The Internet of Things: Sizing Up the Opportunity

InternetofThings

Reposted from McKinsey Insights & Publications:

The challenges associated with the Internet of Things are many; semiconductor executives should consider ways to integrate new development models, process capabilities, and go-to-market strategies in their existing operations. Success will require bold moves, boards that are willing to bet on unfamiliar models and activities, and collaboration with those that are developing industry standards. But the semiconductor industry should embrace this era of innovation and reinvention. The opportunities for growth outweigh the challenges, as components manufacturers explore the creation of a new class of Internet of Things–enabled semiconductors that can cut across a wider swath of potential customers than existing components can. The sector may be on the cusp of unit growth similar to the surge it experienced with the smartphone—and perhaps an even greater jump.

Three years ago, industry pundits and analysts predicted that, by 2020, the market for connected devices would be between 50 billion and 100 billion units. Today, the forecast is for a more reasonable but still sizable 20 billion or 30 billion units. This leveling off of expectations is in line with what we have seen in past introductions of new technologies. Throughout the late 1990s and early 2000s, for instance, there was much discussion in the semiconductor industry about the potential benefits and implications of Bluetooth technology, but the inflection point for Bluetooth did not happen until 2003 or 2004, when a large enough number of industry players adopted it as a standard and pushed new Bluetooth-based devices and applications into the market. The market for Internet of Things devices, products, and services appears to be accelerating toward just such an inflection point, in view of four critical indicators.

As Joep van Beurden, the chief executive at CSR, notes, only about 10 percent of the financial value to be captured from the Internet of Things trend is likely to be in the “things”; the rest is likely to be in how these things are connected to the Internet (see “Making connections: An industry perspective on the Internet of Things”). The semiconductor players that focus primarily on the things themselves should therefore find ways to support the development of a broader ecosystem (beyond silicon) and find their niche as both enablers and creators of value for their customers and their customers’ customers. This will mean developing partnerships with players further downstream, such as companies that are building and providing cloud-based products and services.

Read More…

3 thoughts on “The Internet of Things: Sizing Up the Opportunity

Share your thinking!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s