The Internet of Things – Opportunities and Challenges for Semiconductor Companies May 2015
Total Page:16
File Type:pdf, Size:1020Kb
The Internet of Things – opportunities and challenges for semiconductor companies May 2015 January 2015 This final report is the result of a collaboration between McKinsey and the Global Semiconductor Alliance (GSA) For semiconductors, the IoT is GSA/McKinsey collaboration A key growth opportunity Unpaid collaboration between GSA and ▪ The number of connected IoT devices is McKinsey & Company to develop a expected to reach 20 – 30 bn by 2020 perspective on the implications of IoT for the semiconductor industry ▪ A semiconductor growth opportunity exists for servers/network equipment (“Internet”) and 11 GSA member executives overseeing the components for deployed “things” effort as the Steering Committee A new strategic challenge Interviews with 30 C-level executives from ▪ The highly vertical character of the IoT (many semiconductor companies and the broader IoT small niches) requires a new approach on how ecosystem (including semiconductor to address the market customers) ▪ The IoT is starting to happen but is still early Survey of 229 semiconductor executives in its development (e.g., unclear standards, no from GSA member companies “killer application” yet) ▪ IoT devices often have specific technical Supporting rigorous (quantitative) analyses requirements regarding low power consumption, integration, cost points, Final report summarizing findings (ex- connectivity, and sensors clusively available for GSA members) SOURCE: Gartner; IDC; ABI Research; GSA and McKinsey & Company “IoT collaboration” 1 The joint GSA/McKinsey report on IoT is available in 3 different formats This report Presentation – executive summary Presentation – fact pack Written report 20-page presentation 70-page presentation 20-page written report ▪ Short executive summary for ▪ Detailed presentation and ▪ Complementary perspective an overview on the report’s documentation of findings with special focus on key findings interview findings Reports exclusively available for GSA members at http://www.gsaglobal.org/gsa-resources/publications SOURCE: GSA and McKinsey & Company “IoT collaboration” 2 Editorial This report was developed as a part of an unpaid collaboration between the Global Semiconductor Alliance and McKinsey & Company between Aug. 2014 and Apr. 2015 Churchill Tower Sophienstraße 26 12400 Coit Road, Suite 650 80333 Munich Dallas, Texas 75251 Germany United States Dr. Harald Bauer, Director, Frankfurt http://www.gsaglobal.org [email protected] Sandro Grigolli Mark Patel, Principal, San Francisco EMEA Executive Director [email protected] [email protected] Jan Veira, Associate Principal, Munich [email protected] GSA Steering Committee for this report David Baillie, Fogale Sensation, CEO Dr. Jalal Bagherli, Dialog Semiconductor Plc, CEO Stan Boland, Neul Ltd., CEO Svein-Egil Nielsen, Nordic Semiconductor ASA, CTO Dr. Steven Gray, CSR Plc, CTO Dr. Harald Hamster, Infineon Technologies AG, Head of Strategy Dr. Yannick Levy, Parrot SA, VP Corporate Business Development Dr. Maria Marced, TSMC Ltd., President TSMC Europe (Chair of Steering Committee) Thomas Riener, ams AG, EVP and Head of Marketing & Strategy Dr. Hans Rijns, NXP Semiconductors NV, CTO Remy de Tonnac, INSIDE Secure SA, CEO SOURCE: GSA and McKinsey & Company “IoT collaboration” 3 Contents ▪ IoT spans a broad field of applications and is starting to happen now Introduction IoT as a growth driver for the ▪ IoT is expected to be a key growth driver for semiconductors; however some semiconductor industry ambiguity exists about the timing and the magnitude of growth Good progress towards the ▪ Progress for IoT has been made by increasing supplier push and customer realization of IoT demand, technological and cost advancement, and improved infrastructure ▪ Challenges need to be overcome to unleash the full potential of IoT Security and ▪ How can security be ensured across the IoT stack? 1 privacy ▪ How can privacy requirements be met for IoT? Customer ▪ Which opportunities exist for stimulating market demand? 2 demand Key ▪ What is the best way to navigate an environment strategic 3 Standards of immature standards? challenges Platform ▪ How can customers in fragmented markets be reached successfully? 4 strategy Value ▪ How can a suitable business model be chosen? 5 extraction ▪ How can a semiconductor company capture value? Technological ▪ What can be done to continue the technological improvements towards low- 6 advancement power and low-cost IoT devices? Implications for semiconductor ▪ Semiconductor players have to pick their role in an evolving market players and embrace challenges as opportunities SOURCE: GSA and McKinsey & Company “IoT collaboration” 4 Internet of Things can be defined in a wider or more focused way ILLUSTRATIVE Focus of this report1 Classic Internet devices Wide definition The IoT is the network of all PCs Tablets physical objects accessed through the Internet Smart- phones Big data Wearables Focused definition Medical devices The IoT is the network of all smart things communicating Enterprise intranet Autonomous systems over the Internet with Connected cars Data centers something else without Industrial automation human interaction and that have some sort of sensing Cloud “Smart things” mechanism 1 Key findings in this report are; however; also valid with the wider definition SOURCE: Expert interviews; McKinsey and GSA IoT survey (n=229; VP-level+ executives from semiconductor companies); GSA and McKinsey 5 & Company “IoT collaboration” IoT is an ecosystem, and “things” are only a small part of this IoT technology stack – example energy/smart grid “Things” SELECTED ELEMENTS OF STACK Exemplary players Customer Integration Smart meter applications Grid apps (e.g., supply/ Use (e.g., advanced (e.g., demand- (e.g., substation demand cases meter side automation) balancing, load infrastructure) management) forecasting) System Power grid management systems and system integration integration Meter data Distribution Outage Asset Customer management Software management information manage- information system system (DMS) system (OIS) ment (AM) system (CIS) (MDMS) Communica- Home-area network WAM, WiMAX, cellular LAN, RF mesh, PLC tion network (HAN), ZigBee Semi- Processor DSP Memory Analog MEMS conductor “Things” Switches Transformers Meters Storage Energy T&D Substation Wires Customers infrastructure SOURCE: Press clippings; expert interviews; GSA and McKinsey & Company “IoT collaboration” 6 Many new IoT applications have already been established – even more are gaining traction and are on the horizon Proliferation status of IoT applications Medical Industrial Wearables Smart home electronics automation Connected cars Smart cities Productivity Smart watch Connected lighting Digital patient record In-vehicle infotainment Public surveillance improvement Fitness accessories Home automation Logistics tracking Telematics Traffic monitoring Estab- lished Smart meter Vehicle tracking Existing Surveillance today Smart door lock Predictive process Automatic system Smart glasses Hospital management Traffic control Smart thermostat monitoring upgrade Gaining Connected appliances Vital function monitoring Remote servicing traction Intelligent lighting Smart pill Predictive maintenance Vehicle to vehicle / Intelligent Smart clothes and shoes Gardening Patient localization vehicle to Internet Smart grids production lots Emerging over the communication next 3-5 years Location-based Smart implants Predictive maintenance information Embedded wearables Assisted living Sensor swarms Autonomous driving Predictive maintenance Autonomous On the horizon Distributed maintenance environmental Agile/individual monitoring manufacturing SOURCE: IHS; expert interviews; press clippings; GSA and McKinsey & Company “IoT collaboration” 7 Initial applications show that the IoT is already happening Wearables – Smart watches Connected car – Insurance Smart metering ▪ In 2014 > 22 mn wearable devices ▪ An American car insurance ▪ > 50 mn smart meters (AMI, sold with a volume of ~ USD 12bn company monitors customer advanced meter infrastructure) are ▪ Launch of Apple watch expected driving habits via the mobile installed in the USA which cover in Q2 2015 with volume up to 30 network with a customized device 43% of all US homes mn units in first 12 months1 installed in the car Road pricing system IoT technology in automotive Smart service in industrial machine ▪ In Singapore, > 93 gantries have ▪ An electrical vehicle manufacturer ▪ Smart system diagnostics have Electronic Road Pricing System to fixed battery charging on ~30,000 improved the first-time fix rate by manage road tolls which are cars without a “physical recall” 5% for an exemplary equipment charged based on location, time with a remote system update via vendor in the flexible materials slots, and day (e.g., weekday vs. the mobile network industries weekend) 1 Prediction by Morgan Stanley SOURCE: IHS Technology 2013; press search; Navigant Research; SBD; CCS Insight; University of Michigan; The Edison Foundation Institute 8 for Electric Innovation (IEI); GSA and McKinsey & Company “IoT collaboration” Contents ▪ IoT spans a broad field of applications and is starting to happen now Introduction IoT as a growth driver for the ▪ IoT is expected to be a key growth driver for semiconductors; however semiconductor industry some ambiguity exists about the timing and the magnitude of growth Good progress towards the ▪ Progress for IoT has been made by increasing supplier push and customer realization of IoT demand, technological and