(Blog): In volume terms, the overall M2M market is growing fast in all wireless markets and in all regions. A total of 136 million cellular modules were expected to be active at the end of 2012. According to Samuel Ropert (pictured) of analysts IDATE, overall annual growth for the next four years should top 30% for cellular modules, reaching 372 million in 2016.
By that time, says Ropert, M2M SIM cards will probably represent 4.5% of total SIM cards (human and machine) worldwide and over 21.5% of total SIM cards in the USA (and only 11% in Europe).
Growth is clearly lower in terms of value, because new applications are generally less demanding in terms of bandwidth and/or of advanced features (and ARPU – average revenue per user – is decreasing). In addition, a large share of growth will come from major deployments by reference players in their respective industry which should benefit from bulk purchasing. The worldwide cellular M2M market represents €22.2 billion in 2012, with most revenues coming from software and IT services. It should rise by 13% per year to reach €36 billion in 2016.
On a global basis, the main reasons associated with this dynamic growth in 2012 refer directly to the consumer electronic devices sales and the Chinese boom. From 2015, China will overtake USA in terms of cellular modules installed. Between 2011 and 2016, the Chinese modules base will grow at 40% per year (CAGR).
Figure 1: Cellular module evolution, by country (million units). (Source: IDATE)
M2M development is usually based on a small set of machines, which only communicate a limited amount of information.
The growth of the wireless M2M market has been sustained mainly by a few major vertical markets such as fleet management, industrial asset management, points of sale, and security, plus some specific applications in selected countries (like vending machines in Japan).
The prime (very) early adopters of M2M solutions have been security (mainly for fixed facilities) and transportation (mainly around fleet management). The M2M concept is now expanding gradually to more recent adopters in utilities (meter reading), healthcare (patient monitoring from the home, or outside) and commerce with the emergence of affordable wireless networks.
The issue of utility (with AMR) has been in the spotlight, especially in Nordic countries, as it involves numerous machines from one major provider around one single basic function. The focus is now shifting to the car fitted out with telematics, in particular in the USA, and a few other segments with even larger volumes and numerous functions.
Figure 2: M2M development by vertical industry (Source: IDATE)
In the next few years, three verticals will drive the M2M market, especially in the US.
Automotive will lead the M2M market
The automotive vertical will be a key driver mainly in terms of volume. In terms of cellular modules volume forecasts, it will reach 180 million units in 2016 worldwide, with a 40% CAGR between 2011 and 2016. In the US, all car manufacturers already provide a telematics offering where GM and its OnStar service are seen as pioneers.
Forecasts are very positive, as 3.2 million Onstar systems should be sold by 2017. The US market is the leading market in telematics. It is very confident in the service roll-out, as AT&T inked a deal with GM around the Onstar service running on LTE network.
In Europe, the automotive industry is waiting for the eCall (emergency call system) regulation (from 2015) to equip around 20 million vehicles sold each year in Europe – all new cars will be equipped with at least one cellular module. The market in value is still blurred as the business model is not yet definite: there are multiple doubts in Europe around consumer willingness to pay for such telematics and infotainment services. Mobile devices (phones and tablets) are strong substitutes.
Connected consumer electronics (CE) is gaining traction in the M2M space. Consumer electronics devices in the M2M field refer to connected devices for the mass market where connectivity appears transparent to final users. This market will reach 61 million units in 2016, representing a steady growth (15% CAGR between 2011 and 2016). In this category, the most successful devices are connected e-readers (thanks to the flagship of Amazon’s Kindle), connected PNDs (personal navigation devices), photo frames and speed camera prevention systems, etc. The impact of consumer M2M is so impressive that North America overtook Europe in volume in 2010, thanks to CE devices. The roll-out of consumer electronics devices will be delayed in Europe where WiFi will be widely used.
The utilities market in electricity, water and gas, using AMR (automatic meter reading) and promising next gen smart grid applications, is also a key driver on the M2M space as it relates to many millions of smart meters to equip. Actually, the utilities market will top 54 million cellular modules with the highest CAGR (60% compound aggregate growth rate) between 2011 and 2016 (by taking into account both cellular smart meters and cellular concentrators).
However, lots of national-scale deployments are progressive in the time and some of them have already been delayed. Still, in comparison to other verticals, the potential here is quite huge. In the US, public policies remain the key driver for this market as a US$4.5 billion Stimulus Fund has been specifically reserved for smart grid projects (many pilots and programmes are currently taking place). The target is to reach 40 million smart meters nationally by 2015.
In Europe, the recent liberalisation of the utilities markets and the EU directive around smart metering deployment are also driving the market. For instance, according to the EU directive, by 2020, 80% of the European clients will need to be equipped with an electric smart meter.
Other promising markets are taking off, but less rapidly. The healthcare market has not been yet the most enthusiastic adopter of M2M. Many players are reluctant because of liability issues, and, even more so, due to the absence of clear business models, a situation which relates to national considerations. Moreover, multiple regulations about electronic medical records management are already in place, which could be a hurdle for some players. In most cases, M2M solutions would be used for preventive usages; major health insurance systems, however, are medication-centred. Therefore, volumes are set to remain low, while distribution channels are difficult to penetrate because no expert distributor is yet in place. Wellbeing-based applications would be considered more as a driver for this vertical since it is not hindered by any business model issue.