The IoT semiconductor industry shows immense potential for market growth with plenty of opportunities for semiconductor companies to take advantage of. There are also significant challenges that semiconductor manufacturers will face when they shift their focus from traditional integrated circuits to start building IoT semiconductors and components. Keep reading to find out about these smart devices, the opportunities present in the IoT semiconductor market, and how semiconductor companies plan on overcoming the many challenges they are facing.
What Are IoT Devices?
The Internet of Things (IoT) is the network of connected devices that collect, process, and exchange data with other similar devices and systems on the same network. This network could be a private one or the internet itself. The concept of IoT has been around since the 1990s although the IoT market really kicked off in the past decade. This was due to advancements in new technologies like artificial intelligence, big data analytics, cheap and reliable sensors, and even the huge strides made in networking infrastructure.
IoT devices have been created for many different types of applications. There are consumer electronics like smart home devices. Everything from kitchen appliances to smart TVs and voice assistants come under this. Then there are commercial IoT devices like smart pacemakers used in the medical field, and smart tags used for inventory management by warehouse and transport companies.
The Industrial Internet of Things (IIoT) takes the concept into manufacturing, using sensors to monitor production lines and autonomous systems to control production. These connected devices are also vital to infrastructure and agriculture, with sensors being used to monitor and manage various systems. The smart cities of the future and driverless vehicles are expected to fully utilize the potential of IoT devices.
For IoT applications to work, they often require a few components. First, there are the IoT sensors that collect data and a processing unit to analyze this data. Edge devices may be required to transmit this data from the local network like the home Wi-Fi network to the cloud if the IoT device itself doesn’t have sufficient processing power. Sometimes a smartphone can function as an edge device, although industrial applications usually have specially designed IoT hardware that can handle these functions by themselves.
IoT applications made for consumer electronics usually need an accompanying smartphone app that provides configuration and control options to the user. Some IoT devices come with integrated web servers, allowing users to access these controls through a browser instead. An IoT device just like any piece of modern technology is made from integrated circuits using semiconductors. These IoT semiconductors are in high demand due to IoT solutions increasingly being put to use in nearly every type of industry and consumer technology of today.
Opportunities For IoT Semiconductor Companies
According to business insights derived from research conducted by the McKinsey Global Institute, the Internet of Things is expected to generate about $11 trillion by 2025 globally. These figures cover IoT products themselves, the IoT semiconductors that are present in the hardware, as well as the software and services that run on them. The integration of IoT into existing systems is also included here, with massive potential for both consumer-level customers and business-to-business (B2B) clients.
When looking specifically at how IoT will affect the semiconductor industry, revenue streams will mainly come from the demand for sensors, microcontrollers, as well as memory and connectivity chips that will be utilized to produce IoT components and products. Additionally, data centers will also require networking and server hardware since IoT applications often utilize cloud connectivity for their processing. The semiconductor can expect revenue from these avenues as well. Cellular IoT chipsets are another market segment expected to be in demand when 5G networks become available.
The IoT semiconductor market can expect increasing demand and growth from mainly six types of products and applications. These include wearable devices like smartwatches and fitness trackers, smart home apps that can control lighting and air-conditioning, smart cars with driver assistance, industrial automation with smart manufacturing and predictive maintenance capabilities, medical devices, and smart cities with traffic control systems.
Challenges For The IoT Semiconductor Industry
On the flip side to all of these opportunities are the many challenges that the semiconductor industry is facing. Companies that are semiconductor manufacturers and smart device manufacturers must work together to overcome these issues if they wish to tap into the limitless possibilities of IoT in the foreseeable future.
Privacy And Security Concerns
Ever since IoT products and applications have been in use, there has been a history of hackers taking advantage of the security vulnerabilities of these systems. This was because many companies that first ventured into IoT underestimated the importance of basic security protocols. Furthermore, it wasn’t a major issue since IoT had not penetrated the consumer or industrial markets at a large scale in the beginning.
However, the landscape is now different, and many of these solutions and devices are starting to penetrate the market more. What makes it even more challenging is that IoT has a vast array of applications and verticals, each with its unique security issues. While smart wearable devices may need basic security, medical equipment, and industrial automation require better protection that goes down to the hardware level. The cloud infrastructure also needs adequate security.
A semiconductor company can contribute to building more resilient IoT devices in a few different ways. Developing on-chip security and building integrated circuits with partitioned processor functions are some methods to consider. Going beyond the semiconductor production itself, they can also provide hardware and software services like data encryption, access management, and authentication.
Developing New IoT Products And Solutions
Semiconductor manufacturers can partner up with other entities like IoT equipment manufacturers and application developers, providing them with expertise on hardware security while also learning about the software side of things from them. Some of the most innovative solutions in IoT are developed by startups who often lack expertise with semiconductors and require more hands-on support from the manufacturers.
IoT solution developers may also require a complete end-to-end solution including everything from hardware like sensors, microprocessors, memory, and connectivity chips, as well as the software. Semiconductor manufacturers that can offer such a platform can really support startups with limited funds, allowing them to thrive and develop new applications that make use of IoT.
Competing IoT Connectivity Standards
With so many players working in IoT, it is not surprising that multiple competing standards have appeared over the years. Each has its own positives and negatives, supporting different data rates, power consumption, and connectivity range. IoT connectivity standards like Bluetooth, ZigBee, and LTE Category 0 on the medium to low data rate and low range applications are a few examples.
Some companies are forming consortiums, each attempting to promote their chosen standard, although no clear winner has come out on top. With so many competing IoT connectivity standards, this situation can complicate product development due to their incompatibility with each other. Consumers will also feel reluctant to purchase newer devices that are incompatible with what they already own.
Semiconductor companies will need to work together with these industry groups and focus their attention on the IoT standards that are more commonly used, while also keeping an eye out for any new emerging players.
A Fragmented IoT Market
IoT devices come in different form factors, data processing speeds, prices, and power consumption requirements. A water meter for example might need long-range connectivity but can work with a low data rate. In industrial automation, the device may require high data rates but will work within a small range.
These variations with chip specifications increase the amount of research and development costs needed to deliver this product. A semiconductor manufacturer may have to sell up to 70 million microchips a year to cover these costs. The issue is that for more customized solutions in IoT, these segments are not moving such large quantities of products.
The best thing semiconductor manufacturers can do at present is to categorize chips into archetypes based on their specifications. This way, products from different verticals may be supported by one type of microchip based on their requirements. This could minimize research and development costs, although these chips may not be the optimum choice for each specific application.
Venturing Beyond Hardware
As mentioned above, supporting tech startups and those leading innovation in IoT may push semiconductor manufacturers to go beyond simply producing microchips for these applications. Many companies have already begun to bolster their in-house expertise in providing software solutions that work on their hardware.
The software can also help improve security features in addition to on-chip security. Semiconductor companies can also look into becoming an integration partner, to provide the system-level software for their products, although this may not be feasible for all, requiring them to go outside their normal portfolio of services.
Building Better IoT Semiconductors
There are many IoT niches where companies in the semiconductor industry can play a role. Since research and development are costly, they will need to assess which are the most promising before diving into one. If the company already has partnerships on the consumer electronics side, then wearable tech and smart home devices may present opportunities. If their expertise is in highly specialized integrated circuits, then the industrial and medical sectors might be more worthwhile.
Meeting the huge demand that is growing daily will not be easy with the worldwide chip shortage caused by supply chain issues also adding to the problem. Meeting hardware specifications and compliance standards will require semiconductor companies to improve their manufacturing processes. Many are now looking into smart manufacturing methods to improve their yield during production and deliver more products on time.
Without moving too far away from their core competencies, semiconductor companies venturing into IoT can look into new business models like proving a complete system solution or partnering with a player that does it. Usage-based pricing may be possible, allowing companies to earn revenue through services for the entire lifetime of the device, rather than the fixed upfront purchase amount. Not all companies will be able to do this, however.
It is truly an exciting time in the IoT semiconductor industry, with many companies finding innovative solutions in various fields from consumer electronics, to industrial manufacturing. If you wish to learn more about how IoT has affected semiconductor companies, read Impact of IoT on the Semiconductor Market.
FAQs
Yes. An IoT application requires physical devices like sensors, processing units, and microcontrollers to function. Each device has a printed circuit board made from semiconductors.
The leading companies making IoT semiconductor devices include Samsung Electronics, Intel Corporation, Qualcomm Incorporated, Texas Instruments Incorporated, and Nvidia Corporation to name a few.
