The Internet of Things (IoT), which connects various devices to each other and the cloud, is widely considered to be the next big growth market for tech companies. That's why companies like Intel (NASDAQ: INTC) and Cisco (NASDAQ: CSCO)launched dedicated IoT units, and the market seems flooded with new wearables, smart home devices, and other connected gadgets.
To gain a better understanding of the IoT market, let's take a look at 10 crucial facts and figures.
Research firm IDC expects worldwide spending on IoT hardware, software, and services to rise from about $800 billion this year to nearly $1.4 trillion by 2021. This year, the IoT areas that will attract the biggest investments include manufacturing operations, freight monitoring, production asset management, and smart grid technologies.
BI Intelligence estimates that 24 billion IoT devices will be installed by 2020. It expects that total to be split between three entities -- businesses (11.2 billion devices), governments (7.7 billion devices), and consumers (5 billion devices).
That forecast is much lower than Cisco's widely cited estimate of 50 billion devices by 2020, which it made in 2011. But it's still more bullish than ABI Research's target of 21 billion devices by 2022.
In 2015, General Electric (NYSE: GE) claimed that investments in the Industrial IoT (IIoT) market, which includes all IoT devices used for industrial purposes, would hit $60 trillion over the next 15 years. GE is linking these connected devices to its Predix Cloud, a cloud platform that analyzes data to boost a company's overall productivity.
IDC estimates that 60% of global manufacturers are already using data accumulated from connected products and production chains to optimize their product portfolios. The firm believes that by next year, the proliferation of these analytics-driven solutions will improve manufacturers' innovation delivery and supply chain performance by 15%.
Last year, Forrester Research found that 23% of global enterprise respondents use IoT solutions, compared to just 14% of small and medium-sized businesses (SMBs). The reason is that large companies, like airlines and banks, can often streamline their businesses more effectively with IoT solutions than smaller businesses.
Earlier this year, strategy consulting group Altman Vilandrie & Company surveyed nearly 400 IT decision makers across 19 industries. It found that nearly half of those companies experienced an IoT-related security breach.
For companies with annual revenues less than $5 million, the average cost of a data breach was 13% of their revenues. Larger companies reported "tens of millions" in damages.
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Data breaches are why Gartner expects spending on IoT security solutions to grow from $348 million in 2016 to $840 million in 2020. That's good news for a company like Cisco, which relies on its higher growth IoT and security businesses to offset the slower sales of its legacy routers and switches.
Meanwhile, fitness trackers, smartwatches, and other wearables are linking more mainstream consumers to the IoT. CSS Insight expects this market to grow from $15 billion in 2015 to $25 billion in 2019. Total shipments could jump from 84 million to 245 million during that period.
The smart home market -- which includes smart speakers, appliances, lights, locks, and other automation devices -- could grow from a $24 billion market to a $53 billion one by 2022, according to Zion Research. However, privacy and security concerns will likely remain hurdles to mainstream adoption.
Last year, the Global X Internet of Things Thematic ETF (NASDAQ: SNSR) was introduced as the first ETF to target the growth of the IoT market. The ETF's top holdings include STMicroelectronics, Garmin, AMS AG, Sensata, and Skyworks Solutions. The ETF rallied more than 30% this year, easily outperforming the S&P 500's 16% gain, and could be a viable investment for investors looking for a broad-based play on the market.
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