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Analyst: IoT market to face pressure due to price drop

Posted: 09 Jun 2014     Print Version  Bookmark and Share

Keywords:Yole Developpement  IoT market  Internet of Things  sensor  cloud 

According to Yole Developpement, the annual market for Internet of Things hardware will significantly expand in the next few years but is set to drop as high volumes and competitive pressure drive average selling prices (ASPs) down faster than volumes increase. The market research firm added that one long-term result is likely to be the merging of companies and activities in vertical integrated enterprises to capture value from IoT-related services.

Yole has produced a report on technologies and sensors for IoT that looks forward ten years and sees the IoT equipment market going from an annual value of $9.5 billion in 2014 to $70 billion in 2018 before falling back to $46 billion in 2024. This is partly because in the second period IoT deployments will become smaller but more swarm-like, Yole predicted. However, it is also because value in IoT will migrate to software and services.

Yole predicts the annual value of the overall IoT market in 2024 will be $400 billion with $46 billion coming from hardware, $59 billion from cloud infrastructure and $296 billion from data processing services. That data processing will represent 15 per cent of all data processing on the planet, Yole claimed.

Internet of Things roadmap

The Internet of Things roadmap, according to Yole.

That the value of IoT is tied up in data services is understandable when it is considered that the main purpose of IoT is to make sensing ubiquitous at very low cost resulting in extremely strong price pressure on electronic component manufacturers. Nevertheless, the next five years will be extremely fruitful for device makers and is the time when manufacturers must stake a claim to IoT business.

IoT is a multi-billion dollar market emerging from the convergence of several established markets, such as industrial sensors, wearable electronics and home automation and from three categories of supplier; the electronics components, communications and data storage companies, and service companies. Companies are positioning themselves including Bosch Connected Devices and STMicroelectronics, Oracle, Amazon, Google and Facebook.

Just as there is expected to be price pressure in the components sector so to in data storage despite large investments needed to house the data. Yole added that a price war has begun between the major cloud computing companies cutting prices while growing capacity.

"Service companies will be the big winners in this field. In order to secure some of this value, hardware and cloud companies will have no choice but to try and integrate themselves vertically in order to valorise themselves and the data they'll be responsible for," said Guillaume Girardin, Yole analyst and one of the co-authors of the report.

- Peter Clarke
  EE Times Europe

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