IoT opportunity in the world

of semiconductor companies
July 2018
Brochure / report title goes here |
 Section title goes here

b
Table of
Contents
The opportunity 03
Industrial market overview 07
Automotive market overview 11
Smart city market overview 17
Health care market overview 21
Consumer market overview 25
Appendix 31

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2
 IoT opportunity in the world of semiconductor companies| The opportunity

The opportunity:
Semiconductor
companies in the
future
They could be immersed in powering a world of IoT

How do you create shareholder value when

your product is so heavily commoditized
The power of three •• Low economic profit in the industry: Most
players in the industry have struggled to
that it’s nearly impossible to make high consistently generate profit. Competition
Top trends forcing change
margins on it? You build an ecosystem to is fierce, and when a product is a
The semiconductor industry has been
provide solutions, and the Internet of Things commodity it can shrink margins. In some
affected by three major trends in recent
(IoT) brings semiconductor companies cases, profits made over a period
years that have been difficult hurdles to
that opportunity, with markets ripe for of some years on in-demand products
overcome:
innovation and growth. tend to be lost on future products that
•• Product performance may be peaking: fail to take off.
So, what’s driving the shift? Semiconductors Moore’s law states that the number of
•• Disruption in technology value chain:
form the underpinning of all the electronics transistors, and hence the performance,
Many semiconductor companies
we use in our daily lives. From the alarm in a dense integrated circuit will double
experiencing a decrease in profitability
clock and microwave that help us get our approximately every two years, and it
have uncovered more value from
day started, to the cell phone and laptop has been true for a long time. Computers
integration, software, and service than
that enable our workday—much of what we have become smaller and faster over
from the sale of chips. Many companies
depend on is powered by semiconductor the past few decades lending credence
now have more software engineers than
chips. Yet, semiconductor companies are to the theory. However, in recent years
hardware engineers, but they don’t get
at a critical junction. Leaders require new this phenomenon has slowed. Peak
paid for these costs by their customers.
strategies to grow their businesses in performance of semiconductors may
Essentially, they are offering more and
smart ways. be starting to level out.
getting less, which is only sustainable
for so long.

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IoT opportunity in the world of semiconductor companies| The opportunity

Where there’s How will nuances. Semiconductor companies can

embrace IoT strategies by:
challenge, semiconductor
there’s opportunity companies devise
Building a business ecosystem
In order to provide an end-to-end IoT

Take advantage of IoT markets IoT strategies? solution, we need device manufacturers,
communication hardware, connectivity
In order to overcome the effect of these protocols, cloud providers, IoT platforms,
trends, a large number of semiconductor Semiconductor companies can no
analytics and system integrators, etc. On
companies have taken measures to reinvent longer simply be component providers
top of that, IoT is a nascent and fragmented
themselves. The leaders in the industry are to create value in this market. They have
market with different end-customer needs.
making moves to: to understand the entire IoT stack’s
It is impossible for a single company to
requirement, and in some cases,
•• Improve margins through merger and possess all the technologies. The nature
create an end-to-end solution that facilitates
acquisitions and thus benefit from the of the IoT market calls for an ecosystem
market adoption. A typical IoT stack with
resultant economies of scale. of companies that share a vision and
representative electronic subsystem is
have complementary assets and skills.
•• Grow their product portfolio, thus illustrated in figure 1. The left-hand box
Semiconductor companies could build
moving into more profitable market is typically the device that contains the
such an ecosystem and strive to be
segments such as IoT. sensors. It could be a mobile phone or a
the control point, as they architect and
medical device that captures a person’s
help catalyze, enable, and manage the
There is tremendous opportunity for heartbeat. Both the device and the IoT
whole solution jointly developed by the
semiconductor companies to provide value platform it communicates with have the
ecosystem partners.
to their end customers via IoT markets. capability to analyze and organize the
These devices and sensors are going to play data received.
Enabling ecosystem partners
a critical role in collecting and processing A sustainable partner ecosystem
data across a variety of industries. They will The IoT platform also has the capability of
creates a win-win situation for all parties
likely bring forth new services and create interpreting the data and sending analytics
involved. To form a successful ecosystem,
cost reduction opportunities. They can forge up through an application that provides
semiconductor companies should
insights into new discoveries and help us find insights and alerts to people or providers.
understand, develop, and nurture the
quality issues faster and improve output. Security is a critical component at every
partners to enable their growth. This may
And in some industries, like health care and step of the journey, from the time the data
require providing them technical, business,
automotive, they could even save lives. The is collected to the time it is served up in
and financial support.
ability for an IoT sensor or device to sense the application. There are opportunities
its surrounding, communicate its state, and for semiconductor companies to provide
Semiconductor companies also may
process the collected data to determine products and services in four key areas of
need to adjust the product strategy.
the best response to its environment holds the stack—Sense, Analyze, Communicate,
Besides making trade-offs between
extraordinary promise. The projected size of and Security—as illustrated in the diagram.
power, function, form factor, and security,
the market is equally impressive. There are also greenfield opportunities to
semiconductor companies should consider
provide services in other areas of the stack.
additional features or products to enable
IoT semiconductor spending is projected to Samsung has already taken steps in this
IoT ecosystem partners. Such offerings
be $34 billion in 2020.1 At the same time, IoT direction by offering the ARTIK platform,
might include a software development
electronics solution spending is projected to which includes cloud platform, analytics
kit (SDK) tailored to the IoT developer, or
reach $572 billion presenting semiconductor offerings, and ease of cloud integration.
enabling ease of connectivity to cloud
companies the opportunity for revenue platforms, analytics apps, and system
growth other than from device sales.2 While the opportunity is large, the IoT
integration services.
However, to realize the revenue growth market presents entry challenges to
benefits, semiconductor companies should semiconductor companies. These
adapt their product development and go-to- challenges range from a fast-changing and
market strategy for the IoT market. fragmented market, to security and privacy
issues, to industry-specific go-to-market

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 IoT opportunity in the world of semiconductor companies| The opportunity

Figure 1. IoT stack diagram

Sense Communicate Applications Services

Wireless modules
Gateway processing
Location sensors Analytics
Wave sensors
Edge Platform core
Image sensors
High-performance
Physical sensors
computing Infrastructure
Sensor preprocessing
Sensor fusion GPU CPU FPGA

Security
Encryption TPM

Sense Analyze Communicate Security Greenfield opportunities

Creating a digital sales platform allow semiconductor companies to blanket module with public key infrastructure and
The best way to build a business ecosystem what is now a highly fragmented IoT market multi-factor authenticated access. To ensure
is to build it around a concrete customer with a lot of sub-segments, giving them a the gaps are covered, none of this activity
case. However, the IoT markets are distinct advantage and their customers a should be done in isolation. Work together
so fragmented with varying end-user single point of contact. with partners to uncover and solve potential
requirements in different industry verticals security issues.
and use cases. It is nearly impossible to sell Ensuring security and privacy
to such a broad and fragmented market Security and privacy can make or break Customizing by industry need
without more digital platform to bring the adoption of IoT products. Challenges In addition to these common themes,
the providers of different components include not only hardware vulnerabilities, nuances in each vertical require specific
of the end-to-end solution together. An but also security gaps created during product and go-to-market strategies. To sell
integrated digital sales platform will help integration and implementation of IoT offerings into these markets, it’s important
enable the partners to work together systems as well as those created during to understand what customers are trying
from opportunity identification to solution remote device access, communication, to achieve. Semiconductor companies
development. For example, an intelligent and management. Features and solutions should be particularly interested in IoT
opportunity management will help identify that mitigate these issues often include opportunities in the following markets:
opportunities and determine which software-based API security. Such security industrial, automotive, smart cities,
partners to pull into the deal whether they measures can authenticate and authorize health care, and consumer. Let’s take an
be cloud platform operators, data service data movements between devices. Create in-depth look at these sectors, the market
operators, applications and analytics a hardware-based trusted platform and opportunity for semiconductor companies,
developers, third-party system integrators, execution strategy to ensure authenticity and ways to win.
or consultants. Such integrated deals could of firmware. Use a built-in encryption

5
 IoT opportunity in the world of semiconductor companies| Industrial market overview

Industrial
market overview
This industry is red hot

The industrial semiconductor sector has Out of the $49 billion, IoT semiconductor
grown to $33 billion market in 2015, and it’s sale comprises $8.4 billion.4 There’s a
expected to grow to $49 billion in 2020, at a tremendous amount of opportunity in
CAGR of 9.8 percent (roughly two times that this sector if semiconductor companies
of total semiconductor growth).3 can harness the IoT products and services
customers need.

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IoT opportunity in the world of semiconductor companies| Industrial market overview

Figure 2. YoY revenue growth of industrial semiconductor vs. all semiconductor

25%
Industrial Semiconductor
All Semiconductor
20%

15%

10%

5%

Source: Gartner
0%

-5%
2016 2017 2018 2019 2020

Meet the fourth earlier than historical processes of discovery availability while reducing unnecessary
would have allowed. The phenomenon has maintenance. APM connects disparate
industrial revolution given rise to the next industrial revolution, data sources and uses advanced analytics
now referred to as Industry 4.0. The to turn that data into actionable insights
IoT opportunities and sensor data factories that embrace Industry 4.0 are while fostering collaboration and knowledge
create a smart factory referred to as smart factories. management across the organization.6 APM
The industrial sector is the poster child of ensures the machine operations are tightly
IoT, and it is undergoing disruption with the The ability to adjust and learn from controlled only to satisfy a realistic demand,
advent of the digital age. IoT solutions often data in real time can make the smart ensuring minimal wear and tear of the asset,
create a communication network in the factory more responsive, proactive, and which in turn reduces operational costs.
industrial sector that extends far beyond predictive. It also enables the organization
the walls of the factory and out in the field to avoid operational downtime and other Predictive maintenance (PdM)
to suppliers, distributors, and logistical productivity challenges.5 Where does IoT in PdM techniques are designed to help
organizations serving the enterprise. This the industrial sector hold the most promise determine the condition of in-service
network helps fuse physical realities with for semiconductor companies? equipment to predict when maintenance
new technologies creating interconnected is required. This approach can mean
digital enterprises that are capable of better cost savings over routine or time-based
informed decision making. Sensors track
individual products as they make their way
The main applications preventive maintenance, because tasks are
performed only when warranted.
through a plant, onto trucks, and out into
warehouses, creating a digital record along
are within the factory
the way. Alerts are sent to supervisors if
Asset performance management (APM)
machines sense an abnormality arising.
Unplanned downtime is costly for
Performance data is collected in the field
manufacturers. APM is an approach to
and algorithms identify quality issues a year
increase asset control, reliability, and

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 IoT opportunity in the world of semiconductor companies| Industrial market overview

Figure 3. Sample product opportunities for industrial

Required Industry application

IoT stack
devices Asset performance management (APM) Predictive maintenance (PdM)

Sense
Electro-mechanical sensors, analog to digital converters, amplifiers

Analyze
Microprocessors, microcontrollers, data center to perform core analyses

Communicate
Wi-Fi, Bluetooth, Ethernet communication, near field communication (NFC), and 3G/4G cellular communication

Security
Encryption, trusted source modules

How to win? ecosystem with the partners who provide Qualcomm was forged to create devices
different components of the ecosystem to that will allow companies to control their
Build an ecosystem to capture the develop an end-to-end solution. To make assets using LTE communication without
big IIoT pie the ecosystem sustainable, semiconductor requiring a licensed spectrum. GE Digital
The overall Industrial Internet of Things companies should understand and nurture allows integration to Predix, Nokia is the
(IIoT) market is currently fragmented the ecosystem partners to enable their base station infrastructure, and Qualcomm
across sensor manufacturers, edge devices growth. provides the wireless technology and chips.
manufacturers, platform vendors, network Together, semiconductor companies and
providers, and analytics software solution Develop platform and analytics alliances platform providers can also help establish
providers. Semiconductor manufacturers, Besides building a complete ecosystem, the future standard of the industrial Internet.
as outlined earlier, are dominant players semiconductor companies could also forge In the coming years, significant consolidation
and form the basic building blocks of alliances with various platform makers and is expected in the platform space.
the devices segment in the IIoT solution analytics software providers.
stack. The advent of advanced analytics In addition, partnership with analytics
and connectivity has extended the IIoT IIoT platform standards are beginnning to software providers can provide a significant
solution stack from devices to platform, form based on open-source architectures. growth opportunity to semiconductor
gateways, and application software. By This benefit allows software developers to companies. The need for edge computation
2020, the electronics content market for develop applications on top of the platform is expected to increase given the critical
manufacturing and energy is expected to to perform a multitude of operations.8 It also systems that are controlled in this sector,
reach $76 billion. Finally, services which allows hardware/sensor manufacturers to and analytics software providers can
include consulting, implementation, connect to the platform with minimal effort. help create solutions that run natively on
and operations are expected to reach Thus, semiconductor companies should devices. Semiconductor companies such as
$164 billion.7 Many companies are already forge alliances with platform providers to Xilinx and Cavium are partnering with IIoT
recognizing and acting on initiatives. create devices that can easily integrate edge software providers, such as Foghorn,
Semiconductor companies can capture a with the third-party platform. A recent to enable their chips to seamlessly run
greater portion of the IIoT pie by forming an partnership between GE Digital, Nokia, and Foghorn’s solutions.

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 IoT opportunity in the world of semiconductor companies| Automotive market overview

Automotive
market overview
Electronic features abound in every priced model

From 2001 to 2015, automotive market.This is driven by rising electronic

semiconductor revenue grew from content in cars and the spread of electronic
$10 billion to $30 billion. This semiconductor features from premium models to lower-
segment is expected to grow to $47 billion priced, high-volume models.10 Out of this
in 2020 at a CAGR of 9.2 percent.9 The spending, $10.5 billion is attributed to IoT
growth rate is above average and similar applications.11
to the opportunities in the industrial

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IoT opportunity in the world of semiconductor companies| Automotive market overview

Figure 4. YoY revenue growth of automotive semiconductor vs. all semiconductor

25%
Automotive Semiconductor
All Semiconductor
20%

15%

10%

5%

Source: Gartner
0%

-5%
2016 2017 2018 2019 2020

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 IoT opportunity in the world of semiconductor companies| Automotive market overview

IoT is going to enable automotive IoT to grow beyond the Infotainment systems
classical automotive telematics solution Consumers want to be connected in a digital
change our driving and into these data-rich models that can world. At the center of this application is the

experiences
fundamentally change driving for the better, infotainment unit, where drivers can access
with fewer breakdowns, fewer stranded real-time vehicle data, answer calls, play
people, less room for human error, and music, listen to audio books, and access GPS
Electronic content is rising in the devices hopefully safer roads with fewer accidents. or navigation data. Connection to the web
and solutions that enable asset or fleet or cloud is generally done by tethering the

The main applications

performance management, connected driver’s smartphone to the infotainment or
vehicle applications, and autonomous by including cellular modules as a factory
driving applications. Imagine a car that
sends an alert to your cell phone to not
are within the option. In both cases, semiconductor
providers stand to benefit, as the number of
only schedule maintenance, but also ensure
the parts required for the repair are at
vehicle itself built-in or tethered cellular communication
modules is projected to increase from 6.9
the dealer before you arrive. Imagine a million per year in 2015 to 61 million per year
Autonomous driving
car that can navigate a busy freeway on in 2020.13
Although still in its early stages and slowly
its own without you having to touch the
increasing, the promise is significant;
pedals. And vehicles without Wi-Fi? They’ll Asset performance management (APM)
ranging from fewer accidents to less traffic,
likely be unheard of as a new generation of and predictive maintenance (PdM)
to an increase in operational efficiency.
young drivers take the wheel. All of these APM and PdM are similar in both concept
Autonomous vehicles present opportunities
advances are digitally enabled. Now, take and business benefit to APM and PdM
for semiconductor companies to provide
it a step further. The systems created by in the industrial sector. In the context of
solutions that give vehicles the ability to
these electronics are also enabling new automotive, APM is more likely to serve
sense, analyze, interpret, decide, take
business models and service offerings such enterprise customers with large fleets of
action, and communicate with other
as on-demand car solutions, insurance-as-a- vehicles, like delivery trucks. However, PdM
automobiles, infrastructures, businesses,
service, and car-to-home integration. for both enterprise customers and consumer
people, and organizations. The solution
includes hardware, software, and data vehicles would work in a similar way.
These IoT applications and new business
communications efforts listed in figure 5.
models require understanding of the
For example, more than 25 sensors per
insights from the vehicle’s past, present,
car are required for a car to recognize
and future states. The availability of the
its surroundings.12
expanded big data applications helps

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IoT opportunity in the world of semiconductor companies| Automotive market overview

Figure 5. Sample product opportunities for automotive

Required Industry application

IoT stack
Asset performance
devices Autonomous driving Infotainment systems
management (APM)
Sense
Camera, radar, lidar, ultrasonic Accelerometer, gyroscope, oil/fuel, oxygen, pressure, temperature,
sensors electrical/current, GPS, camera

Analyze
Embedded processors for
APM components + GPUs and UI components
sensor fusion

Communicate
Ethernet (in-vehicle), wired/wireless Ethernet (in-vehicle), wired/wireless
Ethernet (in-vehicle), cellular, Wi-Fi
LAN, DSRC, cellular LAN, Bluetooth, DSRC, cellular

Security
Encryption, trusted platform module

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 IoT opportunity in the world of semiconductor companies| Automotive market overview

How to win? Finally, semiconductor companies can involved in end-product electronic design.
mitigate public and regulator concerns To access these segments, semiconductor
Make sure your bases are covered by addressing them up front and working companies should focus on developing
Semiconductor companies need to together to shape policy. solutions or platforms for the commonly
understand the potential challenges in used end applications in the segment of
the automotive IoT market to develop an Explore providing integrated systems interest. In addition, they’ll need to
effective product and go-to-market strategy. Semiconductor companies also have leverage and enable third-party system
There are three main challenges in entering opportunities in the automotive IoT market integrators with skills to implement highly
the automotive IoT market: 1) product life beyond supplying electronic components. customized solutions. These two activities
cycle, 2) safety requirements, and 3) public One market segment adjacent to ensure and accelerate adoption of solutions
perception and regulations concerning components is the electronic subsystems, in the market.
autonomous vehicles. such as an integrated system. This
segment is expected to reach $110 billion Partner on managed services
The first challenge concerns the long by 2020, which is roughly three times the There’s $28 billion of opportunity in
product development cycles in the forecasted semiconductor device TAM.14 managed services. However, this area
automotive industry due to the significant Most semiconductor companies have is traditionally not closely related to
capital required to design and produce a included demo and prototyping boards in semiconductor companies’ core
vehicle as well as time to ensure product their go-to-market product mix. Therefore, capabilities. There are two ways to access
quality and safety standards are met. with the right investment in system design this segment: 1) Build your own cloud
Semiconductor companies need to assess capabilities, semiconductor companies platform applications or 2) partner with
the time and investment risks in producing may be able to provide a more complete existing vendors. With the first method
devices for automotive customers. To electronics automotive system solution, requiring time and expertise to build assets
mitigate these risks, work closely with which ultimately can increase their and customer credibility for cloud platform,
automotive customers during the product automotive revenue base. it may be advisable to pursue this
planning and design process. opportunity through the second method.
Bulk up on consulting capabilities Finally, connectivity services or data plan
The second challenge involves device quality, Another possible route for increasing is another possible segment valued at
reliability, and security. Solving this challenge revenue is through consulting services and $12 billion. However, this requires high
requires that companies: first, understand implementation services, which provide CapEx spending for infrastructure building,
automotive-grade product requirements, $17 billion in opportunities.15 These market and semiconductor companies will likely
and second, design devices with encryption segments include IoT business strategy face headwinds from existing telecom
and trusted platform solutions that meet development and electronic system design providers. It may be best accessed through
the cybersecurity requirements. usually for highly customized applications partnership with existing carriers.16
for customers who are traditionally not

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 IoT opportunity in the world of semiconductor companies| Smart city market overview

Smart city
market overview
Making life better for citizens while operating
more efficiently

City dwellers are expected to make up The endpoint hardware spending for smart
roughly two-thirds of the world’s population cities was $289 billion in 2016, and it is
by 2050.17 Smart city solutions have projected to grow to $463 billion by 2020
enormous potential to improve the lives of at a CAGR of 12.7 percent.18 Semiconductor
their citizens, making transportation easier, device sales for smart cities were
reducing waste and pollution on a massive $613 million in 2016 and are projected to
scale, lowering energy consumption, and grow to $1.2 billion by 2020.19 The growth
protecting against threats. Smart city is mainly driven by the need for increased
solutions are made up of electronic and connectivity, improved infrastructure, and
software systems that enable metropolitan optimized energy consumption. Existing
assets to be more aware and react to their smart city applications range from highly
environment. Typical applications center on customized niche solutions, like countering
city management, building management, a specific climate threat to the area, to those
energy, infrastructure, governance, and that are common and of high interest by
public services. many cities, like smarter parking.

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IoT opportunity in the world of semiconductor companies| Smart city market overview

Figure 6. Sample product opportunities for smart cities

Required Industry application

IoT stack
devices Smart building Smart parking Smart grid

Sense Metering and power quality

sensors, electrical measurement
Smart grid sensor (including a
sensors, non-electrical smart grid
Vehicle detector sensor transducer, a microcomputer, a
sensors, HVAC (heating, ventilation,
transceiver, and a power source)
and air conditioning) sensors,
energy conservation sensors

Analyze Cloud-based building analytics

that leverage artificial intelligence Cloud-based analytics, intelligent Central computer to process and
and machine learning, dashboards parking management software analyze data and send commands
reporting system

Communicate
Ethernet, other wired (USB, RS232, RS485, LonWorks, DALI), LAN (Zigbee/6LoPAN), Wi-Fi, Bluetooth, powerline,
sub-GHz

Security
Strict controls between IT system and building/parking system networks, encryption-secure coding practices to
sanitize input and prevent remote execution of commands

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 IoT opportunity in the world of semiconductor companies| Smart city market overview

Major applications It is estimated that the building or facilities How to win?

automation electronic content market will
for smart cities? grow to $18 billion by 2020 at a CAGR of Help governments find a path to IoT

Think efficiency
32 percent,23 while connectivity services To gain competitive advantage,
for this application are estimated to be semiconductor companies should provide
$543 million for the same time period.24 more than just components, including
Smart parking There’s plenty of IoT opportunity for more comprehensive, integrated solutions
It is estimated that at any given time, up to semiconductor companies. through core differentiating capabilities
30 percent of all cars in the city are looking or outside partnerships. Such a structure
for a parking space.20 That wastes a lot of Smart grid could not only result in a higher chance of
fuel. Smart parking systems aim to take the People don’t like to lose power. It not only adoption by cities, but also capture more
stress out of finding parking for drivers while creates inconvenience, but also hurts a city's revenue for semiconductor companies from
reducing traffic for cities by getting cars economy. Cities can’t have their grids down the smart city market.
to their destination faster. And it does so for long. Smart grid solutions enhance the
by giving individuals real-time information electric grid with modern digital technology, Build an ecosystem for solution
on available parking spots, helping to save such as sensing and measurement, A complete smart city solution requires
time and reduce carbon output.21 Such integrated and automated communication device manufacturers, communication
systems work by using sensor-enabled networks, and an advanced data analytics hardware, connectivity protocols, cloud
devices that show the location and number platform. These applications allow for two- providers, IoT platforms, analytics and
of available spaces when requested by the way communication between the utility system integrators, etc.
drivers. Coupled with RFID devices installed and its customers. Smart grid can achieve
in the car for vehicle authentication, such a more efficient transmission of electricity, As device manufacturers, semiconductor
system could include reservations, parking faster power restoration after disruption, companies can’t provide such a solution
structure access control, payment systems, reduction in operations and management on their own. However, semiconductor
and dynamic pricing capability allowing costs for utilities, reduction in peak demand, companies could build and even be the
cities to offer new services to increase their improved security, and increased integration control point of an ecosystem, within
revenue base. of large-scale renewable energy systems. which they architect and help catalyze,
Smart meter solutions alone are expected enable, and manage the whole solution
Smart buildings to reach $755 million by 2020.25 jointly developed by the partners. In many
Worldwide, buildings consume 42 percent cases, semiconductor companies also
of all electricity, up to half of which is In addition, cities like Borrego Springs, need to bring the complete solutions to
wasted. Energy costs alone represent California, are incorporating renewable the city planners and jointly develop the
about 30 percent of an office building’s energy micro-grids, which reduce business cases.
total operating costs. Smart buildings greenhouse gas emissions and, because
use sensors to capture energy use they function independently, don’t go down
data that’s analyzed to detect potential when the larger, traditional grid fails.26
issues, predict upcoming maintenance,
and enable optimization of a building’s
energy systems.22 The application uses
IoT-enabled devices that collect and send
consumption data to advanced descriptive
and prescriptive analytics systems.

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 IoT opportunity in the world of semiconductor companies| Health care market overview

Health care
market overview
Let’s change some fundamental elements about care

Health care spending in the US is forecasted Health care IoT growth is primarily driven
to grow from 17.8 percent to 19.9 percent of by remote health monitoring, workflow
GDP in 2025.27 US health care IT spending optimization, and integration with electronic
will reach $137 billion by 2021 at a CAGR medical records (EMRs). Insurers, as payers,
of 12.5 percent.28 This figure comprises and government, as regulators, are among
$4 billion and $14 billion of electronic key stakeholders in the success of health
content spending in 2020 by health care care IoT efforts to improve aggregate
providers and health or fitness consumers health outcomes and lower health care
respectively, with a total of $817 million from expenditure. Technology will play a key role
semiconductor devices.29, 30 in how fast this industry will accomplish its
goals and bring about system-wide change.

21
IoT opportunity in the world of semiconductor companies| Health care market overview

Integrating IoT with Major IoT applications Workflow optimization

Workflow optimization devices are typically
electronic medical in health care lower risk investments because ithey

records provides for both patient

are nonclinical IoT applications and do
not require FDA approval. Compared to

a path and provider other health care products, they have a

relatively fast go-to-market time frame as
a result. There are a variety of ways health
IoT can allow for better population Remote health monitoring
care providers can implement these new
health management solutions and better Access to more information outside a
devices. For example, RFID technology, or
strategies for chronic disease care, which doctor’s office can open windows of insight
other wireless standards, on wrist bands
is a significant cost driver for the industry. that providers haven’t had before. Used
and badges can optimize workflow by
When real-time collection of health data appropriately, remote health monitoring or
providing a smart and connected system
integrates with EMRs, providers can gain home health monitoring can really make a
between patients, providers, and medical
higher efficiencies and better outcomes at a difference in helping people manage chronic
assets. Workflow optimization devices can
lower cost. How does it work? Such systems diseases for the better. How do they work?
automatically detect and alert a provider
collect patient-generated data, populate the Remote health monitoring devices are fitted
of cleanliness using hygiene monitoring
data in the EMR, and apply analytics to find with sensors that track health indicators.
systems. Providers can also keep better
a data-driven, preventive treatment strategy They carry communication modules to
track of medical tools and machines as
for chronic diseases. Providers can see notify health care providers when there
sensors can allow real-time location and
trends they may not have identified on their are changes in a patient’s vital functions. It
tracking services of the tools used in patient
own and adjust an individual’s care for the is part of a system that enables seamless
treatment. Want to know where all the heart
better. Healthier patients generally mean integration between data-generating
monitors are? This IoT application allows for
less burden on the system and lower costs. medical devices to analytic platforms with
easy search and access.
the aim of lowering cost and improving
EMRs have gone from an adoption rate of outcomes in disease management. Chronic
Finally, hospitals largely depend on
9.4 percent in 2008 to 84 percent in 2015 diabetes and heart disease conditions both
machines to do their work and manage
among non-federal acute care hospitals, yield themselves to this type of solution
patient care. When those machines go
while certified ones reached 96 percent very well. Getting these diseases under
down, it can create a lot of havoc to the
from 72 percent.31 From the perspective control carries a high value proposition as
workflow. The same APM and PdM IoT
of health care providers, leveraging IoT the device sensors are apt to prevent crisis
applications used in manufacturing can
integration with EMRs is an important next situations, keep people healthier, and lower
benefit workflow optimization in health care,
step to address rising operating expense the cost of treatment. There will likely be
ultimately improving operational efficiency
and margin pressures. Expect IoT to play a high market demand for remote health
and lowering costs.
central role to opening new avenues to data monitoring in the near future.
in the near future—better patient outcomes
are the end goal.

22
 IoT opportunity in the world of semiconductor companies| Health care market overview

Figure 7. Sample product opportunities for health care

Required Industry application

IoT stack
devices Remote health monitoring Workflow optimization

Sense Temperature sensor, pulse oximeters, pulse/blood

pressure, MEMS-based pressure sensor, weight
scales, glucose meters, electrocardiogram, ultrasound Hygiene sensor, location tracker, CMOF sensor, RFID
scanning, MRI, position emission tomography (PET),
digital stethoscopes; MEMS

Analyze
GPU – MRI, scanning, CPU, FPGA

Communicate Wireless (ANT +Bluetooth, ZigBee, Near field

communication, etc.), Wi-Fi, WAN, LAN, BAN (body area Wireless LAN, Bluetooth, cellular, Ethernet
network), Bluetooth, cellular, edge computing

Security
Pre-silicon and post-silicon verification, secure storage, secure processor, secure IPs,
trusted platform (TPM), encryption

How to win? Adapt for longer life cycles with can work together to develop a common
higher margin standard for sustainable future growth by
Help facilitate a sector that’s There are a variety of factors to consider addressing key stakeholder requirements.
redefining care when entering the health care IoT market, Make sure to get reliability and
The smart health care market presents including: the complexity of the health security right
growth opportunities for semiconductor care ecosystem; compliance with personal It’s a mission-critical affair for health care.
companies on both the consumer and health information (PHI) standards and On the device level, semiconductor
professional services sides. Consumer government regulations. Determining which providers need to address reliability and
services, like remote health monitoring party is going to bear the cost of the device security. The devices should be designed
and fitness trackers, has the highest and developing a common standard for to minimize the chance for malfunction and
projected growth of $10.2 billion in 2020 at connected medical devices are also critical ensure that data generated from sensors
a CAGR of 41.5 percent.32 Forecasted with issues for semiconductor companies to are accessible only to the authorized parties.
a growth rate of approximately 24 percent, consider. Although products in the health For reliability, perform pre-silicon and
professional IoT services for health care care space typically have high margins, post-silicon verification in place as well as an
providers is another promising new segment semiconductor companies’ product accurate estimate of the product mean time
that semiconductor companies can capture planners also need to account for the long to failure. To achieve the health care security
additional revenue from. Such professional product life cycle. requirements, semiconductor companies
IoT services, including consulting, should provide, or work with partners to
implementation, and operation services, Partner to develop common standards provide, embedded security features in
would grow to an $18.2 billion market by To mitigate the factors above, storage, processors, and IPs. Also, secure
2020, with operation services having the semiconductor companies should take the storage and secure lock are needed
largest opportunity at $8.4 billion.33 opportunity to become or partner to be to ensure users cannot change device
the control point of the evolving health care functionality or pull data out. It is important
IoT ecosystem, including medical device that semiconductor companies work with
manufacturers, health care providers, IP vendors to ensure security features and
insurers, and regulators. The participants risks at all levels are properly addressed.
23
 IoT opportunity in the world of semiconductor companies| Consumer market overview

Consumer
market overview
Chores be gone, IoT makes life easier, more entertaining

Consumer electronics accounted for same time frame.36 The volume growth will
$36 billion in semiconductor revenue primarily be driven by increasing micro-
in 2015, and it is forecasted to grow components and sensors used within
to $45 billion by 2020 at a CAGR of consumer appliances that enable devices
6.4 percent.34 From an IoT perspective, to sense and analyze their surroundings.
the semiconductor revenue amounts to The adoption of new devices that address
$7.8 billion today, but it is expected to new value propositions is staged to grow
grow to $13.1 billion by 2020.35 It’s worth as well. However, the value of consumer IoT
noting that a majority of the growth accrues products is not just about the glitz of the
from positive pricing pressure rather than gadget. The value lies in the data collected
volume growth, which is expected to be and how this data makes life easier and even
approximately 2.3 percent during the more entertaining.

25
IoT opportunity in the world of semiconductor companies| Consumer market overview

Major applications As gaming technology moves ahead to immersive experiences and the ability
incorporate new devices, such as motion to communicate. Applications powered
of IoT for consumers detectors or body sensors, to facilitate by devices such as smart watches, head-

are close to home

gamer interaction and improve gaming mounted displays (HMDs), and Bluetooth
experience, these entertainment devices are headsets fall into this category. The second
likely to see wider adoption. is passive applications that mostly deal with
Smart home sensing body motion and signals, backed by
Current smart home applications can As stated, background applications focus devices such as sports watches, wristbands,
broadly be divided into two types of on making the home more comfortable and fitness monitors.
applications. The first set of applications and secure. Consumers can control lights,
can be classified as foreground applications heating, and security systems from their The large growth market, both from a
and contain those that are entertainment- smartphones—and even unlock doors. device perspective and a semiconductor
based and sustain high user engagement. In Appliances can send notifications or perspective, will likely be driven by the
contrast, the second set of applications can show you what’s in your refrigerator from first category. Given their interactive and
be classified as background applications, afar. Landscape systems can measure computing-heavy nature, these applications
which comprise applications that manage plant moisture and water only when it’s would require devices with immense
dull but crucial background activities necessary. Home comfort applications work capability to compute and communicate,
that improve daily life by automating on an ecosystem of connected sensors thus driving the number of embedded
mundane tasks.37 and household appliances, and they semiconductor components per device.
currently operate on a rule-based system.
Foreground applications are primarily home As these applications shift toward true The second category of wearables can be
media and entertainment devices. Devices automation through learning the household considered matured, by comparison, and
such as virtual personal assistant (VPA)- occupant’s behavior, the computational may offer limited growth opportunity for
enabled wireless speakers that allow users needs of the ecosystem are likely to increase semiconductor companies as they primarily
to interact with their home entertainment semiconductor consumption. use simple sensor and memory and
systems and provide a gateway to the communicate components. However, they
Internet will likely be a future driver of Wearables do present a potential source of additional
semiconductor consumption. Traditional Wearables provide consumers with devices revenue as consumers seem willing to pay
devices such as game consoles, smart TVs, that include a host of cloud-connected for health- and fitness-related applications.
and set-top boxes—all of which are now applications. Similar to smart home Application development would be key to
becoming smart and Internet connected— applications, wearable applications can taking advantage of these wearables.
have already experienced broader adoption also be broken down into two categories.
and will likely continue to be a large market. The first is applications that provide

26
 IoT opportunity in the world of semiconductor companies| Consumer market overview

Figure 8. Sample product opportunities for consumer

Required Industry application

IoT stack
devices Smart home Wearables

Sense
Image sensor, chemical sensor, pressure sensor, Image sensor, optical sensor, magnetometer,
temperature sensor, MEMS microphone gyroscope, accelerometer

Analyze
Microprocessor (in device), GPU/microprocessor
Embedded processors for sensor fusion
(required in wearable compatible gaming systems)

Communicate
Wi-Fi, Zigbee, Bluetooth, Ethernet communication Cellular, Wi-Fi, Zigbee, Bluetooth

Security
Encryption, trusted source modules

How to win? can choose to develop either generic Android Things OS, and with Amazon Web
solutions, which empower a large volume of Services for integration.39
Expand into subsystems and devices with interoperability and security for
application development various ecosystems, or specific solutions for Lastly, given consumers' preference to
The consumer IoT market is in a very early blockbuster devices. adopt a single app or device to interact
adoption cycle, and it is a market where use with their IoT ecosystems, there will
cases and value propositions are gradually Focus on interoperability likely be a few blockbuster products
being developed. Currently semiconductor Consumers today are often overwhelmed that will function as IoT platforms in
and electronics manufacturers are with the number of available products the consumer space.40 Given the need
expected to capture $195 billion, compared and the difficulty in integrating products for high-performance computing and
to $13.1 billion for a pure component to work together as part of a single communication, semiconductor companies
play. On top of that, application service is ecosystem. Interoperability is another can partner with device manufacturers in
expected to reach $26 billion.38 major concern expressed by consumers, this space to develop customized hardware
and many companies are trying to address components as well as architectures for
However, companies can still position this issue by creating their own alliances these platforms. While this might mean a
themselves to benefit not only from and platforms. Semiconductor companies longer product and investment cycle for
component sales in the devices that could benefit in aligning themselves with semiconductor companies, it could also lead
power these ecosystems, but also from these partners to ensure that their products them to commanding higher margins for
a strategy that would provide larger meet the end user’s interoperability and their product with a possibility of capturing
electronic subsystems. Depending on their standardization requirements. For example, a larger portion of the electronic content in
competencies, semiconductor companies Qualcomm partnered with Google for these devices.

27
Brochure / report title goes here |
 Section title goes here

Simply put, build an

IoT ecosystem and
digital platform
The IoT electronics content spending is projected to reach $572 billion,41 in 2020, of which
$34 billion42 is from semiconductor devices. However, the IoT market is currently highly
fragmented and covers broad end applications, which makes it impossible for a single
company to provide end-to-end solutions. The nature of the IoT market calls for an
ecosystem of companies that share a vision and have complementary assets and skills.
Semiconductor companies are well positioned to forge such an ecosystem and even be
the control point of the ecosystem, as they architect and help catalyze, enable, and
manage the whole solution jointly developed by the ecosystem partners. Semiconductor
companies also should build an integrated digital sales platform, which will bring the
ecosystem partners together to jointly sell to a broad and fragmented market. Finally, it
takes time to realize the financial benefits of going into the IoT market, so it’s advisable to
measure success KPIs similar to a start-up.

28
 IoT opportunity in the world of semiconductor companies| Authors and Contributors

Authors
John Ciacchella
Principal
Deloitte Consulting LLP
[email protected]

Chris Richard
Principal
Deloitte Consulting LLP
[email protected]

Nina Zhang
Senior Manager
Deloitte Consulting LLP
[email protected]

Contributors
Markus Adhiwiyogo
Vijay Swaminathan
Siddharth Kannan
Nora Zhang

29
IoT opportunity in the world of semiconductor companies| Endnotes

Endnotes
1. Gartner, Forecast: IoT endpoints – Sensing, processing and communications 21. Deloitte Development LLC, Being smart about smart cities.
semiconductors, worldwide, 2016 update, January 9, 2017, https://www.
22. Ibid.
gartner.com/doc/3565023/forecast-iot-endpoints--sensing.
23. Gartner, Forecast: Internet of Things.
2. Gartner, Forecast: Internet of Things – Endpoints and associated services,
worldwide, 2017, December 21, 2017, table 3-1, https://www.gartner.com/ 24. Ibid.
doc/3840665/forecast-internet-things--endpoints.
25. Gartner, Forecast: IoT endpoints.
3. Gartner, Semiconductor Forecast Database, worldwide, 3Q17 update,
table 1-1. 26. Deloitte, Being smart about smart cities.

4. Gartner, Forecast: IoT endpoints. 27. Centers for Medicare & Medicaid Services, “2016–2025 Projections of national
health expenditures data released (press release), https://www.cms.gov/
5. Rick Burke, Adam Mussomeli, Stephen Laaper, Marty Hartigan, and Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-
Brenna Sniderman, The smart factory: Responsive, adaptive, connected items/2017-02-15-2.html.
manufacturing, Deloitte University Press, 2017, https://dupress.deloitte.com/
dup-us-en/focus/industry-4-0/smart-factory-connected-manufacturing.html. 28. Allied Market Research, Internet of Things (IoT) Healthcare Market – Global
Opportunity Analysis and Industry Forecast, 2014–2021, https://www.
6. GE, “Asset performance management for power & utility: How to achieve no alliedmarketresearch.com/iot-healthcare-market.
unplanned downtime” (video), February 8, 2017, https://www.ge.com/digital/
products/asset-performance-management-for-power. 29. Gartner, Forecast: Internet of Things.

7. Gartner, Forecast: Internet of Things – Endpoints and associated services, 30. Gartner, Forecast: IoT endpoints.
worldwide, 2017.
31. JaWanna Henry, Yuriy Pylypchuk, Talisha Searcy, and Vaishali Patel, Adoption
8. Steve Winkler, Predix Architecture and Services (technical whitepaper), of electronic health record systems among US non-Federal acute care
General Electric Company, September 2015, http://go.digital.ge.com/Predix- hospitals: 2008–2015, ONC Data Brief 35, Office of the National Coordinator
Architecture-WP.html. for Health Information Technology, May 2016, https://dashboard.healthit.
gov/evaluations/data-briefs/non-federal-acute-care-hospital-ehr-
9. Gartner, Semiconductor Forecast Database. adoption-2008-2015.php.
10. Gartner, Forecast overview: Automotive electronics and semiconductors, 32. Gartner, Forecast: Internet of Things.
worldwide, 2016, June 24, 2016, https://www.gartner.com/doc/3357317/
forecast-overview-automotive-electronics-semiconductors. 33. Ibid.

11. Gartner, Forecast: IoT endpoints. 34. Gartner, Semiconductor Forecast Database.

12. 12. Gartner, Master the four stages of connected-vehicle evolution to lead 35. Gartner, Forecast: IoT endpoints.
the renaissance of the automobile, March 19, 2015, https://www.gartner.com/
36. Gartner, Semiconductor Forecast Database.
doc/3010718/master-stages-connectedvehicle-evolution-lead.
37. Frank E. Gillet, The Smart Home Finally Blossoms, Forrester
13. Ibid.
Research, Inc., July 27, 2015, https://www.forrester.com/report/
14. Gartner, Forecast: Internet of Things. The+Smart+Home+Finally+Blossoms/-/E-RES120375.

15. Ibid. 38. Gartner, Forecast: Internet of Things.

16. Ibid. 39. Larry Dignan, “Qualcomm steps up its IoT game with processors designed to
ease standard fragmentation,” ZDNet, February 21, 2017, https://www.zdnet.
17. Deloitte Development LLC, Being smart about smart cities: Using technology com/article/qualcomm-steps-up-its-iot-game-with-processors-designed-to-
to improve lives and keep cybersecurity in focus, 2016, https://www2.deloitte. ease-standard-fragmentation/.
com/us/en/pages/risk/articles/smart-cities-solutions-cybersecurity.html.
40. Parks Associates, Top 10 consumer IOT trends in 2017 (whitepaper), 2017,
18. Gartner, Forecast: Internet of Things. http://www.parksassociates.com/bento/shop/whitepapers/files/ParksAssoc-
Top10Trends-2017.pdf.
19. Gartner, Forecast: IoT endpoints.
41. Gartner, Forecast: Internet of Things, table 3-1.
20. Postscapes, Smart Parking (web page), June 4, 2018, https://www.postscapes.
com/smart-parking/. 42. Gartner, Forecast: IoT endpoints.

30
 IoT opportunity in the world of semiconductor companies| Appendix

Appendix
Additional information on how the size of each market was derived is available upon request.

31
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