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Internet of Things December 2021/January 2022 Viewpoints

Technology Analyst: David Strachan-Olson

2021: The Year in Review

By Rob Edmonds
Edmonds is a principal consultant with Strategic Business Insights.

Overview

The secondary effects of the covid‑19 pandemic dominated the IoT industry in 2021. Although the industry continued to grow, chip and talent shortages created constraints. IoT devices' tendency to rely on commodity chips (which faced more issues than did specialist chips) left the devices especially vulnerable. Talent shortages were most acute in artificial intelligence and data science, constraining progress in advanced IoT use cases such as predictive maintenance. Most deployed IoT applications remained in fairly simple areas such as remote asset monitoring and location tracking. However, the supply-chain crisis that challenged the IoT sector—and many other sectors—also created new demand, encouraging logistics firms and manufacturers to accelerate IoT projects for tracking and process optimization. Simple IoT applications also benefited from rapid growth in logistics digitalization and automation, accompanying the rapid rise in e‑commerce. Interest in IoT to aid infrastructure resilience also grew—particularly for energy grids, which faced a series of extreme-weather events and issues relating to rising fuel costs. In networks, 5G deployments continued to grow, and private networks proved especially popular for IoT applications. Broadband-satellite constellations also made progress. For example, SpaceX's Starlink service moved beyond its beta status, and OneWeb raised more investment to accelerate deployment of its remaining satellites. In consumer IoT, Apple's AirTag tracking device for finding missing items and Amazon.com's Amazon Sidewalk technology for connecting home and neighborhood IoT devices were notable. In platforms, some market consolidation occurred, benefiting large firms such as Amazon, IBM, Google, and Alibaba.

Strategic Business Insights (SBI) has identified a number of key areas for stakeholders to monitor that will shape the Internet of Things (IoT) industry during 2022. The constraints of chip and talent shortages will continue, though accelerating digital-transformation and Industry 4.0 efforts will drive growth as manufacturers embrace digitalization and seek to reinforce the strength of their supply chains. Protecting IoT deployments from cyberattacks will be a key priority—particularly for infrastructure and energy projects. Processor advances will accelerate growth of intelligence at the edge, and Big Tech firms will increase their role in IoT platforms.

Key Developments Identified by SBI in 2021

  • Semiconductor-Chip Shortage. The ongoing chip shortage, driven by shifting use patterns during the pandemic and high demand for processors, affected the production of IoT devices. Although the shortage affected many industries, it had a major effect on the IoT industry because the mature sensor, microcontroller, and communications chips that many IoT devices rely on had greater availability issues than did advanced chips such as central processing units and graphics-processing units. Shortages led to production delays and companies' having to adjust operations and manufacturing timelines.
  • Talent shortage. Alongside the chip shortage, the shortage of available talent was the other main constraint on IoT projects during 2021. In many countries, economic recovery exacerbated long-term shortages of workers with tech skills—particularly in software development. Especially difficult to find were workers with skills in developing AI for processing IoT data.
  • The Pandemic's Impact on Industry 4.0 Adoption. A McKinsey & Company survey highlighted the covid‑19 pandemic's impact on Industry 4.0 adoption. Many companies that scaled Industry 4.0 technology across their business before the pandemic hit were able to adapt to changing conditions quickly. Companies had a fresh urgency for deploying Industry 4.0 technologies—especially those that provide flexibility and resilience.
  • Apple's AirTag. Apple's AirTag is a tracking device that can help users find missing items. The device's concept is not new, but the tracking technology behind Apple's Find My system, which leverages Apple's massive install base, is revolutionary and could affect the development of future IoT networks.
  • Expanding Demand-Response Networks for Grid Balancing. OhmConnect received financing from Sidewalk Infrastructure Partners to increase the number of households in California that can participate in aggregate demand response for the state's electricity grid. Demand-response resources are demonstrably and inexpensively helping to balance supply and demand for electricity during peak periods.
  • Ethereum's Transition to Proof of Stake. The Ethereum Foundation announced plans to transition the Ethereum blockchain to a proof-of-stake consensus mechanism, which will decrease the energy use of the network significantly. This change could help the Ethereum blockchain become more popular for smart contracts, decentralized apps, and IoT platforms, as well as encourage interest in distributed-ledger technologies more generally. However, the initial transition date for the end of 2021 slipped to the first half of 2022.
  • Ransomware Crackdown. Ransomware attacks against large companies with critical national interests spurred new efforts to stop ransomware criminals. The US Department of Justice plans to increase the seriousness of investigations into ransomware, and some stakeholders are calling for governments to clamp down on cryptocurrencies to make receiving payments anonymously more difficult for attackers.
  • Flexible Arm Processor. Arm, in partnership with PragmatIC Semiconductor, created a 32‑bit flexible processor out of metal-oxide thin films on a flexible polymer substrate. Although the chip is significantly less powerful than current-generation processors, which are crystalline silicon, the technology could lead to flexible electronics that companies can embed in clothing, food packaging, and other types of everyday objects.
  • Opportunities for Climate and Environmental Sensors. Climate impacts will worsen during the coming decades. Governments, companies, and communities could benefit from a more detailed understanding of climate impacts on a local level. Vast networks of low-cost environmental sensors in combination with climate-intelligence systems could help organizations better understand and minimize climate risks.
  • Intelligent Manufacturing. Nissan unveiled its Nissan Intelligent Manufacturing initiative, which uses the IoT, robotics, and AI. This initiative highlights the potential of the IoT to transform manufacturing, creating far greater levels of optimization, flexibility, and automation than are possible today. Most firms are still rolling out foundational technologies for intelligent manufacturing, but further progress is likely.
  • TCP/IP Vulnerabilities and IoT Supply Chains. The disclosure of 33 vulnerabilities in open-source TCP/IP (transmission-control-protocol/internet-protocol) software stacks highlighted the challenge of IoT-device cybersecurity arising from sprawling supply chains.

Areas to Monitor Highlighted by SBI in 2021

Macro/Dynamic Issues (Frequently Featured)

  • Digital Transformation & Disruption

    Digital transformation is the use of technology to change fundamentally how a company operates; it is not simply the use of technology to improve a company's core business. Many legacy companies may struggle to embrace digital transformation, which creates opportunities for new players to disrupt incumbents.

  • Industry 4.0

    Industry 4.0 leverages machines, parts, and services that exchange data and self-configure to support dynamic, agile, and efficient manufacturing processes. Stakeholders expect Industry 4.0 to revolutionize manufacturing and industrial practices to create self-sufficient systems, but challenges could limit progress.

  • Cybersecurity

    Cyberattacks are increasing in frequency and severity. Networked cyber-physical systems require extensive security measures, because attacks against such systems could cause significant damage. Hackers constantly find new vulnerabilities; therefore, organizations must continually monitor and improve their systems.

  • Tech Talent

    Global competition for technology talent is a key factor shaping the future of technology commercialization. Emerging technologies, almost by definition, lack large numbers of skilled practitioners. As technologies commercialize, job openings often outstrip the supply of talent, and education systems change slowly.

Micro/Semi-Stable Issues (Sometimes Featured)

  • Internet of Everything

    Some stakeholders imagine a world beyond the Internet of Things, where all aspects of daily life—including people and processes—connect to digital ecosystems. Optimists say that only 1% of Internet of Everything objects are connected today. Significant cost reductions in electronics manufacturing are necessary to increase this percentage.

  • Big Tech Power

    Big Tech companies wield immense power through the massive scale of their digital platforms and their ability to centralize and leverage data. Because of their influence, Big Tech companies can create massive disruptions when they enter new markets, and they can dictate pseudo industry standards.

  • Privacy

    Internet of Things devices can generate large amounts of data about individuals and their behaviors, which many companies may try to take advantage of. So far, concerns about privacy have not influenced consumer behavior significantly; however, sentiments could change, and government regulations could force companies to respect privacy.

  • Government Funding and Initiatives

    Government agencies sponsor the development of the sensor industry by investing in pure and applied research or by being customers for sensor technologies. Public investments and initiatives may spur the development of new infrastructure, such as mass-transit systems, water-treatment plants, and smart energy grids.

  • Processor Advances

    Advances in processor design and fabrication are helping to make Internet of Things devices more computationally powerful and power efficient. New processor designs could enable simple Internet of Things devices to host AI algorithms or perform complex calculations, which previously necessitated cloud computing.

  • Smart Grids

    The increased use of intermittent renewables and energy storage will require a significant modernization of electric grids. Smart grids, which offer advanced mechanisms for monitoring and controlling the flow of electricity, could also make grids more efficient and reliable and decrease energy costs.

Look for These Developments in 2022

  • Continuing semiconductor shortages. Semiconductor-supply issues will likely continue. On the one hand, the shortages will constrain IoT-device manufacturing; on the other hand, firms will likely up expenditure on supply-chain technologies, including IoT technologies, to mitigate future problems.
  • Sustainability-demand drivers. Many new IoT applications, including Industry 4.0, will connect with energy-efficiency or resource-management goals. Most of these applications will focus on asset monitoring and process optimization, though interest will also increase in IoT sensors to monitor the climate resilience of infrastructure and in IoT applications for environmental monitoring.
  • Electric-vehicle infrastructure. Relating to the sustainability theme will be demand for IoT technologies that support intelligent charging infrastructure for electric vehicles. Stakeholders expect rapid growth in charging networks and at-home charging solutions.
  • Intelligent-IoT systems. Leading-edge IoT projects will combine the IoT with AI. Intelligent-IoT deployments will include predictive maintenance, process optimization, and novel predictive applications that utilize condition-monitoring data. New AI processors for edge computing will aid the latency and reliability of intelligent-IoT systems, though AI in the cloud will also remain important.
  • Progress in consumer IoT applications. Although much focus will be on industrial and business IoT applications, consumer IoT applications will also make progress. One development to monitor is the arrival of the forthcoming Matter open-source standard, which promises improved device interoperability.
  • Increasing regulation. The regulatory environment will continue to toughen as recent or upcoming data-protection laws affect the IoT market in China, Japan, India, Australia, and elsewhere.
  • The Chinese state and the IoT. The ongoing regulatory crackdown in China's technology sector will influence the direction of the IoT in China and create knock-on implications for the IoT market elsewhere. In general, the changes will increase the role of the Chinese state in the IoT.