Can we grow the number of IoT devices fast enough?

Can we grow the number of IoT devices fast enough?

The Internet of Things is considered a very significant, high impact business opportunity. It will connect “Things” to form a network of things that will interact automatically or semi-automatically along their pre-trained or self-taught algorithms. What seems astounding is the magnitude of growth, the enormous number growth of devices that is forecasted.

Growth rates of the IoT hardware opportunity

For comparison, mobile phones grew ~28% (1997-‘07), internet users grew ~27% (1997-‘07). And these numbers were considered high. Facebook grew its user base by 122% per year (’04-’14), Amazon grew 40% per year (1998-‘12), but then both companies did not manufacture tangible products. And where they did, like the Kindle, CAGR never went above 20%, although the devices were priced at or below cost. I am not sure whether this is a fundamental limitation, it would certainly be interesting to find out.

The numbers show that the compound annual growth rates required for reaching these goals would put excessive strain on the supply chains as we know them today. The analysis shows that not all segments in the value chain are affected equally. The key to understanding the implications for each of the major steps in the value chain is the knowledge of the product structure that will deliver IoT devices. There will be fundamentally different product structures that the supply chain will encounter, with significantly different impact on the different segments of the supply chain and the added value per segment. Consider these types of devices:

  1. a product that in its “pre-IoT” incarnation already was equipped with electronics, had a power supply, and possibly some form of sensing and actuation.
  2. a product that had no electrical/electronic feature before being considered a vital contributor to the IoT. It will need to be equipped with a device that will utilize the complete supply chain to enable sensing and communication, along with power and logic.

In the first case, adding sensor and communication components, plus some additional logic, will have impact on the component suppliers, who may deliver additional components. However, the substrate/PCB supplier will still deliver revisions of the same PCBs, the PCB assembly companies will add a handful of components more to the existing design.

Only in the second case, the complete supply chain will benefit from the new devices.

The dilemma of the opportunity

The growth opportunity reveals itself when you calculate the annual production volumes required to reach the forecasted numbers Going from (optimistic) 5bn devices existing today, to 26bn (2020) and 500bn (2030) requires building the same number of connected devices each year as the have been built up to today until 2020. From 2020-2030 this number rises from 5 bn devices/year to a staggering ≈45bn devices/year! On average. Quite some potential. To grasp the potential and not make hardware be the bottleneck in the development of the IoT, fresh and innovative, non-linear thinking needs to be undertaken.

I perceive the proposed growth rates and the existing manufacturing capabilities as a dilemma. Do I have a simple answers to solve the dilemma? No. Are there answers to all questions? No. Do we know all questions? For sure, no.

To start getting a better grip on the topic, to identify opportunities for the supply chain in manufacturing the Internet of Things, members of the electronics manufacturing supply chain will be convening to discuss the topic at the SMT fair in the workshop “Manufacturing the Internet of Things”.

Workshop website: http://www.mesago.de/en/SMT/The_conference/Program/135__program_detail.htm

Further reads

maristechcon blog: http://maristechcon.com/archives/249

LinkedIn post http://linkd.in/1EveBqG

Markus Riester

Partner @ meisterwerk ventures | Engineering solutions, executive coaching

8y

Andreas, this was discussed at the workshop. PCBs grow with <2%, while the growth rates of IoT devices is between 25-55%, depending on the numbers that are used for the calculation. This said, when neither the application nor the form factors of the IoT devices are completely clear it is hard to tell how the PCB market needs to develop. My current estimate is that the PCB (and substrate) manufacturers will see a boost from their current low growth, but nowhere near non-linear.

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Andreas Schaller

V2X Technology Strategy at Robert Bosch Mobility Solutions

9y

Looking forward to see a comparison between the global PCB demand forecast and the IOT hype numbers !

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