IoT news | The pandemic continues to disrupt some IoT markets, but some sectors present opportunities for operators

By Ibraheem Kasujee, Analyst and Michele Mackenzie, Principal Analyst at Analysys Mason.

“The increased use of IoT during the pandemic and the adoption of 5G will provide opportunities for operators to increase their number of IoT connections, but they may need to take more risks to translate that into meaningful revenue growth.”

The total number of wireless IoT connections worldwide will increase with a CAGR of 15% from 1.8 billion at the end of 2020 to 6.2 billion in 2030, according to this The latest IoT forecast from Analysy Mason. IoT connectivity revenue will grow more slowly than the number of connections between 2020 and 2030, with a CAGR of 11%, as competitive pressures in the connectivity market continue to undermine connectivity ARPC. the increased use of IoT during the pandemic and the 5G rollout will provide opportunities for operators to increase their number of IoT connections, but they may have to take more risks if they want to translate that into significant revenue growth.

The consequences of the COVID-19 pandemic will curb the growth of the IoT market until at least 2023

The growth rates of the number of IoT connections fell in most countries between 2019 and 2020; For example, the growth rate in the number of IoT connections in France fell from 20% in 2019 to just 8% in 2020, based on data from the French regulator. For some countries, this decline in growth rates was stronger than we had previously forecast.

IoT connectivity revenue and the number of IoT connections will grow more slowly in 2021 than expected before the pandemic, as no new contracts were signed in 2020 and chipset shortages persist. We predict that the growth rate in the number of connections and connectivity revenues will return to the previous trend by 2023 when the effects of the pandemic wear off (Figure 1).

illustration 1: Forecasts 2020 and 2021 for IoT Connectivity Services Revenue Growth Year Over Year, Worldwide, 2020–2030

The automotive sector was particularly hard hit in 2020: OICA reported that sales of automobiles worldwide fell 12% in 2020, with significant regional differences.¹ Vehicle sales decreased by over 20% in the EU and nearly 30% in North America, but decreased by only 6% in China and increased by 8% in South Korea. Vehicle sales began to surge in the second half of 2020 and early 2021, but the ongoing global chipset shortage has slowed the recovery. Vehicle sales in the EU were lower in the 3rd quarter of 2021 than in the same months of 2020.²

Not all sectors have been adversely affected by the pandemic and new opportunities are opening up for operators

Despite the disruptions due to chipset shortages, operators in the automotive market have opportunities for revenue growth. The electric vehicle market, in which a large proportion of cars are connected, is growing rapidly, although the automotive market in general is struggling. Hybrid electric vehicles and electrified vehicles accounted for over 22% of all car sales in the EU in 2020, up from 9% in 2019.³ 5G will enable operators to offer higher quality in-car services, such as in-car entertainment and over-the-air software updates.

The COVID-19 pandemic has also accelerated the digitization of other sectors and thus opened up further IoT opportunities for operators.

• Healthcare. The added pressure on hospitals and health clinics and the need for social distancing have forced the healthcare sector to adopt virtual solutions such as telemedicine, remote patient monitoring, and remote clinical study. Healthcare has long been a challenging market for operators due to its strict regulations and fragmented nature, but operator activity in the healthcare sector has increased since the pandemic began. Vodafone has connected over 20 million healthcare devices and partnered with Deloitte in October 2021 to accelerate the adoption of connected healthcare solutions. KORE is also very active in the US healthcare market after acquiring Integron, a healthcare specialist, in December 2019 and aims to have $ 300 million in healthcare sales by 2025.

• sale. The switch to contactless payment during the pandemic helped to increase the number of connected point-of-sale (PoS) terminals. The use of PoS terminals has also benefited from the relaxation of payment regulations and the increase in the contactless spending limit in several countries.

• Utilities. The utilities sector will benefit from economic funds such as the EU Recovery Fund and the US Infrastructure Bill, which provide funding for sustainability-related projects. This includes intelligent water and gas meters as well as smart grid applications such as electric charging points.

The automotive sector will drive the diffusion of 5G IoT solutions

The number of 5G IoT connections worldwide will reach 470 million in 2030.^4th The automotive sector accounts for 70% of these connections, followed by the smart cities sector (13%). Both sectors include high bandwidth, low latency applications that will benefit from 5G, such as in-car entertainment and CCTV cameras. OEMs in these sectors will be more willing to bear the additional hardware costs associated with 5G than OEMs of other IoT devices. Adopting 5G in other sectors will be slow as the additional module cost of 5G will be prohibitive for most applications.

Few commercial 5G IoT contracts (for devices in public networks) have been announced. In fact, the majority of 5G IoT activity takes place in the realm of private networks. One public 5G contract is GM’s Connected Car contract with AT&T, which was announced in August 2021. GM will use AT & T’s 5G network to provide entertainment and over-the-air software upgrades. Most of the other 5G activities in public networks are still in the testing phase. For example, China Telecom has tested a smart city project in Hangzhou, and Vodafone UK and Telefónica Spain are testing 5G connected trams and C-V2X, respectively.

Operators need to assess their risk appetite as they track IoT revenue growth

The competitive pressure in the IoT connectivity market is unlikely to ease. The connectivity disruptors that compete with operators tend to be less risk averse and more willing to innovate with new technologies (like cloud-native virtual core networks). Attempts by operators to go beyond connectivity and offer industry-specific solutions have so far produced mixed results. Operators must decide whether to accept that the IoT will be a relatively small, low-growth (but high-margin) connectivity game, or whether to make a bigger foray into the faster-growing vertical solutions market. Some will also choose to invest more in adjacent opportunities like private networks and edge, which have greater sales growth prospects but require investment and attention.

^4th This forecast focuses on IoT connections over public and wide area networks and does not include private network connections.