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IoT Chips: A Look at a Valuable Trend for Semiconductors

The Internet of Things (IoT) enables physical and virtual objects to connect with each other via cloud technology and exchange data and information. With rapid technological advancements and increasing dependence on technology, it is evident that the concept of IoTwill only expand. Increased research and development (R&D) in the field of IoT in terms of new and improved technologies and the increasing need for improved lifestyle are the two crucial factors driving the IoT chip market. 

Several companies and organizations across the globe, especially the large firms operating in the technology sector, are now working on IoT and plan to expand in this market space. Given the rate of proliferation of the network of wireless sensors, increasing adoption of emerging technologies, and mainstreaming of many smart consumer applications, IoT has gained popularity across domains. IoT has opened up a huge opportunity for the growth of semiconductor companies. Billions of devices are expected to be connected to the Internet by 2020, and the growing IoT market would drive the IoT chip market.

The core application areas of IoT are wearable devices, healthcare, building automation, retail, agriculture, industrial, BFSI, oil and gas, and automotive and transportation, among others. We expect that the IoT chip market for the retail end-use application could grow from $0.5 million in 2015 to $795.2 million by 2022, at the highest compound annual growth rate (CAGR) of 172.9% between 2016 and 2022.

For instance, the Amazon Go concept by Amazon will make use of computer vision, sensor fusion, and deep learning algorithms. It will use Just Walk Out technology, which adds items to the virtual cart of the customer and charges from the Amazon account. After charging, the technology sends the receipt to the app. Amazon Go would help provide smooth shopping experience to the customers.

The introduction of such technologies would help the customers reduce checkout times, facilitate easier payment procedures, allow a comparative cost analysis, and make overall shopping experience easier. Further, the growth of IoT in the automotive and transportation application would be driven by significant business opportunities for connected cars. Automotive companies believe that the use of IoT would help to evaluate the performance of the vehicle. Increased connectivity will also provide additional ways for automotive companies to cross-sell their products to customers.

The automotive and transportation sector is expected to considerably drive the demand for connectivity ICs in the near future. In 2015, connectivity ICs held the largest share of 46.3% of the IoT chip market. The increasing use of IoT in the automotive and transportation sector requires better wireless connectivity technologies to support new segments such as connected cars and intelligent transportation systems (ITS), which would result in increasing demand for connectivity ICs. 

The IoT chip market is expected to grow from $5.75 billion in 2015 to $14.81 million by 2022, at a CAGR of 13.2% between 2016 and 2022. Integration of connectivity capabilities in large number of devices and applications and development of IPv6 have considerably driven the IoT chip market. Further, increasing investments in the IoT industry space to develop new IoT-based products would create demand for more IoT chips.

As of 2016, companies such as Intel (U.S.), Qualcomm (U.S.), STMicroelectronics (Switzerland), Texas Instruments (U.S.), and MediaTek (Taiwan) were the leaders in the IoT chip market evaluated on the basis of their R&D investment and growth strategies such as new product launches, acquisitions, collaborations, and partnerships in the IoT industry space. For instance, Intel believes that the automotive market is a critical space, and it plans to invest about $250 million for autonomous driving. These kinds of investments would drive the technological development in terms of connectivity, communications, and security and further fuel the growth of the IoT chip market. 

Thus, the growing penetration of IoT and development of new IoT-based products would significantly generate demand for the development of more IoT chips in the near future.

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