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Internet of Things December 2022/January 2023 Viewpoints

2022: The Year in Review

By Guy Garrud

Overview

The biggest single factor that shaped the IoT industry in 2022 and will—in all likelihood—continue to shape it throughout 2023 is large-scale changes in the global semiconductor industry. Following the major disruptions of the covid‑19 pandemic, various public and private players took steps to shore up future supplies of silicon chips, including establishing chip-fabrication plants (fabs) outside East Asia. During 2022, some of these facilities were coming online at a time when global supply lines were also seeing significant recovery. The net effect was a surge in supply at the same time as a shift in demand. In the IoT sector, demand for silicon integrated circuits lagged behind the predictions of a few years ago, and some manufacturers decreased priority for products for IoT applications in favor of more profitable sectors, including data centers and graphical processors. Other developments in the IoT space largely revolve around ongoing longer-term trends. Increasing scrutiny on cybersecurity and the evolving role of China in the global IoT supply chain remain key issues. Additionally, the growing vulnerability of infrastructure to cyberattacks enabled by more widespread use of IoT technologies was an area of growing concern.

A look forward to 2023 sees potential for a significant resurgence in IoT rollouts. Several key limitations that stunted growth in the past two years—particularly supply shortages and near-term acute financial pressures—are now easing; accordingly, some IoT rollouts that were on hold during the pandemic may see renewed activity. Indeed, several growth drivers—including staffing availability—have only increased in the past 24 months, and IoT solutions will be one of several technologies that are likely to gain attention and investment in response to these changes. Another crucial enabler for IoT growth in the coming year will be increasing access to artificial-intelligence systems; IoT technologies offer key capabilities in terms of data gathering and physical interfaces to enable major expansions in automation and operational efficiencies alongside low-code and no‑code AI services, drastically reducing the barrier to entry and growing the potential market for businesses to make use of AI- and IoT‑driven approaches.

Key Developments Identified by SBI in 2022

  • Advances in Computer Vision. Computer-vision is a key synergistic technology for various information-technology applications that incorporate image sensing. Computer-vision technologies are increasingly finding real-world applications in a variety of sectors, including retail, asset tracking, and governance (for example, the French government has begun using satellite imagery and machine-vision systems to enforce property taxation). However, much of the media attention has focused on controversy about AI‑generated art that uses large libraries of questionably sourced training data.
  • Concerns about Long-Term Support for Consumer IoT Products. In spring 2022, smart-home company Insteon shut down servers for its smart-home devices as part of apparent bankruptcy proceedings, effectively rendering its customers' devices useless. A group of highly motivated Insteon users subsequently acquired the company and restored device functionality. Such uncertainty highlights a major risk that customers take when purchasing IoT products and could drive market consolidation, with potential customers proving unwilling to buy any product not backed by a tech giant that appears too big to fail.
  • Increasing IoT Security Regulation. The US government announced plans to implement a cybersecurity-labeling scheme for IoT devices. Operating in a way similar to that of energy-efficiency ratings, the new labeling scheme—the US government hopes—will enable users to be more aware of the potential security risks that come with implementing IoT products in their homes.
  • Aviation and 5G. Planned wide-scale rollout of C‑band 5G networks in the United States prompted concerns about aviation safety, because the networks risk interfering with radio altimeters used by passenger aircraft when making low-visibility landings. Although last-minute compromises managed to avoid disruption, future cases of interference and overlap in the electromagnetic spectrum appear inevitable.
  • Shift in Focus from IoT. A failed acquisition of chip-designer Arm by chip-manufacturer Nvidia prompted executive-level shake‑ups in Arm and, with it, a shift in the company's focus away from IoT controller chips and, potentially, toward designing next-generation server chips. This shift reflects a broader cooling of expectations for the IoT controller-chip market.
  • Concerns about IoT Health Privacy. The maturing rollout of Internet of Things devices, aided by 5G and greater consumer-digital openness, revived both government and industry interest in mobile health—now, IoT health. This wave of remote monitoring and patient observation is based on a sounder tech platform but is still vulnerable to data-privacy concerns that might curb take‑up.
  • The Military IoT. The Ukraine war and other geopolitical issues drove demand for next-generation war‑fighting technologies such as battlefield IoT. Advances in cloud and edge computing along with next-generation cellular networks could revolutionize how decisions take place both in the field and more centrally, with major implications for both the defense industry and the people who are directing military operations.
  • The Metaverse and the IoT. Microsoft positioned its full technology stack to harness the potential of the "industrial metaverse." From digital twins to real-time simulations of commerce, metaverse technologies have potential. Their development will require greater integration with IoT technology and drive a demand for hardware, from wearables to advanced sensors and robotics.
  • Unifying Matter to Boost Choice and Innovation in IoT. The Matter standard is set to transform compatibility in the IoT industry in the coming years. By having one unifying protocol, companies will be able to innovate more easily, and consumers will benefit from greater choice. But compatibility issues with existing technology will require further investment by consumers and manufacturers.
  • The Industrial IoT Security Challenge. The growth of industrial IoT is bringing with it an increased cybersecurity threat. Businesses across a range of sectors have come under attack in the past 12 months, and geopolitical tensions continue to cause concerns. But greater standardization, effective partnerships, and investment in IoT technology with built‑in security will provide solutions.
  • Cloud-Based Networks Supporting the IoT. The rollout of the first US cloud-based 5G open radio network could resolve many of the challenges that are hindering IoT‑technology growth. Physical obstacles, gaps in coverage, and massive bandwidth requirements remain challenges, but enabling operators to build their own networks could create a democratic and affordable technological solution.
  • Logistics Robots. The Internet of Things underpins networks of logistics robots, which are seeing increasing deployment by companies such as Amazon.com. Facing labor shortages and surging demand for warehousing and distribution in 2022, the wider sector began to deploy even more robots, and the IoT industry is set to grow as well to support this rapid new expansion.
  • Private 5G Networks for Smart Factories. The demand for greater manufacturing automation is partly dependent on rollout of effective 5G technology in factories. But technology and implementation issues, coupled with a fragmented market, have proved to be stumbling blocks. In 2022, a number of major investments in private 5G networks signaled a renewed focus on the technology's potential in manufacturing.

Areas to Monitor Highlighted by SBI in 2022

Macro/Dynamic Issues (Frequently Featured)

  • 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.

  • Wireless Spectrum Overlap

    5G networks, home and industrial wireless internet, and smart-home appliances and hubs all seek to communicate using the electromagnetic spectrum. Companies must either gain regulatory approval to use certain portions of the electromagnetic spectrum or make use of increasingly crowded unregulated sets of frequencies.

  • End-User Demand

    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.

  • 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.

Micro/Semi-Stable Issues (Sometimes Featured)

  • 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.

  • Digital Transformation and Disruption

    Digital transformation is the use of technology to fundamentally change 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.

  • Health-Care Applications

    The health-care sector is already a major user of connected digital technologies. Health-care providers have been among the early adopters of a range of high‑end technologies. Hospitals and surgeons make use of a wide variety of digital devices for examining and monitoring patients and for dispensing drugs.

  • Networks and Wireless Communications

    For many robots, actions such as receiving instructions, uploading data, and accessing cloud-computing resources require wireless communications. Existing LTE (long-term-evolution) and Wi‑Fi networks offer basic wireless communications, but the development of 5G ultrareliable low-latency communications could enable new operational capabilities for robots.

  • 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.

  • Satellite Internet

    Satellite-broadband services such as those from SpaceX and OneWeb are making progress and could disrupt existing broadband services. Internet connectivity via satellites could also open up new Internet of Things and sensing opportunities in remote regions, where fixed lines and cellular networks are impractical or unreliable.

Look for These Developments in 2023

  • Harmonization (or not) in the smart-home sector. Rollout and adoption of the Matter smart-home standard could offer growing interoperability between manufacturers of smart devices, hubs, and control systems. Watch for early teething problems and overall market responses, especially if Matter is able to offer only limited functionality in some use cases.
  • Infrastructure cybersecurity. Cybersecurity-risk profiles for large-scale infrastructure are very different from consumer or even industrial IoT applications. New smart-infrastructure applications including electric-vehicle-charging infrastructure and sensor networks may come under increasing regulatory scrutiny. Any even moderately successful cyberattacks on smart infrastructure could trigger a major overhaul for vendors and governments alike.
  • Renewed focus on edge computing. Growing supplies of silicon chips will enable a shift back toward on- or near-device computing in key IoT markets. Instead of pushing computationally intensive tasks to centralized servers, expect increasing use of mid‑tier silicon in local hubs to reduce latency.
  • Growing use of AI. Increasing availability of low-code and no‑code AI systems will likely enable more companies and other organizations to leverage AI technologies for a wide variety of applications, including asset tracking and general operational insights. In particular, watch for small and medium-size groups leveraging their own IoT‑enabled analytics to try to gain an advantage over larger competitors.
  • Predictive maintenance and digital twins. Various companies may move forward with IoT rollouts that have been on pause for the past two to three years. In particular, watch for growing use of digital twins and predictive maintenance as potentially lucrative low-hanging fruit for early implementations.
  • Industrial metaverses. So-called Metaverse technologies (broadly, next-generation augmented and virtual reality) have gained significant media attention but are unlikely to materialize in the coming 12 months. However, Metaverse developers may provide compelling proofs of concepts and use cases that encourage investment in developing systems for several years down the line.
  • Chinese silicon markets. The Chinese government's response to the reshaping of the global semiconductor industry is going to be an important factor in whether the country remains at the core of the global electronics industry. Homegrown fabs and chip designs, especially in the simpler commodified chip sector, can have a significant impact on the cost of implementing IoT solutions.