UBS TMT Conference September 2015 The global M2M · PDF fileUBS TMT Conference September 2015...

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© Analysys Mason Limited 2015

U B S T M T Conference September 2015

analysysmason.com

The global M2M and IoT market: forecasts and key trends

Michele Mackenzie


© Analysys Mason Limited 2015 2

Consulting from Analysys Mason

For 30 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the world to make the most of their opportunities.

To find out more, please visit www.analysysmason.com/consulting

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Consultingportfolio

Strategy and planning

Transactionsupport

EXPERTISECommercial due diligenceRegulatory due diligenceTechnical due diligence

Regulation

EXPERTISEPolicy development and response

Margin squeeze testsAnalysing regulatory accounts

Expert legal supportMedia regulation

Postal sector costing, pricing and regulationRegulatory economic costingNet cost of universal service

Performance improvement

EXPERTISEMarket researchMarket analysisBusiness strategy and planningMarket sizing and forecastingBenchmarking and best practiceNational and regional broadband strategy and implementation

EXPERTISEPerformance analysis

Technology optimisationCommercial excellence

Transformation services

EXPERTISERadio spectrumauction supportRadio spectrum

management

Spectrum policy and auction support



Research from Analysys Mason

We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range of research programmes that focus on different services and regions of the world.

To find out more, please visit www.analysysmason.com/research

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PROGRAMMES

Service AssuranceCustomer Experience Management

Customer CareRevenue Management

AnalyticsNetwork Orchestration

Software-Controlled NetworkingService Delivery Platforms

Service FulfilmentTelecoms Software Market Shares

Telecoms Software Forecasts

PROGRAMMES

Digital Economy StrategiesDigital Economy PlatformsFuture Comms and MediaIoT and M2M Solutions

PROGRAMMES

Mobile ServicesMobile DevicesFixed Broadband and Multi-PlaySME Strategies

PROGRAMMES

Fixed NetworksWireless Networks

Spectrum

Consumer and SME services

Digital economy

Regional marketsTelecoms

software

Network technologies

PROGRAMMES

Global Telecoms ForecastsAsia–PacificThe Middle East and AfricaEuropean Country ReportsEuropean Core ForecastsEuropean Telecoms Market Matrix

Researchportfolio



IoT and M2M Solutions Programme: In 2014, our IoT and M2M research was largely vertically focused

Examples of vertical focused research reports

Connected Car Security Fleet Management Industrial Internet

Digital Signage Smart Cities Smart Metering

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IoT and M2M Solutions programme: In 2015, our IoT and M2M research focuses on examining horizontal issues, while further developing our vertical insights

Examples of planned horizontally focused research reports, 2015

Opportunities in APAC

Application Enablement Platforms

Enterprise wearables

Emerging Wireless Access Technologies

Healthcare Usage Based Insurance

Building Energy Management

Examples of vertically focused research reports

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CONTENTSCONTENTS

INTRODUCTION TO ANALYSYS MASON

DEMAND AND SUPPLY SIDE DRIVERS

OUTLOOK FOR M2M/IoT

KEY TRENDS

ABOUT THE AUTHOR

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Definition: M2M versus IoT

• M2M and IoT continue to be used interchangeably on both the demand and supply side of the industry.

• M2M typically refers to the connectivity that enables two or more• machines or things to communicate with each other.• The IoT industry is nascent and its boundaries and structures are still

evolving – and, as a result, so is its definition. • IoT is often closely associated with the consumer market and• consumer devices, and IoT certainly takes into account the human

interaction with the data generated by devices in a connected environment.

• However, IoT is just as relevant, if not more so, in the enterprise domain as it is in the consumer environment.



Barriers: Fragmentation of standards, and fears over privacy and security will make some firms reluctant to invest

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Key inhibitors for growth in internet of things

New providersThe lowering cost of service provision has led to hundreds of new start ups

PrivacyNew providers

The lowering cost of service provision has led to hundreds of new start ups

Fragmentation of standards New providers


Security

Internet of things

Billions of new devices will be connected


Vertical-specificbarriers New providers


Funding



Drivers: Developments in devices and networks as well as new business models are enabling new internet of things services

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Key reasons for enterprise adoption of internet of things

Internet of things

Billions of new devices will be connected


Opportunities to grow revenuesNew providers


Opportunities to reduce costsNew providers


Regulation on connected cars & smart meters


New low cost devices, networks &

solutions

$$


Stimulus plans and government funding



And forecasts from industry stakeholders for ‘connected things’ have been bullish….

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Ericsson’s forecast for connected devices

Cisco’s forecast for connected devices



…although some forecasts have since been slashed

Ericsson’s forecast for connected devices

26 BILLION CONNECTED DEVICES



Headlines like these indicate increased media focus on the broader IoT sector and it’s not always positive…

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6 reasons why we’re under-hyping the Internet of Things

The Internet of Things businesses taking the sector by storm



But the macro-economic situation is driving enterprises to try to achieve operational excellence and the IoT presents an opportunity…

Figure: Growth in world output, developed and emerging economies, 2011-2014 [Source: World Economic Outlook Update, IMF, July, 2013]

–1%0%1%2%3%4%5%6%7%

European Union Emergingmarkets

2011 2012 2013 2014

Operational efficiency

Risk management

Modernisation

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The evolution of equipment with respect to time and intelligence

And smart connected devices will redefine many industry sectors and transform companies and user experiences

‘Dumb’ physical equipment

Smart equipment with embedded

system

Smart connected equipment with

networking capabilities

Past, present & future

Present & future

Recent past, present & future

Prod

uct I

ntel

ligen

ce

Time

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CONTENTSCONTENTS



OUTLOOK FOR M2M/IoT

KEY TRENDS

ABOUT THE AUTHOR

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M2M device connections by sector, worldwide, 2013–2024

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.52013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Connections (billion)

Automotive and transport Financial services HealthcareIndustrial Public sector RetailSecurity Utilities Other

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Supply side and demand side factors feed into our projection that M2M connections will grow to 3.4 billion by 2024

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Three sectors will account for more than 90% of connections from 2014 onwards

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M2M device connections by key sectors, worldwide, 2013–2024

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Percentage of connections

Automotive and transport Security Utilities Other

Automotive & Transportvertical

Security vertical

Utilities vertical

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M2M device connections by sector, Western Europe, 2013–2024

M2M device connections by sector, North America, 2013–2024

North America and Western Europe have pioneered developments in M2M and IoT

0

100

200

300

400

500

600

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Connections (million)

CAGR 16%

050100150200250300350400450

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024


CAGR 15%

7 million connections

EUR 35bn revenue



Emerging Asia Pacific (China!) is now leading in terms of overall volumes of connections and Developed Asia Pacific focuses on different segments

M2M device connections by sector, EMAP, 2013–2024

M2M device connections by sector, DVAP, 2013–2024

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02004006008001000120014001600

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024


CAGR 22%

300m + smart meters

0

50

100

150

200

250

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024


CAGR 22%

3000 digital signage units



M2M device connections by sector, Middle East & Africa, 2013–2024

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Middle East and Africa is growing fast from a small base

0

20

40

60

80

100

120

140

160

180

200

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

CAGR 22%

“ROI depends on the major fleet issues in each market. It could be oil theft, driver behaviour, route optimisation, vehicle recovery and cold storage monitoring. However, on average, an ROI in the 15–20% range can be expected.”

Head of M2M, Middle East telco

R66,000 fuel savings month



Passenger cars in use with embedded or tethered connectivity

Core segments: Several factors are now aligning to make in-car connectivity a reality

1 Technological advancement

5 New data and connectivity opportunities for VMs

Consumer demand seamless services4Vehicle manufacturers extend their appeal3

2 Regulation drives adoption

0

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2014

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2023

2024


Embedded Tethered



Fleet management M2M device connections by vehicle type, worldwide, 2013–2024 [Source: Analysys Mason, 2014]

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Core segments: fleet management is a more mature M2M segment but still has room for growth

0

20

40

60

80

100

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024


HGV LCV

§ The penetration rate for fleet management solutions stood at 15% of total fleet vehicles in 2013, when there were 34 million fleet management connections worldwide.

§ In developing markets, reducing vehicle and fuel theft and misuse of the vehicle are stimulating demand for solutions

§ But hardware and installation costs can be prohibitive



M2M device connections in the security sector by application, worldwide, 2013–2024 [Source: Analysys Mason, 2014]

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Core segments: alarms constitute the largest application for connectivity in the security sector

0

50

100

150

200

250

300

350

2013

2014

2015

2016

2017

2018

2019

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2021

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2023

2024


Alarms CCTV

• The migration from ‘dumb’ security systems to smart connected systems that enable users to access and monitor alarms and CCTV remotely isrevitalising the security sector and providing new opportunities for connectivity.

• The number of connected security devices worldwide will grow from 83 million in 2013 to 307 million in 2024, at a CAGR of 13%.



CONTENTSCONTENTS



OUTLOOK FOR M2M/IoT

KEY TRENDS

ABOUT THE AUTHOR

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Key trends in the M2M/IoT market

LPWA: optimised networks will drive future growth

M2M and IoT merger and acquisition activity

continues to shape the industry

Players are positioning to take advantage of the M2M/IoT market



LPWA network standards are emerging and are opening new market opportunities

Total addressable market and forecast of LPWA opportunity and connections

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Con

nec

tion

s (b

illio

ns)

Total addressable market Forecast of LPWA connections

Low CostLess than USD5 per module

Long, independent power source Up to and exceeding 10 years

Strong propagationThe ability to penetrate walls and obstacles

Proposed characteristics of LPWA

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LPWA networks launches are mainly concentrated in Europe for now: A number of operators are deploying LoRa LPWAN

KPNNetherlands

ProximusBelgium

BouyguesFrance

SwisscomSwitzerland

USA

South Africa

CiscoUSA

FastnetSouth Africa

LoRa network launched

LoRa network planned

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Vibrant M&A activity has shaped the composition of the M2M value chain in 2013 and 2014, and will continue to do so through 2015

Established M2M players aim to expand their position in the M2M value chain

Established M2M players strengthen their position in the M2M value chain

Players entering the M2M space to complement their core line of business and capitalise on the M2M opportunity

Financial investments to capitalise on the M2M opportunity$

$7.7 B Total disclosed transaction value (Nov. 2014)

Source: Hampleton Partners

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Financial investors

Technology companies

M&A activity in M2M is driven by diverse players and diverse motivations

▪ Source: Analysys Mason, Public sources

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In market consolidation Telecoms operators Non-TMT strategic

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Key takeaways

1Demand and supply side drivers are aligning to drive growth in the M2M/IoT market • But the market is immature and dynamic and forecasts have already been adjusted

• The IoT is however expected to deliver a new wave of economic growth

2Regional and vertical variations will persist§ Developing markets are beginning to deploy M2M/IoT more rapidly§ Fleet management, connected car, security and utilities have grown quickly but

other verticals are attracting interest.

3IoT optimised networks are emerging and M&A activity is increasing§ LPWA affords a significant opportunity to connect new application groups § M&A activity is significant as players position to capture the value of the IoT

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