While growth remains very strong in mobile IoT connections, delays in regulation, technology evolution and fragmentation, and changing user behaviour all give cause for revising expectations
The IoT market is becoming ever more complex, throwing up new opportunities on an annual basis and the occasional dead-end. Earlier this month Machina Research published its IoT Global Forecast & Analysis 2015-2025 report, our annual snapshot of our expectations for the global IoT market for the next 10 years. The analysis in the report is based on our ongoing regularly updated IoT Forecast Database, updated on rolling analysis of the opportunity across 200+ applications. Every year the analysis of what has changed over the previous 12 months throws up some new perspectives and changing dynamics in the industry as a whole. In this article we dig into those in some detail, with a particular focus on the cellular opportunity.
The first thing to note is that compared with last year most of the forecast is ‘steady as she goes’, with growth in most of the major markets, including China and the US, developing pretty much as we would have expected compared to 12 months ago. One or two geographies have been a bit slower to develop. Most notable has been Japan, courtesy of a continuing lack of maturity in certain verticals and a degree of isolation from global trends. However, we expect operator activity to pick up this year with Softbank particularly ready to push on. Brazil, despite strong growth, has also had its share of foot dragging, specifically in the auto sector where regulation of stolen vehicle recovery continues to be delayed. In Europe there is a similar issue, with eCall still being delayed, with some impact on forecast connections in the next few years. The overall impact of these reviews was that we revised our cellular connections at the end of 2015 down by 6% compared to what we had been forecasting.
The long-term forecast for cellular has also been pegged back somewhat, coming down 10% for the year 2024, i.e. the last year for which we have comparable figures with last year’s forecast. This is partly due to a slower than expected implementation of some of the regulatory drivers noted above. It is also partly down to the continuing uncertainty about 2G and 3G switch-off in some countries. This has been a slight inhibiting factor in the past in the US, where operator plans, e.g. from the likes of AT&T, have been transparent. In Europe in particular there is a lack of communication which will have a temporary knock on effect over the ten-year period over which we expect the refarming to take place.
The growth of Low Power Wide Area (LPWA) will also have a slight depressing impact on cellular connections in the long term, although we don’t see them predominantly as a cannibalising set of technologies. Nevertheless, particularly for devices that would otherwise have connected using 2G, LPWA technologies are a viable option in many cases. We have always been bullish about the opportunity for LPWA, albeit having recently had to revise down the short-term growth prospects due to relatively slow deployments. However, the relatively smooth development of the 3GPP standard (which has been through countless name changes, but is now termed ‘LTE-NB1’) compared to what we might have expected 12 months ago, and the almost universal embracing by MNOs has led us to expect great thing from licensed LPWA in the medium term.
However, it’s not all about regulation and access technologies. We have also revised our expectations of a few applications based on evolving market dynamics. The most prominent is with regard to stand-alone vehicle navigation. While last year we expected some continuing appetite for this form factor, the evidence suggests that it’s only a matter of time before it is consigned to the dustbin of history, squashed between smartphone-based apps and the irresistible rise of the embedded connection (‘Vehicle Platform’ in our terminology).
No forecast is ever going to be exactly right. New trends emerge, new technologies are developed and things happen slightly faster or slower than can be predicted with certainty. The best approach to sizing the market and undertaking forecasts is to use a highly granular segmentation and review regularly, as we do. The IoT Global Forecast & Analysis 2015-2025 report was published in August 2016. It provides an overview of the total market opportunity in the Internet of Things, based on on-going analysis of the market as presented in the Machina Research IoT Forecast Database, the world’s most comprehensive and rigorously tested forecast of the IoT opportunity.
The author of this blog is Matt Hatton, Founder & CEO, Machina Research