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SSIA Summit 2016 - Mapping the value of the Internet of Things for Semiconductor Companies

McKinsey & Company shared that Internet of Things (IoT) presents opportunities for new growth beyond mobile and create potential opportunities beyond silicon.  In analyzing the potential of the Internet of Things, they identified 9 key settings, namely - Human Body, Home, Retail, Office, Factory, Worksite, Vehicle, City, and Outside.  These 9 settings are expected to create from US$3.9 to 11+ trillion in value, with some surprises on where it will come from.  McKinsey’s research shows that the top 3 values are created from the Human, Factories and Cities settings, with 70% of that US$11+trillion expected to be in B2B.

Some of the data shared during their presentation showed that 99% out of data collected today are not used and 21% of those surveyed sees IoT as being used for tracking and alerts. McKinsey believes that 63% of the value obtained will be value through operations optimization, and to enable that, 40% of the potential value will require setting interoperability to unlock.

McKinsey found that most of the value of IoT will be captured by users, but technology spending will still be significant to support the IoT enablement in the region of US$300 to 800 billion by 2025.  Of this they projected that solution integration services will take up about 20-40%, application development between 20-35%, software infrastructure between 5-20%, connectivity up to 10%, with hardware between 20-30%.

McKinsey also presented on their view of the 3 phases of value capture, based on  the how the internet was built historically, where in Phase 1 involving deployment of infrastructure, with Phase 2 being the development of core services to scale, and finally Phase 3 with emergence of adjacent business model.  They also believe that various trends are shaping different elements of the IoT stack and many key enablers for IoT growth are already in place today, from the push by suppliers, demand from customers, technological enhancements and infrastructure requirements. Many of the enablers and barriers would look familiar, among which enablers being technology advancements and interoperability, while barriers being regulations, privacy concerns and security.

McKinsey concluded that IoT is an opportunity that could require new operating models in the semiconductor industry and they identified 3 strategic needs for individual players: Identify application – and vertical-specific growth pockets, seek value beyond silicon, and revisit the operating model to cultivate and support IoT innovation.




Article contributed by:


Executive Committee Member, SSIA