China and the U.S. will compete for dominance of the global market by 2025. China, which will account for 21 percent of global IoT connections, will be slightly ahead of the U.S. 20 percent IoT connections share, with similar growth proportions for cellular connections.
However, the U.S. market will lead in terms of IoT revenue over China -- 22 percent vs 19 percent. Furthermore, the third largest market is forecast to be Japan with 7 percent of all connections, 7 percent of cellular connections and 6 percent of the global revenue.
The total IoT revenue opportunity will be $3 trillion in 2025 -- that's up from $750 billion in 2015. Of this figure, $1.3 trillion will be accounted for by revenue directly derived from end users in the form of devices, connectivity and application revenue. The remainder comes from upstream and downstream IoT-related sources such as application development, systems integration, hosting and data.
Machina analysts forecast that IoT will generate over 2 zettabytes of data by 2025, mostly generated by consumer electronics devices. However it will account for less than 1 percent of the global total cellular data traffic. Moreover, cellular traffic will likely be generated by digital billboards, in-vehicle connectivity and CCTV.
Other key findings from the market study include:
- The total number of IoT connections will grow from 6 billion in 2015 to 27 billion in 2025, a CAGR of 16 percent.
- Today 71 percent of all IoT connections are connected using a short range technology (e.g. WiFi, Zigbee, or in-building PLC), by 2025 that will have grown slightly to 72 percent.
- The big short-range applications, which cause it to be the dominant technology category, are Consumer Electronics, Building Security and Building Automation.
- Cellular connections will grow from 334 million at the end of 2015 to 2.2 billion by 2025, of which the majority will be LTE.
- Forty-five percent of those cellular connections will be in the Connected Car sector, including both factory-fit embedded connections and aftermarket devices.
- Eleven percent of connections in 2025 will use Low Power Wide Area (LPWA) connections such as Sigfox, LoRa and LTE-NB1.
Market Development of IoT Technologies
"Through our regular ongoing work in IoT, we are constantly monitoring hundreds of different constituent applications across every country and adjusting our outlook for each. Every year we take a snapshot of the IoT market, pulling our latest forecasts to examine how the overall market had developed in the year," said Matt Hatton, CEO at Machina Research.
According to the Machina assessment, this year the top line connections and revenue growth estimates demonstrate that the upside opportunity is substantial. However, not all the vendors rushing into this emerging market opportunity will reap the rewards.
To fully take advantage of the opportunities in IoT, Machina analysts believe that technology suppliers need to understand the key market dynamics and their competitive environment, and then develop best practices for market development.