Everyone is (understandably) excited by the promises of the Internet of Things (IoT). After all, to be honest, I've got end-devices that are definitely in the IoT realm on my holiday shopping lists, I'm betting you do too. The consumer moment aside though, there are real supply chain reasons for IoT excitement. The increased semiconductor and electronics penetration is always welcomed news, but while the forecast for growth for the IT side of IoT is lengthy, the hardware boom may only have a few years' runway.
Component and hardware boom first
As we've already been seeing, ICs are strong and set to continue pace through the next year plus – this is directly related to the increased demand in new IoT devices and in upgrades to support connectivity to IoT. For the global semi supply chain, the fact that IoT truly spans markets and regions is a major plus. Additionally, there is good growth in sensors, as the ability to add that user functionality into IoT devices, especially wearables and smarter smartphones is at the top of feature demands currently.
Yole Developpement offered the following forecast earlier this year regarding market growth and IoT: "As an example, we expect the overall IoT market to reach $400B in 2024, with $46B coming from hardware, $59B from the cloud and $296B from data processing." Additionally, as Yole pointed out in the same mid-year report, the growth for the wider electronics industry will be intense but hinging on downward price pressures in order to push the ubiquity aspect of IoT. In other words, in order for IoT to really take hold, the end-devices and user engagement points have to have a low enough cost that they will be purchased and adopted. This is a volume market; a market strategy opposite of smartphones and tablets that enter at the high priced end, drawing a targeted, high-end consumer and then trickling down to lower cost devices over device generations.
Changing the supply chain dynamics?
As SEMI recently discussed, the IoT growth and the direction this growth is likely to take, may actually impact the global semiconductor and electronics supply chain, altering some business models. As SEMI reported, George Liu, TSMC Director of Corporate Development, offered important insights into possible impacts from IoT:
Liu projected that devices will need to operate at near threshold or even sub-threshold voltages, with “thinner” processing overhead, while the integration of more different functions will redefine the system-in-a-chip. Smaller and lower cost devices will require new materials and new architectures, new types of heterogeneous integration and wafer-level packaging, and an ecosystem of standard open platforms to ease development. TSMC’s own MEMS development kit has layout rules, but not yet behavioral rules, always the more challenging issue for these mechanical structures. “That’s the next big thing for us,” he asserted. “These huge gaps mean huge opportunities.”
There are certainly many, many opportunities that will (continue) to arise from the growth, expansion, and maturation of IoT. Low power, low cost, and smaller solutions (component and device) are at the forefront because IoT directly involves portability, accessibility and intuitive use cases for users. Ubiquity may refer to "everywhere" but the seamless and intuitive requirements of these IoT solutions mean that users don't necessarily want to be reminded of the amount of technology behind the SmartLife that IoT brings them.
Looking into 2015, the IoT growth curve is still building for hardware, while our time in the super-growth period may be relatively shortened compared to the software and IT side, the immediate opportunities for the next five years or so are tremendous and many critical supply chain changes are just beginning. Thankfully, these changes hold significant promise for the global semiconductor and electronics supply chain.