We know the implications of the Internet of Things/Everything (IoT/IoE), and we know that consumer electronics (CE) devices continue to increase, particularly with the rapid growth we see starting from wearables along with the still-hot smartphone market. A recent survey and study conducted by GSMA forecasted between one to two billion M2M connections are likely by 2020 given current market trends. The significant difference in these numbers is based on an important event rooted in a set of key variables that GSMA outlines. As the GSMA report explains, "the market base could be double that if a number of growth factors are successfully enabled by industry players and governments in the short to medium term."
Growth base strong
For the semiconductor and electronics industry, the strong forecast for M2M connectivity is important because it carries with it not only device growth but also significant hardware, networking, and backend server growth drivers. The current GSMA forecast sees a 25% compound annual growth rate (CAGR) annually from 2015 to 2020. That alone is quite impressive. GSMA, however, explored six critical growth drivers for M2M cellular connectivity and what it would take to remove the barriers to such growth and where that would push the forecast. The following are the six growth drivers that are currently dampened but could double M2M connectivity opportunities over the next five years, as determined by GSMA:
- Low power wide area network opportunities are enabled
- Connected consumer goods market grows significantly
- Government policies driving M2M
- Global Big Data analytics emerging rapidly
- End-to-end security being assured
- Sustainable M2M business models are developed
Among the barriers to realizing these opportunities are price barriers for device adoption and the ability to provide seamless connectivity and interoperability across domains and industries with the support of standardized protocols. Lowering prices equals CE adoption increase and lowering barriers to use and improving connectivity and power/battery life with security would increase the diversity of use-cases for various devices and bring in many industries (e.g., health, agriculture, municipalities, industrial, etc.) that could benefit in productivity with improved M2M connectivity. Adding the value from Big Data analytics to improve the meaning and provide value added insight into the data collected from M2M events would also help propel additional adoption, growing the opportunity even more.
All of these events are reasonable and possible, even probable – whether the growth over the next five years will be at the 25% or the highest forecasted range of 40% is hard to say at this point, but while those are high numbers, they are rooted in solid assumptions and data by GSMA. And they all point to significant volume drivers for devices and supporting electronics and hardware.
Case study in growth: China 2015
One means for validating the probability of the GSMA assumptions and findings is comparing their data to the recent report by IDC, as reported by Evertiq. In 2014, China saw a year-over-year (YoY) increase of smart connected devices (SCD) reaching 16.2%, or 510 million units. However, as the country continues to face a slowing economy, the 2015 YoY forecast by IDC is expected to show only a modest gain, reaching 540 million new devices. However, the story doesn't just end there with a slowdown, there are important questions raised by IDC, as reported by Evertiq:
Although the overall growth of China's SCDs will slowdown a little bit, the real question is what will occur in regional markets and urban markets, at different tiers of cities as well as different products and channels? Which trends will determine how consumers and suppliers adapt to the market changes? Bearing these questions in mind, IDC concluded the following 10 predictions for China's SCD market in 2015:
- PC demands will recover 1st- to 3rd-tier cities
- Smartphone market growth in the 4th- to 6th-tier cities will slow down
- Tablet markets in lower tier cities will face great challenges
- Smartphone shipment in Western China will exceed 80 million units
- SCD shipments in Central China will keep on growing by double digits
- Market development of Northern China enters the "New Normal"
- Shipments of tablets in Southern China will exceed 6 million units
- Growth of commercial tablets in Eastern China will outrun the national average
- Product integration of wearables and smart home continues in largest urban cities
- Channel advantages of cities of different tiers are different
One theme across the drilldown forecast for China is the increase in different market strategies to adapt to the different market demands of those regions or cities in China. Extending this adaptive and agile market strategy to the global marketplace, it becomes clear that continued growth is not elusive. The key, of course, being market agility to adapt to the local demands and pricing. With these types of nuances at the fore of future market growth, having suppliers embedded in local supply chains is equally important – Smith & Associates continues to expand our global offices to increase our customers' opportunities for customized, dedicated supply chain solutions and global services that put the new market opportunities in their reach.