London, UK. 10 October, 2011 – Machina Research, global advisors on M2M and mobile broadband, have published a new report, M2M Global Forecast & Analysis 2010-20. It provides a comprehensive and detailed analysis of the global opportunity for machine-to-machine (M2M) communications. The key findings are:
Global M2M* connections will increase from one billion at the end of 2010 to 12 billion at the end of 2020, accounting for half of all global data connections. Connections will be dominated by two sectors: consumer electronics (including cameras, music players and TVs) and intelligent buildings (e.g. security and HVAC systems). Between them they will account for over 60% of the total. By 2020 Europe will be the biggest region for M2M, accounting for 28% of connections. The biggest single markets will be in China and the US with 21% and 20% respectively.
Over 70% of M2M devices will be connected by short-range technologies, mostly WiFi. Of the remainder, wireless cellular technologies dominate. When considering solely cellular connections, the most important applications sectors are utilities (principally smart metering) and automotive (including pay-as-you-drive insurance, emergency/eCall, and security & tracking). At the end of 2010 M2M accounted for 2% of cellular connections. By 2020 this will reach 19%, or 2.3 billion connections, says Machina Research.
In terms of revenue**, M2M will grow from €91 billion in 2010 to €714 billion in 2020, a compound annual growth rate (CAGR) of 22.9%. Europe is again forecast to be the dominant region, generating revenue of over €200 billion in 2020. The US is the largest individual country with over €150 billion revenue, followed by China with over €110 billion.
The addressable revenue opportunity for mobile network operators (MNOs) will be €210 billion in 2020, of which Machina Research expects them to take €40 billion if they have an effective M2M strategy. The amount of revenue that will be generated simply from playing the role of bit-pipe will be much more modest at €4 billion, reflecting the relatively small amounts of traffic generated by most M2M connections. In total just 800Pb of data will be generated by M2M in 2020, less than 2% of total mobile data traffic.
Commenting on the findings, report author Jim Morrish (pictured) warns that addressing the huge opportunity is fraught with complexity: “M2M is as diverse as the business sectors that it serves. Each and every one of the hundreds of applications that we’ve analysed has different dynamics. It’s only by looking at each application individually that you can hope to either forecast the market opportunity, as we have, or address the connectivity requirements, as the throngs of device manufacturers, service providers, network operators and systems integrators will hope to do.”
The key for MNOs to be successful lies in adapting to the new dynamics of the M2M market. “MNOs will have to up their game to engage with others in the value chain,” notes Morrish. “The fact is that much of the value of M2M lies in the products and services that are wrapped around a connection, and in the value of that connection (rather than simply the traffic). This is clearly a new business model for MNOs. But, beyond that, in many verticals there are incumbent service providers, or others with specific sector, or application specific, expertise – the trick for MNOs will be to partner with the right companies in a way that brings value to both parties.”
Co-Author Matt Hatton also notes: “What we’re talking about with M2M is little short of a second industrial revolution. The growth in connected devices over the next 10 years will fundamentally change the way we live and work. With that shift comes a lot of upheaval which represents an opportunity for nimble service providers to build a business for themselves and an opportunity for intelligent businesses to radically change the way they work.”
* Machina Research defines M2M as “Connections to remote sensing, monitoring and actuating devices, together with associated aggregation devices”. It includes all forms of short range and wide area technologies. It excludes personal mobile broadband devices in the form of mobile handsets, PC/laptop connections and tablets/eReaders.
** Revenue includes device cost where connectivity is integral to the device, module costs where devices can optionally have connectivity enabled, installation and integration costs, monthly subscriptions, connectivity and traffic fees.