The IoT is at the Center of Disruptive Technologies

Feb 8, 2019

Imagine waking up in the year 2030. While getting ready for work, your smart home heats up some coffee and picks an outfit to match the formality of a meeting on your calendar later that day. An electric and autonomous vehicle stops outside your house with the temperature set to your preferred 70 degrees and the stereo playing your morning playlist. The car zips you to work with breathtaking speed while you prepare for the day’s meetings. Before heading upstairs to your office, you grab breakfast at a local café and walk out without ever reaching for a wallet or phone.

The work day goes by smoothly, but in the afternoon, you’re reminded by your smart assistant that it’s your sister’s birthday tomorrow and that you have a doctor’s appointment later in the evening. The virtual assistant suggests a few gifts based on your prior purchasing habits, popular items, and the profile it has of your sister. Choosing your favorite option, you instruct the present to be delivered via drone and arrive exactly as she’s leaving her apartment tomorrow at 8:00 AM.

On your way home, you stop by your company’s factory to review a recent customer order. Your employer manufactures key components for the automotive, chemical, and energy industries. The factory is run by a network of robots and a team of engineers that oversee operations. Today, the factory is building customized command and control systems for a renewable energy provider will help the customer automate energy grid operations, unlock new transmission efficiencies and reduce maintenance costs. The plant manager informs you that the factory’s robots identified some irregularities in a key component and were able to self-correct the problem. The products will still be ready on time, allowing you to breathe a sigh of relief.

Once you make it home, you check into your doctor’s appointment from your living room couch and complete the session via a telehealth terminal. The doctor asks a few questions, examines data sent to her from your wearable health monitor and confirms that your health is in good condition. Your wrist has been hurting a bit recently though, so she sends a file to your 3D printer to build a custom wrist support that you will wear for the next few weeks until the follow-up appointment.

It’s now dinner time, and your refrigerator suggests a low-carb vegetable soup, based on the age of the produce in the vegetable drawer and your calorie burn that day. Afterwards, you help your kids with their homework: completing a level in an educational, virtual reality adventure game set in medieval Europe, designed to teach them math and history. After an hour or so, the level is complete, so you put your kids to bed and head to your bedroom. The shades are down, the lights already dimmed to match your circadian rhythm, and the temperature is set to 66. Your smart assistant lets you know that tomorrow is less busy, and you can sleep in an extra 15 minutes.

The IoT: A theme of themes

While elements of this anecdote are speculative, it illustrates several profound technological advancements that are currently under development and expected to transform our work and everyday lives, including robotics, artificial intelligence, autonomous vehicles, smart home devices, wearables, mobile payments, and virtual reality.

Essential to each of these technologies is the Internet of Things (IoT), or the connection of devices to the internet. Products and services linked to the internet can collect and share information, be monitored or controlled remotely, and communicate with other smart devices or assistants. For consumers, such capabilities will offer greater control, time savings, personalization, and availability for use anytime and anywhere. On the enterprise side, the IoT will help businesses collect vast amounts of data that can be used in varying capacities, from predicting consumer behavior to reducing supplier risks. Forecasts expect 20.4 billion connected devices to be online by 2020 with $1.4 trillion in worldwide annual spending on IoT hardware, software and services by 2021.1

IoT in Commercial Uses

The IoT will not propel each of these innovations alone. Rather, the IoT is a critical enabler and enhancer of several emerging technologies that are expected to have disruptive impacts felt across the global economy. Enterprise technologies that either rely on the IoT, or should be greatly empowered by its emergence, include:

  1. Artificial Intelligence & Big Data: The IoT offers the necessary hardware and infrastructure for turning unstructured information like images, videos, and sounds into data for machine and deep learning. Predictive maintenance and analytics have already gained significant traction in manufacturing and telecommunications by using sensors to collect data that can then be analyzed by algorithms. Experts expect that by 2022, more than 80% of enterprise IoT initiatives will include an AI component, up from only 10% in 2017.2
  2. Cloud Computing/SaaS: In tandem with the growth of IoT, AI, and big data, cloud computing allows companies to efficiently scale their compute power and storage as more data is collected and analyzed. The shift to software-as-a-service business models is expected to support IoT growth, as service providers seek to move up the value chain and offer other services such as security or data governance, and AI and analytics.
  3. Robotics and automation: Advanced sensors will enable robots to perform precise tasks and to navigate unstructured environments. IoT, for instance, offers opportunities to improve robotic vision, as well as the automation of certain tasks, as connected robots can communicate with each other and flexibly adjust processes in the face of unforeseen disruptions.
  4. Autonomous vehicles (AVs): AVs, which will be equipped with dozens of sensors and GPS chips, stand to benefit from substantial improvements in the speed of network connections, as well as reductions in latency to provide near-instantaneous communication between vehicles and smart infrastructure. Importantly, the launch of 5G could herald a new era for network communications and provide IoT the catalyst it needs to support safe, level 5 vehicle autonomy.
  5. Smart Infrastructure: In addition to the development of smart transportation systems to support autonomous vehicles, the IoT is expected to improve energy grid efficiency, utilities services, commercial and residential property management, and the overall growth of smart cities. Connected traffic lights, for instance, re-route traffic based on congestion or disruption from accidents. Smart meters monitor in real-time utilities usage and help providers more efficiently distribute electricity across the entire grid. The global smart grid market is forecasted to reach $61.3 billion by 2023, up from $23.8 billion in 2018, with a compound annual growth rate (CAGR) of 20.9%.3

IoT in Consumer Products

While intelligent factories and manufacturing are at the heart of the industrial internet of things (IIoT), there are several use cases for connected devices in the consumer-facing world. In fact, changing customer preferences and behaviors, often driven by tech-savvy younger generations, are encouraging more consumer-facing sectors like healthcare, retail, financial services and real estate to adopt the IoT for a connected future.

  1. Smart homes: The IoT can connect household appliances like refrigerators, washers, dryers, trashcans, coffeemakers, thermostats, security cameras and more. Smart home residents can remotely control their appliances and monitor their use. They can automate household chores like laundry or restocking the fridge with just their smart phone or the help of a virtual assistant. Estimates suggest the smart home market grew by 31% in 2018, with sales of nearly 644 million smart home devices. As many as 1.3 billion smart home devices are expected to be sold in 2022 for a compound annual growth rate (CAGR) of more than 20%.4
  2. Health & Wellness: Internet-connected devices offer many players in healthcare, from pharmaceuticals to medtech and health service providers, unprecedented opportunities to gather and analyze patient data. Connected medical devices, such as mobile robots and surgical-assistants, may help improve patient outcomes and reduce the costs of health care. This trend is propelled by younger generations’ growing interest in monitoring their own health and maintaining physical wellbeing through use of wearable health-trackers. The wearables market is expected to double by 2022, reaching $27 billion via an estimated 233 million unit sales.5
  3. E-commerce and fintech: Connected devices offer consumers new means of making purchases and transactions, as well as opportunities for businesses to learn from consumer behavior to create better products and user experiences. Virtual assistants today are already capable of ordering your favorite pizza or restocking laundry detergent. Growth of the IoT, however, could lead to even greater efficiencies in processes like retail inventory management, warehouse operations and customer analytics. Even financial services and insurance firms could be affected as they gather more data to improve offerings like credit assessments, investment advisory services, and underwriting.

While the impact of the IoT is expected to be vast, we believe there are three primary industries that are likely to benefit most from the emergence of Internet of Things. These industries include:

  • Connected Device Manufacturers: Creators of sensor-laden devices and appliances that make up the end-products ultimately used in IoT, like wearables and smart home device makers.
  • Network or Service Providers and Communications Equipment Manufacturers: IoT depends on fast, secure, and reliable networks to transmit information from sensors to data processors and control systems.
  • Semiconductor Manufacturers: IoT is expected to significantly increase demand for microcontrollers, sensors, WiFi and cellular chips, flash memory and high-performance processing units.

Related ETFs

SNSR: The Global X Internet of Things ETF enables investors to access a potential high growth theme through companies at the leading edge of IoT, an approach which transcends classic sector, industry and geographic regions to target this emerging theme. In a single trade, SNSR delivers access to dozens of companies with high exposure to emerging IoT technology.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.

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