IoT spending predicted to reach $1T worldwide in 2020

Market news |
By Rich Pell

The forecast represents an increase of 14.6% over the $674 billion that will be spent in 2017. Looking ahead through 2021, the firm expects worldwide spending on IoT to sustain a compound annual growth rate (CAGR) of 14.4% through the 2017-2021 forecast period, surpassing $1 trillion in 2020 and reaching $1.1 trillion in 2021.

The largest IoT category in 2018, the report says, will be hardware, with modules and sensors along with some spending on infrastructure and security accounting for about $239 billion. Services is expected be the second largest technology category, followed by software and connectivity.

In the software category – predicted to be the fastest growing technology segment with a five-year CAGR of 16.1% – spending will be led by application software along with analytics, IoT platforms, and security software. Services spending is also expected to grow at a faster rate than overall rate – with a CAGR of 15.1% – and to nearly equal hardware spending by the end of the forecast.

“By 2021, more than 55% of spending on IoT projects will be for software and services. This is directly in line with results from IDC’s 2017 Global IoT Decision Maker Survey where organizations indicate that software and services are the key areas of focused investment for their IoT projects,” says Carrie MacGillivray, vice president, Internet of Things and Mobility at IDC.

“Software creates the foundation upon which IoT applications and use cases can be realized,” says MacGillivray. “However, it is the services that help bring all the technology elements together to create a comprehensive solution that will benefit organizations and help them achieve a quicker time to value.”

Among the industries expected to spend the most on IoT solutions in 2018 are manufacturing ($189 billion), transportation ($85 billion), and utilities ($73 billion). Manufacturers will be largely focused on solutions that support manufacturing operations and production asset management, while in transportation, two thirds of IoT spending will go toward freight monitoring, followed by fleet management. IoT spending in the utilities industry will be dominated by smart grids for electricity, gas, and water.

According to the report, cross-industry IoT spending – which represents use cases common to all industries, such as connected vehicles and smart buildings – will be nearly $92 billion in 2018. This ranks it among the top areas of spending throughout the five-year forecast.

“Consumer IoT spending will reach $62 billion in 2018, making it the fourth largest industry segment. The leading consumer use cases will be related to the smart home, including home automation, security, and smart appliances,” says Marcus Torchia, research director, Customer Insights & Analysis. “Smart appliances will experience strong spending growth over the five-year forecast period and will help to make consumer the fastest growing industry segment with an overall CAGR of 21.0%.”

In terms of geographic regions, Asia/Pacific (excluding Japan) is expected to see the most IoT spending in 2018 – $312 billion – followed by North America (the United States and Canada) at $203 billion, and Europe, the Middle East, and Africa (EMEA) at $171 billion. China, says the report, will be the single country with the largest IoT spending total in 2018 ($209 billion), driven by investments from manufacturing, utilities, and government.

IoT spending in the United States is predicted to total $194 billion in 2018, led by manufacturing, transportation, and the consumer segment. Japan ($68 billion) and Korea ($29 billion) will be the third and fourth largest countries in 2018, with IoT spending largely driven by the manufacturing industry. Latin America is expected to deliver the fastest overall growth in IoT spending with a five-year CAGR of 28.3%.

For more, see the “Worldwide Semiannual Internet of Things Spending Guide.”

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