Iot Opportunity in the World of Semiconductor Companies July 2018 Brochure / Report Title Goes Here | Section Title Goes Here

IoT opportunity in the world of semiconductor companies July 2018 Brochure / report title goes here | Section title goes here

b Table of Contents

The opportunity 03 Industrial market overview 07 Automotive market overview 11 Smart city market overview 17 Health care market overview 21 Consumer market overview 25 Appendix 31

1 2 IoT opportunity in the world of semiconductor companies | The opportunity

The opportunity: Semiconductor companies in the future

They could be immersed in powering a world of IoT

How do you create shareholder value when •• Low economic profit in the industry:Most your product is so heavily commoditized The power of three players in the industry have struggled to that it’s nearly impossible to make high consistently generate profit. Competition Top trends forcing change margins on it? You build an ecosystem to is fierce, and when a product is a The semiconductor industry has been provide solutions, and the Internet of Things commodity it can shrink margins. In some affected by three major trends in recent (IoT) brings semiconductor companies cases, profits made over a period years that have been difficult hurdles to that opportunity, with markets ripe for of some years on in-demand products overcome: innovation and growth. tend to be lost on future products that •• Product performance may be peaking: fail to take off. So, what’s driving the shift? Semiconductors Moore’s law states that the number of •• Disruption in technology value chain: form the underpinning of all the electronics transistors, and hence the performance, Many semiconductor companies we use in our daily lives. From the alarm in a dense integrated circuit will double experiencing a decrease in profitability clock and microwave that help us get our approximately every two years, and it have uncovered more value from day started, to the cell phone and laptop has been true for a long time. Computers integration, software, and service than that enable our workday—much of what we have become smaller and faster over from the sale of chips. Many companies depend on is powered by semiconductor the past few decades lending credence now have more software engineers than chips. Yet, semiconductor companies are to the theory. However, in recent years hardware engineers, but they don’t get at a critical junction. Leaders require new this phenomenon has slowed. Peak paid for these costs by their customers. strategies to grow their businesses in performance of semiconductors may Essentially, they are offering more and smart ways. be starting to level out. getting less, which is only sustainable for so long.

3 IoT opportunity in the world of semiconductor companies | The opportunity

Where there’s How will nuances. Semiconductor companies can embrace IoT strategies by: challenge, semiconductor Building a business ecosystem there’s opportunity companies devise In order to provide an end-to-end IoT solution, we need device manufacturers, Take advantage of IoT markets IoT strategies? communication hardware, connectivity In order to overcome the effect of these protocols, cloud providers, IoT platforms, Semiconductor companies can no trends, a large number of semiconductor analytics and system integrators, etc. On longer simply be component providers companies have taken measures to reinvent top of that, IoT is a nascent and fragmented to create value in this market. They have themselves. The leaders in the industry are market with different end-customer needs. to understand the entire IoT stack’s making moves to: It is impossible for a single company to requirement, and in some cases, possess all the technologies. The nature •• Improve margins through merger and create an end-to-end solution that facilitates of the IoT market calls for an ecosystem acquisitions and thus benefit from the market adoption. A typical IoT stack with of companies that share a vision and resultant economies of scale. representative electronic subsystem is have complementary assets and skills. illustrated in figure 1. The left-hand box •• Grow their product portfolio, thus Semiconductor companies could build is typically the device that contains the moving into more profitable market such an ecosystem and strive to be sensors. It could be a mobile phone or a segments such as IoT. the control point, as they architect and medical device that captures a person’s help catalyze, enable, and manage the heartbeat. Both the device and the IoT There is tremendous opportunity for whole solution jointly developed by the platform it communicates with have the semiconductor companies to provide value ecosystem partners. to their end customers via IoT markets. capability to analyze and organize the data received. These devices and sensors are going to play Enabling ecosystem partners a critical role in collecting and processing A sustainable partner ecosystem The IoT platform also has the capability of data across a variety of industries. They will creates a win-win situation for all parties interpreting the data and sending analytics likely bring forth new services and create involved. To form a successful ecosystem, up through an application that provides cost reduction opportunities. They can forge semiconductor companies should insights and alerts to people or providers. insights into new discoveries and help us find understand, develop, and nurture the Security is a critical component at every quality issues faster and improve output. partners to enable their growth. This may step of the journey, from the time the data And in some industries, like health care and require providing them technical, business, is collected to the time it is served up in automotive, they could even save lives. The and financial support. ability for an IoT sensor or device to sense the application. There are opportunities for semiconductor companies to provide its surrounding, communicate its state, and Semiconductor companies also may products and services in four key areas of process the collected data to determine need to adjust the product strategy. the stack—Sense, Analyze, Communicate, the best response to its environment holds Besides making trade-offs between and Security—as illustrated in the diagram. extraordinary promise. The projected size of power, function, form factor, and security, There are also greenfield opportunities to the market is equally impressive. semiconductor companies should consider provide services in other areas of the stack. additional features or products to enable Samsung has already taken steps in this IoT semiconductor spending is projected to IoT ecosystem partners. Such offerings 1 direction by offering the ARTIK platform, be $34 billion in 2020. At the same time, IoT might include a software development which includes cloud platform, analytics electronics solution spending is projected to kit (SDK) tailored to the IoT developer, or offerings, and ease of cloud integration. reach $572 billion presenting semiconductor enabling ease of connectivity to cloud companies the opportunity for revenue platforms, analytics apps, and system 2 While the opportunity is large, the IoT growth other than from device sales. integration services. However, to realize the revenue growth market presents entry challenges to benefits, semiconductor companies should semiconductor companies. These adapt their product development and go-to- challenges range from a fast-changing and market strategy for the IoT market. fragmented market, to security and privacy issues, to industry-specific go-to-market

4 IoT opportunity in the world of semiconductor companies | The opportunity

Figure 1. IoT stack diagram

Sense Communicate Applications Services Wireless modules Gateway processing Location sensors Analytics

Wave sensors Edge Platform core Image sensors High-performance computing Physical sensors Infrastructure Sensor preprocessing Sensor fusion GPU CPU FPGA

Security

Encryption TPM

Sense Analyze Communicate Security Greenfield opportunities

Creating a digital sales platform allow semiconductor companies to blanket module with public key infrastructure and The best way to build a business ecosystem what is now a highly fragmented IoT market multi-factor authenticated access. To ensure is to build it around a concrete customer with a lot of sub-segments, giving them a the gaps are covered, none of this activity case. However, the IoT markets are distinct advantage and their customers a should be done in isolation. Work together so fragmented with varying end-user single point of contact. with partners to uncover and solve potential requirements in different industry verticals security issues. and use cases. It is nearly impossible to sell Ensuring security and privacy to such a broad and fragmented market Security and privacy can make or break Customizing by industry need without more digital platform to bring the adoption of IoT products. Challenges In addition to these common themes, the providers of different components include not only hardware vulnerabilities, nuances in each vertical require specific of the end-to-end solution together. An but also security gaps created during product and go-to-market strategies. To sell integrated digital sales platform will help integration and implementation of IoT offerings into these markets, it’s important enable the partners to work together systems as well as those created during to understand what customers are trying from opportunity identification to solution remote device access, communication, to achieve. Semiconductor companies development. For example, an intelligent and management. Features and solutions should be particularly interested in IoT opportunity management will help identify that mitigate these issues often include opportunities in the following markets: opportunities and determine which software-based API security. Such security industrial, automotive, smart cities, partners to pull into the deal whether they measures can authenticate and authorize health care, and consumer. Let’s take an be cloud platform operators, data service data movements between devices. Create in-depth look at these sectors, the market operators, applications and analytics a hardware-based trusted platform and opportunity for semiconductor companies, developers, third-party system integrators, execution strategy to ensure authenticity and ways to win. or consultants. Such integrated deals could of firmware. Use a built-in encryption

IoT opportunity in the world of semiconductor companies | Industrial market overview

Industrial market overview

This industry is red hot

The industrial semiconductor sector has Out of the $49 billion, IoT semiconductor grown to $33 billion market in 2015, and it’s sale comprises $8.4 billion.4 There’s a expected to grow to $49 billion in 2020, at a tremendous amount of opportunity in CAGR of 9.8 percent (roughly two times that this sector if semiconductor companies of total semiconductor growth).3 can harness the IoT products and services customers need.

7 IoT opportunity in the world of semiconductor companies | Industrial market overview

Figure 2. YoY revenue growth of industrial semiconductor vs. all semiconductor

25% Industrial Semiconductor All Semiconductor 20%

15%

10%

-5% Gartner Source: 2016 2017 2018 2019 2020

Meet the fourth earlier than historical processes of discovery availability while reducing unnecessary would have allowed. The phenomenon has maintenance. APM connects disparate industrial revolution given rise to the next industrial revolution, data sources and uses advanced analytics now referred to as Industry 4.0. The to turn that data into actionable insights IoT opportunities and sensor data factories that embrace Industry 4.0 are while fostering collaboration and knowledge create a smart factory referred to as smart factories. management across the organization.6 APM The industrial sector is the poster child of ensures the machine operations are tightly IoT, and it is undergoing disruption with the The ability to adjust and learn from controlled only to satisfy a realistic demand, advent of the digital age. IoT solutions often data in real time can make the smart ensuring minimal wear and tear of the asset, create a communication network in the factory more responsive, proactive, and which in turn reduces operational costs. industrial sector that extends far beyond predictive. It also enables the organization the walls of the factory and out in the field to avoid operational downtime and other Predictive maintenance (PdM) to suppliers, distributors, and logistical productivity challenges.5 Where does IoT in PdM techniques are designed to help organizations serving the enterprise. This the industrial sector hold the most promise determine the condition of in-service network helps fuse physical realities with for semiconductor companies? equipment to predict when maintenance new technologies creating interconnected is required. This approach can mean digital enterprises that are capable of better cost savings over routine or time-based informed decision making. Sensors track preventive maintenance, because tasks are individual products as they make their way The main applications performed only when warranted. through a plant, onto trucks, and out into are within the factory warehouses, creating a digital record along the way. Alerts are sent to supervisors if Asset performance management (APM) machines sense an abnormality arising. Unplanned downtime is costly for Performance data is collected in the field manufacturers. APM is an approach to and algorithms identify quality issues a year increase asset control, reliability, and

8 IoT opportunity in the world of semiconductor companies | Industrial market overview

Figure 3. Sample product opportunities for industrial

Required Industry application IoT stack devices Asset performance management (APM) Predictive maintenance (PdM)

Sense Electro-mechanical sensors, analog to digital converters, amplifiers

Analyze Microprocessors, microcontrollers, data center to perform core analyses

Communicate Wi-Fi, Bluetooth, Ethernet communication, near field communication (NFC), and 3G/4G cellular communication

Security Encryption, trusted source modules

How to win? ecosystem with the partners who provide Qualcomm was forged to create devices different components of the ecosystem to that will allow companies to control their Build an ecosystem to capture the develop an end-to-end solution. To make assets using LTE communication without big IIoT pie the ecosystem sustainable, semiconductor requiring a licensed spectrum. GE Digital The overall Industrial Internet of Things companies should understand and nurture allows integration to Predix, Nokia is the (IIoT) market is currently fragmented the ecosystem partners to enable their base station infrastructure, and Qualcomm across sensor manufacturers, edge devices growth. provides the wireless technology and chips. manufacturers, platform vendors, network Together, semiconductor companies and providers, and analytics software solution Develop platform and analytics alliances platform providers can also help establish providers. Semiconductor manufacturers, Besides building a complete ecosystem, the future standard of the industrial Internet. as outlined earlier, are dominant players semiconductor companies could also forge In the coming years, significant consolidation and form the basic building blocks of alliances with various platform makers and is expected in the platform space. the devices segment in the IIoT solution analytics software providers. stack. The advent of advanced analytics In addition, partnership with analytics and connectivity has extended the IIoT IIoT platform standards are beginnning to software providers can provide a significant solution stack from devices to platform, form based on open-source architectures. growth opportunity to semiconductor gateways, and application software. By This benefit allows software developers to companies. The need for edge computation 2020, the electronics content market for develop applications on top of the platform is expected to increase given the critical 8 manufacturing and energy is expected to to perform a multitude of operations. It also systems that are controlled in this sector, reach $76 billion. Finally, services which allows hardware/sensor manufacturers to and analytics software providers can include consulting, implementation, connect to the platform with minimal effort. help create solutions that run natively on and operations are expected to reach Thus, semiconductor companies should devices. Semiconductor companies such as $164 billion.7 Many companies are already forge alliances with platform providers to Xilinx and Cavium are partnering with IIoT recognizing and acting on initiatives. create devices that can easily integrate edge software providers, such as Foghorn, Semiconductor companies can capture a with the third-party platform. A recent to enable their chips to seamlessly run greater portion of the IIoT pie by forming an partnership between GE Digital, Nokia, and Foghorn’s solutions.

9 Brochure / report title goes here | Section title goes here

10 IoT opportunity in the world of semiconductor companies | Automotive market overview

Automotive market overview

Electronic features abound in every priced model

From 2001 to 2015, automotive market.This is driven by rising electronic semiconductor revenue grew from content in cars and the spread of electronic $10 billion to $30 billion. This semiconductor features from premium models to lower- segment is expected to grow to $47 billion priced, high-volume models.10 Out of this in 2020 at a CAGR of 9.2 percent.9 The spending, $10.5 billion is attributed to IoT growth rate is above average and similar applications.11 to the opportunities in the industrial

11 IoT opportunity in the world of semiconductor companies | Automotive market overview

Figure 4. YoY revenue growth of automotive semiconductor vs. all semiconductor

25% Automotive Semiconductor All Semiconductor 20%

15%

10%

-5% Gartner Source: 2016 2017 2018 2019 2020

12 IoT opportunity in the world of semiconductor companies | Automotive market overview

IoT is going to enable automotive IoT to grow beyond the Infotainment systems classical automotive telematics solution Consumers want to be connected in a digital change our driving and into these data-rich models that can world. At the center of this application is the fundamentally change driving for the better, infotainment unit, where drivers can access experiences with fewer breakdowns, fewer stranded real-time vehicle data, answer calls, play people, less room for human error, and music, listen to audio books, and access GPS Electronic content is rising in the devices hopefully safer roads with fewer accidents. or navigation data. Connection to the web and solutions that enable asset or fleet or cloud is generally done by tethering the performance management, connected driver’s smartphone to the infotainment or vehicle applications, and autonomous The main applications by including cellular modules as a factory driving applications. Imagine a car that are within the option. In both cases, semiconductor sends an alert to your cell phone to not providers stand to benefit, as the number of only schedule maintenance, but also ensure vehicle itself built-in or tethered cellular communication the parts required for the repair are at modules is projected to increase from 6.9 the dealer before you arrive. Imagine a Autonomous driving million per year in 2015 to 61 million per year car that can navigate a busy freeway on 13 Although still in its early stages and slowly in 2020. its own without you having to touch the increasing, the promise is significant; pedals. And vehicles without Wi-Fi? They’ll ranging from fewer accidents to less traffic, Asset performance management (APM) likely be unheard of as a new generation of to an increase in operational efficiency. and predictive maintenance (PdM) young drivers take the wheel. All of these Autonomous vehicles present opportunities APM and PdM are similar in both concept advances are digitally enabled. Now, take for semiconductor companies to provide and business benefit to APM and PdM it a step further. The systems created by solutions that give vehicles the ability to in the industrial sector. In the context of these electronics are also enabling new sense, analyze, interpret, decide, take automotive, APM is more likely to serve business models and service offerings such action, and communicate with other enterprise customers with large fleets of as on-demand car solutions, insurance-as-a- automobiles, infrastructures, businesses, vehicles, like delivery trucks. However, PdM service, and car-to-home integration. people, and organizations. The solution for both enterprise customers and consumer includes hardware, software, and data vehicles would work in a similar way. These IoT applications and new business communications efforts listed in figure 5. models require understanding of the For example, more than 25 sensors per insights from the vehicle’s past, present, car are required for a car to recognize and future states. The availability of the its surroundings.12 expanded big data applications helps

13 IoT opportunity in the world of semiconductor companies | Automotive market overview

Figure 5. Sample product opportunities for automotive

Required Industry application IoT stack Asset performance Autonomous driving Infotainment systems devices management (APM) Sense Camera, radar, lidar, ultrasonic Accelerometer, gyroscope, oil/fuel, oxygen, pressure, temperature, sensors electrical/current, GPS, camera

Analyze Embedded processors for APM components + GPUs and UI components sensor fusion

Communicate Ethernet (in-vehicle), wired/wireless Ethernet (in-vehicle), wired/wireless Ethernet (in-vehicle), cellular, Wi-Fi LAN, DSRC, cellular LAN, Bluetooth, DSRC, cellular

Security Encryption, trusted platform module

14 IoT opportunity in the world of semiconductor companies | Automotive market overview

How to win? Finally, semiconductor companies can involved in end-product electronic design. mitigate public and regulator concerns To access these segments, semiconductor Make sure your bases are covered by addressing them up front and working companies should focus on developing Semiconductor companies need to together to shape policy. solutions or platforms for the commonly understand the potential challenges in used end applications in the segment of the automotive IoT market to develop an Explore providing integrated systems interest. In addition, they’ll need to effective product and go-to-market strategy. Semiconductor companies also have leverage and enable third-party system There are three main challenges in entering opportunities in the automotive IoT market integrators with skills to implement highly the automotive IoT market: 1) product life beyond supplying electronic components. customized solutions. These two activities cycle, 2) safety requirements, and 3) public One market segment adjacent to ensure and accelerate adoption of solutions perception and regulations concerning components is the electronic subsystems, in the market. autonomous vehicles. such as an integrated system. This segment is expected to reach $110 billion Partner on managed services The first challenge concerns the long by 2020, which is roughly three times the There’s $28 billion of opportunity in product development cycles in the forecasted semiconductor device TAM.14 managed services. However, this area automotive industry due to the significant Most semiconductor companies have is traditionally not closely related to capital required to design and produce a included demo and prototyping boards in semiconductor companies’ core vehicle as well as time to ensure product their go-to-market product mix. Therefore, capabilities. There are two ways to access quality and safety standards are met. with the right investment in system design this segment: 1) Build your own cloud Semiconductor companies need to assess capabilities, semiconductor companies platform applications or 2) partner with the time and investment risks in producing may be able to provide a more complete existing vendors. With the first method devices for automotive customers. To electronics automotive system solution, requiring time and expertise to build assets mitigate these risks, work closely with which ultimately can increase their and customer credibility for cloud platform, automotive customers during the product automotive revenue base. it may be advisable to pursue this planning and design process. opportunity through the second method. Bulk up on consulting capabilities Finally, connectivity services or data plan The second challenge involves device quality, Another possible route for increasing is another possible segment valued at reliability, and security. Solving this challenge revenue is through consulting services and $12 billion. However, this requires high requires that companies: first, understand implementation services, which provide CapEx spending for infrastructure building, automotive-grade product requirements, $17 billion in opportunities.15 These market and semiconductor companies will likely and second, design devices with encryption segments include IoT business strategy face headwinds from existing telecom and trusted platform solutions that meet development and electronic system design providers. It may be best accessed through the cybersecurity requirements. usually for highly customized applications partnership with existing carriers.16 for customers who are traditionally not

IoT opportunity in the world of semiconductor companies | Smart city market overview

Smart city market overview

Making life better for citizens while operating more efficiently

City dwellers are expected to make up The endpoint hardware spending for smart roughly two-thirds of the world’s population cities was $289 billion in 2016, and it is by 2050.17 Smart city solutions have projected to grow to $463 billion by 2020 enormous potential to improve the lives of at a CAGR of 12.7 percent.18 Semiconductor their citizens, making transportation easier, device sales for smart cities were reducing waste and pollution on a massive $613 million in 2016 and are projected to scale, lowering energy consumption, and grow to $1.2 billion by 2020.19 The growth protecting against threats. Smart city is mainly driven by the need for increased solutions are made up of electronic and connectivity, improved infrastructure, and software systems that enable metropolitan optimized energy consumption. Existing assets to be more aware and react to their smart city applications range from highly environment. Typical applications center on customized niche solutions, like countering city management, building management, a specific climate threat to the area, to those energy, infrastructure, governance, and that are common and of high interest by public services. many cities, like smarter parking.

17 IoT opportunity in the world of semiconductor companies | Smart city market overview

Figure 6. Sample product opportunities for smart cities

Required Industry application IoT stack devices Smart building Smart parking Smart grid

Sense Metering and power quality sensors, electrical measurement Smart grid sensor (including a sensors, non-electrical smart grid Vehicle detector sensor transducer, a microcomputer, a sensors, HVAC (heating, ventilation, transceiver, and a power source) and air conditioning) sensors, energy conservation sensors

Analyze Cloud-based building analytics that leverage artificial intelligence Cloud-based analytics, intelligent Central computer to process and and machine learning, dashboards parking management software analyze data and send commands reporting system

Communicate Ethernet, other wired (USB, RS232, RS485, LonWorks, DALI), LAN (Zigbee/6LoPAN), Wi-Fi, Bluetooth, powerline, sub-GHz

Security Strict controls between IT system and building/parking system networks, encryption-secure coding practices to sanitize input and prevent remote execution of commands

18 IoT opportunity in the world of semiconductor companies | Smart city market overview

Major applications It is estimated that the building or facilities How to win? automation electronic content market will for smart cities? grow to $18 billion by 2020 at a CAGR of Help governments find a path to IoT 32 percent,23 while connectivity services To gain competitive advantage, Think efficiency for this application are estimated to be semiconductor companies should provide $543 million for the same time period.24 more than just components, including Smart parking There’s plenty of IoT opportunity for more comprehensive, integrated solutions It is estimated that at any given time, up to semiconductor companies. through core differentiating capabilities 30 percent of all cars in the city are looking or outside partnerships. Such a structure 20 for a parking space. That wastes a lot of Smart grid could not only result in a higher chance of fuel. Smart parking systems aim to take the People don’t like to lose power. It not only adoption by cities, but also capture more stress out of finding parking for drivers while creates inconvenience, but also hurts a city's revenue for semiconductor companies from reducing traffic for cities by getting cars economy. Cities can’t have their grids down the smart city market. to their destination faster. And it does so for long. Smart grid solutions enhance the by giving individuals real-time information electric grid with modern digital technology, Build an ecosystem for solution on available parking spots, helping to save such as sensing and measurement, A complete smart city solution requires 21 time and reduce carbon output. Such integrated and automated communication device manufacturers, communication systems work by using sensor-enabled networks, and an advanced data analytics hardware, connectivity protocols, cloud devices that show the location and number platform. These applications allow for two- providers, IoT platforms, analytics and of available spaces when requested by the way communication between the utility system integrators, etc. drivers. Coupled with RFID devices installed and its customers. Smart grid can achieve in the car for vehicle authentication, such a more efficient transmission of electricity, As device manufacturers, semiconductor system could include reservations, parking faster power restoration after disruption, companies can’t provide such a solution structure access control, payment systems, reduction in operations and management on their own. However, semiconductor and dynamic pricing capability allowing costs for utilities, reduction in peak demand, companies could build and even be the cities to offer new services to increase their improved security, and increased integration control point of an ecosystem, within revenue base. of large-scale renewable energy systems. which they architect and help catalyze, Smart meter solutions alone are expected enable, and manage the whole solution Smart buildings to reach $755 million by 2020.25 jointly developed by the partners. In many Worldwide, buildings consume 42 percent cases, semiconductor companies also of all electricity, up to half of which is In addition, cities like Borrego Springs, need to bring the complete solutions to wasted. Energy costs alone represent California, are incorporating renewable the city planners and jointly develop the about 30 percent of an office building’s energy micro-grids, which reduce business cases. total operating costs. Smart buildings greenhouse gas emissions and, because use sensors to capture energy use they function independently, don’t go down data that’s analyzed to detect potential when the larger, traditional grid fails.26 issues, predict upcoming maintenance, and enable optimization of a building’s energy systems.22 The application uses IoT-enabled devices that collect and send consumption data to advanced descriptive and prescriptive analytics systems.

IoT opportunity in the world of semiconductor companies | Health care market overview

Health care market overview

Let’s change some fundamental elements about care

Health care spending in the US is forecasted Health care IoT growth is primarily driven to grow from 17.8 percent to 19.9 percent of by remote health monitoring, workflow GDP in 2025.27 US health care IT spending optimization, and integration with electronic will reach $137 billion by 2021 at a CAGR medical records (EMRs). Insurers, as payers, of 12.5 percent.28 This figure comprises and government, as regulators, are among $4 billion and $14 billion of electronic key stakeholders in the success of health content spending in 2020 by health care care IoT efforts to improve aggregate providers and health or fitness consumers health outcomes and lower health care respectively, with a total of $817 million from expenditure. Technology will play a key role semiconductor devices.29, 30 in how fast this industry will accomplish its goals and bring about system-wide change.

21 IoT opportunity in the world of semiconductor companies | Health care market overview

Integrating IoT with Major IoT applications Workflow optimization Workflow optimization devices are typically electronic medical in health care lower risk investments because ithey are nonclinical IoT applications and do records provides for both patient not require FDA approval. Compared to other health care products, they have a a path and provider relatively fast go-to-market time frame as a result. There are a variety of ways health IoT can allow for better population Remote health monitoring care providers can implement these new health management solutions and better Access to more information outside a devices. For example, RFID technology, or strategies for chronic disease care, which doctor’s office can open windows of insight other wireless standards, on wrist bands is a significant cost driver for the industry. that providers haven’t had before. Used and badges can optimize workflow by When real-time collection of health data appropriately, remote health monitoring or providing a smart and connected system integrates with EMRs, providers can gain home health monitoring can really make a between patients, providers, and medical higher efficiencies and better outcomes at a difference in helping people manage chronic assets. Workflow optimization devices can lower cost. How does it work? Such systems diseases for the better. How do they work? automatically detect and alert a provider collect patient-generated data, populate the Remote health monitoring devices are fitted of cleanliness using hygiene monitoring data in the EMR, and apply analytics to find with sensors that track health indicators. systems. Providers can also keep better a data-driven, preventive treatment strategy They carry communication modules to track of medical tools and machines as for chronic diseases. Providers can see notify health care providers when there sensors can allow real-time location and trends they may not have identified on their are changes in a patient’s vital functions. It tracking services of the tools used in patient own and adjust an individual’s care for the is part of a system that enables seamless treatment. Want to know where all the heart better. Healthier patients generally mean integration between data-generating monitors are? This IoT application allows for less burden on the system and lower costs. medical devices to analytic platforms with easy search and access. the aim of lowering cost and improving EMRs have gone from an adoption rate of outcomes in disease management. Chronic Finally, hospitals largely depend on 9.4 percent in 2008 to 84 percent in 2015 diabetes and heart disease conditions both machines to do their work and manage among non-federal acute care hospitals, yield themselves to this type of solution patient care. When those machines go while certified ones reached 96 percent very well. Getting these diseases under down, it can create a lot of havoc to the from 72 percent.31 From the perspective control carries a high value proposition as workflow. The same APM and PdM IoT of health care providers, leveraging IoT the device sensors are apt to prevent crisis applications used in manufacturing can integration with EMRs is an important next situations, keep people healthier, and lower benefit workflow optimization in health care, step to address rising operating expense the cost of treatment. There will likely be ultimately improving operational efficiency and margin pressures. Expect IoT to play a high market demand for remote health and lowering costs. central role to opening new avenues to data monitoring in the near future. in the near future—better patient outcomes are the end goal.

22 IoT opportunity in the world of semiconductor companies | Health care market overview

Figure 7. Sample product opportunities for health care

Required Industry application IoT stack devices Remote health monitoring Workflow optimization

Sense Temperature sensor, pulse oximeters, pulse/blood pressure, MEMS-based pressure sensor, weight scales, glucose meters, electrocardiogram, ultrasound Hygiene sensor, location tracker, CMOF sensor, RFID scanning, MRI, position emission tomography (PET), digital stethoscopes; MEMS

Analyze GPU – MRI, scanning, CPU, FPGA

Communicate Wireless (ANT +Bluetooth, ZigBee, Near field communication, etc.), Wi-Fi, WAN, LAN, BAN (body area Wireless LAN, Bluetooth, cellular, Ethernet network), Bluetooth, cellular, edge computing

Security Pre-silicon and post-silicon verification, secure storage, secure processor, secure IPs, trusted platform (TPM), encryption

How to win? Adapt for longer life cycles with can work together to develop a common higher margin standard for sustainable future growth by Help facilitate a sector that’s There are a variety of factors to consider addressing key stakeholder requirements. redefining care when entering the health care IoT market, Make sure to get reliability and The smart health care market presents including: the complexity of the health security right growth opportunities for semiconductor care ecosystem; compliance with personal It’s a mission-critical affair for health care. companies on both the consumer and health information (PHI) standards and On the device level, semiconductor professional services sides. Consumer government regulations. Determining which providers need to address reliability and services, like remote health monitoring party is going to bear the cost of the device security. The devices should be designed and fitness trackers, has the highest and developing a common standard for to minimize the chance for malfunction and projected growth of $10.2 billion in 2020 at connected medical devices are also critical ensure that data generated from sensors a CAGR of 41.5 percent.32 Forecasted with issues for semiconductor companies to are accessible only to the authorized parties. a growth rate of approximately 24 percent, consider. Although products in the health For reliability, perform pre-silicon and professional IoT services for health care care space typically have high margins, post-silicon verification in place as well as an providers is another promising new segment semiconductor companies’ product accurate estimate of the product mean time that semiconductor companies can capture planners also need to account for the long to failure. To achieve the health care security additional revenue from. Such professional product life cycle. requirements, semiconductor companies IoT services, including consulting, should provide, or work with partners to implementation, and operation services, Partner to develop common standards provide, embedded security features in would grow to an $18.2 billion market by To mitigate the factors above, storage, processors, and IPs. Also, secure 2020, with operation services having the semiconductor companies should take the storage and secure lock are needed largest opportunity at $8.4 billion.33 opportunity to become or partner to be to ensure users cannot change device the control point of the evolving health care functionality or pull data out. It is important IoT ecosystem, including medical device that semiconductor companies work with manufacturers, health care providers, IP vendors to ensure security features and insurers, and regulators. The participants risks at all levels are properly addressed. 23

IoT opportunity in the world of semiconductor companies | Consumer market overview

Consumer market overview

Chores be gone, IoT makes life easier, more entertaining

Consumer electronics accounted for same time frame.36 The volume growth will $36 billion in semiconductor revenue primarily be driven by increasing micro- in 2015, and it is forecasted to grow components and sensors used within to $45 billion by 2020 at a CAGR of consumer appliances that enable devices 6.4 percent.34 From an IoT perspective, to sense and analyze their surroundings. the semiconductor revenue amounts to The adoption of new devices that address $7.8 billion today, but it is expected to new value propositions is staged to grow grow to $13.1 billion by 2020.35 It’s worth as well. However, the value of consumer IoT noting that a majority of the growth accrues products is not just about the glitz of the from positive pricing pressure rather than gadget. The value lies in the data collected volume growth, which is expected to be and how this data makes life easier and even approximately 2.3 percent during the more entertaining.

25 IoT opportunity in the world of semiconductor companies | Consumer market overview

Major applications As gaming technology moves ahead to immersive experiences and the ability incorporate new devices, such as motion to communicate. Applications powered of IoT for consumers detectors or body sensors, to facilitate by devices such as smart watches, head- gamer interaction and improve gaming mounted displays (HMDs), and Bluetooth are close to home experience, these entertainment devices are headsets fall into this category. The second likely to see wider adoption. is passive applications that mostly deal with Smart home sensing body motion and signals, backed by Current smart home applications can As stated, background applications focus devices such as sports watches, wristbands, broadly be divided into two types of on making the home more comfortable and fitness monitors. applications. The first set of applications and secure. Consumers can control lights, can be classified as foreground applications heating, and security systems from their The large growth market, both from a and contain those that are entertainment- smartphones—and even unlock doors. device perspective and a semiconductor based and sustain high user engagement. In Appliances can send notifications or perspective, will likely be driven by the contrast, the second set of applications can show you what’s in your refrigerator from first category. Given their interactive and be classified as background applications, afar. Landscape systems can measure computing-heavy nature, these applications which comprise applications that manage plant moisture and water only when it’s would require devices with immense dull but crucial background activities necessary. Home comfort applications work capability to compute and communicate, that improve daily life by automating on an ecosystem of connected sensors thus driving the number of embedded 37 mundane tasks. and household appliances, and they semiconductor components per device. currently operate on a rule-based system. Foreground applications are primarily home As these applications shift toward true The second category of wearables can be media and entertainment devices. Devices automation through learning the household considered matured, by comparison, and such as virtual personal assistant (VPA)- occupant’s behavior, the computational may offer limited growth opportunity for enabled wireless speakers that allow users needs of the ecosystem are likely to increase semiconductor companies as they primarily to interact with their home entertainment semiconductor consumption. use simple sensor and memory and systems and provide a gateway to the communicate components. However, they Internet will likely be a future driver of Wearables do present a potential source of additional semiconductor consumption. Traditional Wearables provide consumers with devices revenue as consumers seem willing to pay devices such as game consoles, smart TVs, that include a host of cloud-connected for health- and fitness-related applications. and set-top boxes—all of which are now applications. Similar to smart home Application development would be key to becoming smart and Internet connected— applications, wearable applications can taking advantage of these wearables. have already experienced broader adoption also be broken down into two categories. and will likely continue to be a large market. The first is applications that provide

26 IoT opportunity in the world of semiconductor companies | Consumer market overview

Figure 8. Sample product opportunities for consumer

Required Industry application IoT stack devices Smart home Wearables

Sense Image sensor, chemical sensor, pressure sensor, Image sensor, optical sensor, magnetometer, temperature sensor, MEMS microphone gyroscope, accelerometer

Analyze Microprocessor (in device), GPU/microprocessor Embedded processors for sensor fusion (required in wearable compatible gaming systems)

Communicate Wi-Fi, Zigbee, Bluetooth, Ethernet communication Cellular, Wi-Fi, Zigbee, Bluetooth

Security Encryption, trusted source modules

How to win? can choose to develop either generic Android Things OS, and with Amazon Web solutions, which empower a large volume of Services for integration.39 Expand into subsystems and devices with interoperability and security for application development various ecosystems, or specific solutions for Lastly, given consumers' preference to The consumer IoT market is in a very early blockbuster devices. adopt a single app or device to interact adoption cycle, and it is a market where use with their IoT ecosystems, there will cases and value propositions are gradually Focus on interoperability likely be a few blockbuster products being developed. Currently semiconductor Consumers today are often overwhelmed that will function as IoT platforms in and electronics manufacturers are with the number of available products the consumer space.40 Given the need expected to capture $195 billion, compared and the difficulty in integrating products for high-performance computing and to $13.1 billion for a pure component to work together as part of a single communication, semiconductor companies play. On top of that, application service is ecosystem. Interoperability is another can partner with device manufacturers in expected to reach $26 billion.38 major concern expressed by consumers, this space to develop customized hardware and many companies are trying to address components as well as architectures for However, companies can still position this issue by creating their own alliances these platforms. While this might mean a themselves to benefit not only from and platforms. Semiconductor companies longer product and investment cycle for component sales in the devices that could benefit in aligning themselves with semiconductor companies, it could also lead power these ecosystems, but also from these partners to ensure that their products them to commanding higher margins for a strategy that would provide larger meet the end user’s interoperability and their product with a possibility of capturing electronic subsystems. Depending on their standardization requirements. For example, a larger portion of the electronic content in competencies, semiconductor companies Qualcomm partnered with Google for these devices.

27 Brochure / report title goes here | Section title goes here

Simply put, build an IoT ecosystem and digital platform

The IoT electronics content spending is projected to reach $572 billion,41 in 2020, of which $34 billion42 is from semiconductor devices. However, the IoT market is currently highly fragmented and covers broad end applications, which makes it impossible for a single company to provide end-to-end solutions. The nature of the IoT market calls for an ecosystem of companies that share a vision and have complementary assets and skills. Semiconductor companies are well positioned to forge such an ecosystem and even be the control point of the ecosystem, as they architect and help catalyze, enable, and manage the whole solution jointly developed by the ecosystem partners. Semiconductor companies also should build an integrated digital sales platform, which will bring the ecosystem partners together to jointly sell to a broad and fragmented market. Finally, it takes time to realize the financial benefits of going into the IoT market, so it’s advisable to measure success KPIs similar to a start-up.

28 IoT opportunity in the world of semiconductor companies | Authors and Contributors

Authors

John Ciacchella Principal Deloitte Consulting LLP [email protected]

Chris Richard Principal Deloitte Consulting LLP [email protected]

Nina Zhang Senior Manager Deloitte Consulting LLP [email protected]

Contributors

Markus Adhiwiyogo Vijay Swaminathan Siddharth Kannan Nora Zhang

29 IoT opportunity in the world of semiconductor companies | Endnotes

Endnotes

1. Gartner, Forecast: IoT endpoints – Sensing, processing and communications 21. Deloitte Development LLC, Being smart about smart cities. semiconductors, worldwide, 2016 update, January 9, 2017, https://www. 22. Ibid. gartner.com/doc/3565023/forecast-iot-endpoints--sensing. 23. Gartner, Forecast: Internet of Things. 2. Gartner, Forecast: Internet of Things – Endpoints and associated services, worldwide, 2017, December 21, 2017, table 3-1, https://www.gartner.com/ 24. Ibid. doc/3840665/forecast-internet-things--endpoints. 25. Gartner, Forecast: IoT endpoints. 3. Gartner, Semiconductor Forecast Database, worldwide, 3Q17 update, table 1-1. 26. Deloitte, Being smart about smart cities.

4. Gartner, Forecast: IoT endpoints. 27. Centers for Medicare & Medicaid Services, “2016–2025 Projections of national health expenditures data released (press release), https://www.cms.gov/ 5. Rick Burke, Adam Mussomeli, Stephen Laaper, Marty Hartigan, and Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases- Brenna Sniderman, The smart factory: Responsive, adaptive, connected items/2017-02-15-2.html. manufacturing, Deloitte University Press, 2017, https://dupress.deloitte.com/ dup-us-en/focus/industry-4-0/smart-factory-connected-manufacturing.html. 28. Allied Market Research, Internet of Things (IoT) Healthcare Market – Global Opportunity Analysis and Industry Forecast, 2014–2021, https://www. 6. GE, “Asset performance management for power & utility: How to achieve no alliedmarketresearch.com/iot-healthcare-market. unplanned downtime” (video), February 8, 2017, https://www.ge.com/digital/ products/asset-performance-management-for-power. 29. Gartner, Forecast: Internet of Things.

7. Gartner, Forecast: Internet of Things – Endpoints and associated services, 30. Gartner, Forecast: IoT endpoints. worldwide, 2017. 31. JaWanna Henry, Yuriy Pylypchuk, Talisha Searcy, and Vaishali Patel, Adoption 8. Steve Winkler, Predix Architecture and Services (technical whitepaper), of electronic health record systems among US non-Federal acute care General Electric Company, September 2015, http://go.digital.ge.com/Predix- hospitals: 2008–2015, ONC Data Brief 35, Office of the National Coordinator Architecture-WP.html. for Health Information Technology, May 2016, https://dashboard.healthit. gov/evaluations/data-briefs/non-federal-acute-care-hospital-ehr- 9. Gartner, Semiconductor Forecast Database. adoption-2008-2015.php.

10. Gartner, Forecast overview: Automotive electronics and semiconductors, 32. Gartner, Forecast: Internet of Things. worldwide, 2016, June 24, 2016, https://www.gartner.com/doc/3357317/ forecast-overview-automotive-electronics-semiconductors. 33. Ibid.

11. Gartner, Forecast: IoT endpoints. 34. Gartner, Semiconductor Forecast Database.

12. 12. Gartner, Master the four stages of connected-vehicle evolution to lead 35. Gartner, Forecast: IoT endpoints. the renaissance of the automobile, March 19, 2015, https://www.gartner.com/ 36. Gartner, Semiconductor Forecast Database. doc/3010718/master-stages-connectedvehicle-evolution-lead. 37. Frank E. Gillet, The Smart Home Finally Blossoms, Forrester 13. Ibid. Research, Inc., July 27, 2015, https://www.forrester.com/report/ 14. Gartner, Forecast: Internet of Things. The+Smart+Home+Finally+Blossoms/-/E-RES120375.

15. Ibid. 38. Gartner, Forecast: Internet of Things.

16. Ibid. 39. Larry Dignan, “Qualcomm steps up its IoT game with processors designed to ease standard fragmentation,” ZDNet, February 21, 2017, https://www.zdnet. 17. Deloitte Development LLC, Being smart about smart cities: Using technology com/article/qualcomm-steps-up-its-iot-game-with-processors-designed-to- to improve lives and keep cybersecurity in focus, 2016, https://www2.deloitte. ease-standard-fragmentation/. com/us/en/pages/risk/articles/smart-cities-solutions-cybersecurity.html. 40. Parks Associates, Top 10 consumer IOT trends in 2017 (whitepaper), 2017, 18. Gartner, Forecast: Internet of Things. http://www.parksassociates.com/bento/shop/whitepapers/files/ParksAssoc- Top10Trends-2017.pdf. 19. Gartner, Forecast: IoT endpoints. 41. Gartner, Forecast: Internet of Things, table 3-1. 20. Postscapes, Smart Parking (web page), June 4, 2018, https://www.postscapes. com/smart-parking/. 42. Gartner, Forecast: IoT endpoints.

30 IoT opportunity in the world of semiconductor companies | Appendix

Appendix

Additional information on how the size of each market was derived is available upon request.

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