IO-Link Wireless technology, which is based on IEEE 802.15.1 (the technical standard for Bluetooth) and allows for wireless communication between sensors/actuators and an I/O master.
- Cellular IoT. Cellular IoT (2G, 3G, 4G, 5G, LTE-M, and NB-IoT) now makes up nearly 20% of global IoT connections. According to the Global Cellular IoT Connectivity Tracker & Forecast (Q1/2023 Update) by IoT Analytics, global cellular IoT connections grew 27% YoY in 2022, strongly surpassing the growth rate for global IoT connections. This growth is due to the adoption of newer technologies such as LTE-M, NB-IoT, LTE-Cat 1, and LTE Cat 1 bis, as older technologies such as 2G and 3G are phased out. Although 5G module shipments also grew more than 100% YoY in 2022, the growth rate is still slower than many had expected. In 2023, the top five network operators—China Mobile, China Telecom, China Unicom, Vodafone, and AT&T—managed 84% of all global cellular IoT connections. In terms of IoT revenue, the top five network operators make up 64% of the IoT network operator market, with China Mobile, AT&T, Deutsche Telekom (including T-Mobile), China Unicom, and Verizon leading the market.
The analysis shows a few notable shifts over the years, for example:
- China Mobile jumped from fifth place in 2012 to first place in 2021 and is expected to remain there in the foreseeable future.
- AT&T, Verizon, and Deutsche Telekom have consistently ranked in the top five from 2010 to 2022 and are expected to maintain their positions through 2027.
- China Unicom joined the top five in 2022 and is projected to remain among the leading network operators through 2027.
IoT connectivity trends to look out for
While the general IoT connectivity landscape only changes slowly (e.g., some devices remain connected for a decade or even longer), new IoT connectivity technologies do have an impact on the landscape in the long run. Here are two interesting developments we are monitoring (for more also visit our Embedded World conference 2023 takeaways and our MWC 2023 takeaways):
1. LPWAN technology convergence
In 2022, the LPWAN industry saw two significant events that shifted the focus from competition among LPWAN connectivity technologies to co-existence and convergence of those technologies. UnaBiz‘s acquisition of Sigfox and Semtech’s acquisition of Sierra Wireless paved the way for LPWAN companies to provide multi-connectivity of several LPWAN technologies at the same time. To make this convergence happen and be able to deploy any LPWAN technology, UnaBiz, for example, now collaborates with The Things Industries, Actility, Soracom, LORIOT, and others. This means that UnaBiz has become more than just a technology provider but rather a solution provider that also bundles all different technologies and orchestrates them on their own software platform. UnaBiz is just one example that shows how the industry is shifting from a single LPWAN technology view to a multi-connectivity solution view.
We anticipate that this LPWAN convergence may lead to the emergence of new multi-LPWAN connectivity modules in the future that would provide end-to-end connectivity in verticals such as logistics and mobility.
2. LEO-based satellite IoT connectivity
LEO satellite connectivity for IoT is gaining popularity because it provides extensive coverage, minimal delays, and strong reliability. The technology is especially useful in the agriculture, maritime, and logistics industries. LEO satellites are closer to Earth than traditional satellites, resulting in reduced latency and faster data transmission, which are essential for real-time data processing. This type of connectivity is more resilient and reliable, ensuring consistent communication, even in challenging environments or during natural disasters. Advancements in LEO-based IoT satellite connectivity continue to optimize performance and enhance the user experience.
According to IoT Analytics, satellite IoT connections are expected to grow from six million to 22 million between 2022 to 2027, at a CAGR of 25%. While this growth is expected to have a minor effect on the overall market, the integration of satellite connectivity options into LPWA chipsets by companies like Qualcomm could accelerate adoption. Sony Semiconductor already launched ALT1350, the first cellular IoT LPWA chipset to offer satellite connectivity, which opens up new possibilities for IoT devices to communicate beyond traditional network boundaries. This integration of satellite connectivity into LPWA chipsets is expected to drive further innovation and growth in the IoT market.
Other State of IoT (Spring 2023) research highlights
The 137-page report highlights a number of current developments in the IoT market. Here are three developments that are discussed in more depth in the report:
1. Predominantly positive IoT sentiment going into the second half of 2023
Despite a number of macro uncertainties and some (IoT-related) layoffs, the IoT market remains largely intact going into the second half of 2023. Most market participants have a predominantly positive outlook, with industrial IoT projects and Industry 4.0 initiatives driving the market. Below are some recent representative quotes from chip companies with a focus on IoT:
“We continue to secure major greenfield design wins, even amid macro uncertainty. The IoT market has incredible potential, with thousands of new applications on the horizon.”Matt Johnson – President & CEO, Silicon Laboratories (1 February 2023)
“The industrial IoT markets are performing better than our expectations.”Kurt Sievers – President & CEO, NXP Semiconductors (31 January 2023)
2. IoT platforms market is consolidating
Several major companies that were selling IoT platforms recently announced discontinuations, including Google’s IoT Core, Bosch‘s IoT Device Management, IBM’s Watson IoT Platform, and SAP’s IoT services. The reasons for the strategic shift away from IoT vary. The market dominance of Microsoft Azure IoT and AWS IoT in “generic” IoT platforms certainly played a role, in conjunction with the “the lack of profitability” in the offered IoT services. Several of these companies have announced a shift toward creating solutions specific to particular verticals or relying more on a few select partners to continue to support IoT initiatives (e.g., Google–Litmus Automation partnership).
“IoT services themselves don’t make enough money. The services like AWS IoT Core and Azure IoT Hub are expensive to build and maintain and by themselves they are likely not profit-making.”Former IoT Product Lead, Microsoft
3. IoT-focused start-ups are struggling to secure funding
The amount of money invested in global IoT start-ups decreased significantly in the last 12 months. In the first quarter of 2023, we tracked 52 IoT-related funding rounds totalling $840 million, a 45% reduction in the value of investment in IoT start-ups companies compared to Q1/2022. Some of the larger recent IoT-related funding rounds include a $150 million Series D for US-based chipset manufacturer Astera Labs in November 2022 and a $43 million Series C for China-based connectivity chipset company XINYI Information Technology in March 2023.Click to read previous analyses
Article written by Mohammad Hasan on May 18, 2022.
State of IoT 2022: Number of connected IoT devices growing 18% to 14.4 billion globally
IoT connections market update—May 2022
The chip shortage continues to slow the Internet of Things (IoT) market recovery, according to our latest State of IoT—Spring 2022 report, released in May 2022. The number of global IoT connections grew by 8% in 2021 to 12.2 billion active endpoints, representing significantly lower growth than in previous years.
Despite a booming demand for IoT solutions and positive sentiment in the IoT community as well as in most IoT end markets, IoT Analytics expects the chip shortage’s impact to the number of connected IoT devices to last well beyond 2023. Other headwinds for IoT markets include the ongoing COVID-19 pandemic and general supply chain disruptions. In 2022, the market for the Internet of Things is expected to grow 18% to 14.4 billion active connections. It is expected that by 2025, as supply constraints ease and growth further accelerates, there will be approximately 27 billion connected IoT devices.
Both the 2021 actuals and the current 2025 forecast for IoT devices are lower than previously estimated. (The previous estimate for 2021 was 12.3 billion connected IoT devices; the previous forecast for 2025 was 27.1 billion connected IoT devices).
Here is what impacted IoT connections in 2021, where we stand in 2022, and where we may be headed beyond 2022:
IoT in 2021: Selected IoT connection growth highlights
These are some key trends that impacted the growth of the number of connected IoT devices in 2021:
- LPWA networks expanded, especially those using NB-IoT technology. NB-IoT adoption (finally) took off, with connections growing by 61% YoY, driven by a wide variety of implementations, most notably in the areas of water and gas metering.
- Users are moving away from legacy 2G/3G toward 4G/5G IoT. 4G IoT connections grew by 24% due to higher adoption of LTE Cat 1-, Cat 4-, and Cat 6-based chipsets. For many implementations, LTE Cat 1 bis is becoming an alternative to the aforementioned LPWA technologies.
- The chip shortage continued to slow the market recovery (see above).
- COVID-19 continued to impact products and supply chains. In 2021, ongoing (local) COVID-19 restrictions resulted in many new and severe supply chain issues, such as a lack of vessels, trucks, and shipping containers and port congestion.
IoT in 2022: Current market sentiment
The current business sentiment for companies in digital and IoT remains predominantly positive although coming down from Q4 2021 highs. There is widespread acknowledgment that Covid-19 had an overall positive effect on the accelerated adoption of IoT technologies. This is confirmed by quotes from CEOs of IoT vendors and a sentiment analysis of earnings calls. The highest sentiments are found in companies offering connectivity services (sentiment score of 117), general software (115), cybersecurity (113), and cloud (113).
“Robust demand was again widespread across our end markets [in Q1 2022].  Overall, we continue to forecast favorable demand conditions to hold throughout the second half of this calendar year.“Phil Gallagher, CEO at Avnet – April 27, 2022
“We are seeing continued momentum in key IoT markets, including industrial, enterprise, energy and first responder as more companies are collecting business-critical data from the edge of the network. The COVID-19 pandemic has accelerated Industry 4.0.”Phil Brace, CEO at Sierra Wireless – May 12, 2022
From a regional point of view, sentiment in North America is leading (116), with APAC (103) lagging, specifically China, where fresh COVID-19 lockdowns are seen as a key threat to business growth in the region.
IoT beyond 2022: Key macro themes affecting the IoT device forecast going forward
In our latest research, we highlight and discuss eight key macro themes to watch, many of which are interrelated. Here is a selection:
- Inflation. Global growth forecasts are declining as inflation intensifies to >5% p.a. in most major economies of the world, raising expectations of increasing interest rates and a subsequent cooling down of the economy.
- The ongoing war in Ukraine. The war in Ukraine is adding to supply disruptions and inflation concerns. The Minister of State for Electronics and Information Technology in India, Rajeev Chandrasekhar, for example, stated: “The Russia-Ukraine conflict has impacted supply chains in numerous sectors, including the semiconductor industry. The conflict may have particular impact on the supply of Neon and Hexafluorobutadiene gases, which are essential element[s] to manufacture semiconductor chips, as these are used in the lithography processes for chip production.”
- The war for digital talent. Many companies are facing a massive challenge finding skilled labor to move ahead full force with digital transformation, AI, IoT, and cloud projects. IoT Analytics tracks online job ads on an ongoing basis. The number of job ads that included “IoT” grew by +32% between July 2021 and April 2022. Job ads including “AI” (+48%), “Edge Computing” (+53%), and “5G” (+52%) were in even higher demand.
As a result of some of these macro factors, particularly inflation, companies are forced to focus more on operational efficiency to neutralize cost pressures and ensure supply to customers.
Other State of IoT (Spring 2022) research highlights
- Record levels of VC investments for IoT firms. Based on our research, Global VC funding for IoT-focused companies increased to a record of $1.2 billion in Q1 2022 compared to just $266 million in Q1 2021, with fewer deals in total but a number of very large funding rounds. Most recent investments centered around AI and analytics, cybersecurity, and IoT connectivity.
- Several large IoT-focused acquisitions. IoT firms specializing in AI and analytics, IoT software, and semiconductors/chips collectively accounted for approximately 45% of all major IoT-related acquisitions between Q3 2021 and Q1 2022. Many of these deals were driven by the acquirer’s desire to create a more complete technology stack or product portfolio and reduce external dependency. Notable announcements include Panasonic’s acquisition of Blue Yonder ($8.5 billion) and Generac Power Systems’ acquisition of Ecobee ($770 million).
Growth in the number of connected devices slowed in 2021 but is expected to re-accelerate in 2022 and beyond. While new headwinds, such as inflation and prolonged supply disruptions, have emerged for the IoT market, the overall sentiment continues to be relatively positive, with the number of connected IoT devices expected to reach 14.4 billion by the end of 2022.
Article written by Satyajit Sinha on September 22, 2021.
State of IoT 2021: Number of connected IoT devices growing 9% to 12.3 billion globally, cellular IoT now surpassing 2 billion
Despite the chip shortage and COVID-19’s extended impact on the supply chain, the market for the Internet of Things continues to grow. In 2021, IoT Analytics expects the global number of connected IoT devices to grow 9%, to 12.3 billion active endpoints. By 2025, there will likely be more than 27 billion IoT connections.
This is one of many findings in IoT Analytics’ latest reports: State of IoT—Summer 2021 and the updated Cellular IoT & Low-Power Wide-Area (LPWA) Market Tracker (Q3 2021).
The 2020 actuals for the number of connected IoT devices came in slightly lower than the mid-year 2020 forecast (11.7 billion connected IoT devices forecasted for 2020 vs. actual of 11.3 billion). The forecast for the total number of connected IoT devices in 2025 has also been lowered to 27.1 billion (compared to 30.9 billion forecasted in 2020). Two critical factors are leading to the dent in the growth curve:
- The COVID-19 pandemic: COVID-19 has impacted both demand and supply. Supply was reduced, as production was halted at times, and supply chains and access to raw materials were not intact. In the first half of 2020, budgets were frozen. In the second half of 2020, demand came back, but supply was often disrupted. Many IoT initiatives were halted or, in some cases, canceled in 2020. In 2021, COVID-19 effects have continued to significantly impact some regions, resulting in additional supply chain issues, such as a lack of vessels and shipping containers and port congestion.
- The chip shortage: Initially, the chip shortage was a by-product of the COVID-19 impact on the supply chain. However, it has become its own issue; the supply capacity is not available to meet global chip demand. The chip shortage first impacted the automotive industry and then extended to other segments, such as smartphones, televisions, gaming, and IoT. In 2021, the chip shortage is expected to be a factor for up to two more years before enough additional production capacity becomes available. The current shortage is so pervasive that, of 3,000+ analyzed public companies, 11% mentioned “chip shortage” in their conference calls in the second quarter (Q2) of 2021.
These two factors are expected to have a negative impact for several years.
From a connectivity point of view, new technology standards, such as fifth-generation (5G), Wi-Fi 6, and LPWA, are driving device connections. A wildcard in the mix is satellite IoT, which could make a bigger impact toward the latter part of the forecast period.
It is important to note that, while the forecast for the total number of IoT connections has been lowered due to the aforementioned reasons, IoT markets, in general, are accelerating post-COVID-19 (as previously reported). The IoT acceleration is driven by investments into additional software tools and applications and the required integration. Global enterprise IoT spending in 2020 grew 12.1%, reaching $128.9 billion as reported earlier in the year.
Cellular IoT market deep dive: two billion active connections by the end of Q2 2021
The number of connected IoT devices using cellular technology grew 18% year-over-year (YoY) to reach 2 billion by the end of the first half (1H) of 2021. China Mobile, China Telecom, and China Unicom account for almost three-quarters of the market. In the past 12 months, China Telecom grew 42% and increased its market share by more than two percentage points. Vodafone continues to lead the global market outside of China with a 6% global market share. US-based AT&T grew 22% YoY and held a 4% global market share in 1H 2021. IoT initiatives in China during the last 1.5 years were much less affected by COVID-19 and, in many cases, continued as planned after a short COVID-19 lockdown.
Regarding cellular technologies, the decline of 2G and 3G IoT connections continues, while the mass deployment of 5G connections is anticipated to start this year. Fourth-generation long-term evolution (4G LTE) connections grew 25% YoY due to higher adoption of the long-term evolution category 1 (LTE-Cat 1) and LTE-Cat 1 bis subsegments.
LPWA market deep dive: licensed LPWA market now larger than unlicensed LPWA
In 1H 2020, the share of connected IoT devices using unlicensed LPWA (e.g., long range (LoRa) and Sigfox) led with a 53% share, and licensed LPWA (i.e., narrow-band IoT (NB-IoT) and LTE-machine-type communication (LTE-M)) contributed 47% of global LPWA connections. A year later, licensed LPWA leads with a 54% share, while unlicensed LPWA has a 46% share of global LPWA connections. A key reason is that NB-IoT connections grew 75% YoY in 1H 2021. NB-IoT as a single technology now dominates the LPWA connection market with 44% market share, and LoRa has slipped to second place with a 37% share of global connections.
In the last 12 months, asset tracking and monitoring were the key applications driving unlicensed LPWA growth, while growth in NB-IoT was driven by smart meters and buildings and infrastructure industry verticals.
IoT Analytics expects that NB-IoT and LoRa/LoRaWAN will continue to dominate the market in the coming five years, with LTE-M and Sigfox in distant third and fourth places, respectively. While other technologies will continue to exist, at this point, it does not appear as though they will play a significant role in the overall global market, although they remain attractive for certain niche applications.
Look out for an updated 2021 low-power wide-area network (LPWAN) market report with plenty of detail on the LPWA market in Q4 2021.
End of previous analyses.
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A comprehensive 137-page market report on the current state of the Internet of Things, including market update and forecast, latest trends, and more.
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