Internet of Things March 2022 Viewpoints
Arm Shifts Focus from IoT
By Guy Garrud
Garrud is a consultant with Strategic Business Insights.
UK silicon-chip-designer Arm is undergoing high-level personnel changes following a failed sale to chip-manufacturer Nvidia. A recent report in the Financial Times indicates that the company may now shift its focus away from a previous preoccupation with developing integrated circuits for Internet of Things– (IoT-) controller applications. Arm cofounder Tudor Brown has commented that he believes a focus on IoT markets distracted Arm from the more lucrative and larger market of servers for data centers.
Arm's owner, SoftBank, had been due to sell the chip designer to Nvidia, but the proposed deal faced vocal opposition from various tech giants because of fears it would give Nvidia an unfair advantage (various chip manufacturers rely on designs from Arm).
SoftBank has also revised some of its market estimates for the silicon-chip market. In 2018, the group estimated that the IoT-controller market would be worth $24 billion by 2026 (which is larger than their estimates for the global server market). More recent predictions anticipate an IoT market of $16 billion and a server market of twice that size ($32 billion).
An important factor in an assessment of any emerging technology is the inherent difficulty of predicting end-market sizes—in particular, as a result of distorted expectations. Market research firm Gartner popularized the concept of a "hype curve" that most emerging technologies experience, with a peak of overinflated expectations followed by the "trough of disillusionment." The ultimate impact of a technology often lies somewhere between the peak and the trough, but gauging the impact early on in the cycle is hugely challenging. Apparently Arm and to some degree SoftBank have experienced difficulty in assessing the potential emerging market for IoT chips, and by overestimating the medium-term market, they potentially neglected more important sectors.
Another important factor to highlight is that successful implementation and commercialization of IoT technologies requires not just device hardware but also the supporting communications network and computing power in order to leverage the benefits of a large number of small connected devices. Consequently, even extremely well-realized chip designs for IoT devices can have only a very limited real-world impact if other aspects of the IoT ecosystem are either undercommcercialized or technologically underdeveloped. Market predictions for, say, IoT devices are particularly challenging and extremely prone to shifts in large parts of the value chain, including ongoing silicon-chip shortages, a lack of common standards for IoT systems, and broader public sentiment.
Relevant Areas to Monitor
Internet of Things technology has an almost limitless number of potential applications, but most markets are nascent with limited end-user demand. As opportunity areas emerge, grow, and falter, suppliers and other stakeholders may struggle with decisions about how to allocate resources and develop new products.
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.
Opportunities in the Following Industry Areas
- Internet of Things