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Tuesday, October 06, 2015

IoT Connected Device Revenue will Reach $74 Billion

The Internet of Things (IoT) enables the potential for many new categories of connected devices. In the near term, smart wearables will likely be first to disrupt the consumer electronics landscape, as mind-share and eventually revenue shift from PCs and smartphones to these new devices.

Connected device competition will intensify as vendors compete for the nearly $74 billion in new revenue that will be available by 2020, with smart watches accounting for more than $50 billion in revenue, according to the latest market study by Technology Business Research (TBR).

"Most wearables require a mobile device, PC or both for users to gain the most functionality, helping keep PCs and smartphones in the purchasing conversation, especially in consumer markets," said Jack Narcotta, analyst at TBR.

However, as component and chip makers -- such as Intel, Samsung and Qualcomm -- innovate in areas like processors, displays and batteries, smart wearables will become more advanced and autonomous, relegating PCs and smartphones to mere supporting roles.

TBR research uncovered that most people will choose the connected device they need for a specific task or activity, just-in-time, and they view the PC and smartphone as their information and connectivity hubs.

That being said, TBR believes the influx of smart watches creates opportunities for PC and mobile vendors to strengthen the role and appeal of their legacy devices -- even if they do not participate in the smart watch market.

However, as PC and smartphone user attention shifts to smart wearables, revenue and profit growth from these traditional product segments will surely contract. In fact, consistent year-to-year revenue declines experienced by vendors in the TBR benchmark study amplify the pervasive trends.

While TBR estimates total device revenue for 2Q15 rose 7.9 percent year-to-year to $109.1 billion, the Apple iPhone revenue of $31.4 billion accounted for 28.7 percent of total device revenue in 2Q15.

Apple's 58.8 percent year-to-year revenue growth served as a stark contrast to the cumulative 11.1 percent decline of all remaining vendors and segments.

According to the TBR assessment, companies prepared for changes in customer purchasing behaviors and device use-cases will win in these new markets, and those that capitalize on the smart wearables opportunity will strike a balance of making quick decisions to enter the market and cultivating longer-term strategies that identify the next steps to protect legacy core businesses.