State of IoT 2022: Connected IoT devices grow 18% worldwide to 14.4 billion
IoT Connectivity Market Update – May 2022
Chip shortages are slowing the recovery of the Internet of Things (IoT) market, according to our latest State of IoT-Spring 2022 report released in May 2022. The number of global IoT connections will grow by 8% to 12.2 billion active endpoints in 2021. , which represents significantly lower growth than in previous years.
Despite increasing demand for IoT solutions and positive sentiment in the IoT community, as well as in most IoT end markets, IoT Analytics expects the impact of the chip shortage on the number of connected IoT devices to persist beyond 2023. Other headwinds for IoT markets include the continued COVID-19 pandemic and general supply chain disruptions. The IoT market is expected to grow by 18% to 14.4 billion active connections by 2022. There are expected to be approximately 27 billion connected IoT devices by 2025 due to easy supply constraints and extremely fast growth.
Both current and current 2025 forecasts for IoT devices are lower than previously estimated. (The previous estimate for 2021 was 12.3 billion connected IoT devices; the previous forecast for 2025 was 27.1 billion connected IoT devices).
Here’s what will affect IoT connectivity in 2021, where we are in 2022, and where we might be after 2022:
IoT in 2021: Selected Highlights of IoT Connectivity Growth
Here are some key trends that will influence the growth of connected IoT devices in 2021:
LPWA networks are expanding, especially those using NB-IoT technology. NB-IoT adoption is (finally) starting, with connections growing by 61% year-on-year, driven by a wide range of implementations, especially in water and gas metering. Users are migrating from legacy 2G/3G to 4G/5G IoT. 4G IoT connections grew by 24% due to higher adoption of LTE Cat 1-, Cat 4- and Cat 6-based chipsets. For many implementations, LTE Cat 1 bis have become an alternative to the aforementioned LPWA technologies.
Chip shortages continue to slow market recovery (see above).
COVID-19 continues to impact products and supply chains. In 2021, the ongoing (local) restrictions of COVID-19 have resulted in many new and serious problems in the supply chain, such as shortages of ships, trucks, and shipping containers and port congestion.
IoT in 2022: Current Market Mood
Current business sentiment for digital and IoT companies remains largely positive, even from the highs of Q4 2021. It is widely recognized that Covid-19 will have an overall positive impact on the rapid adoption of IoT technologies. Quotations from IoT vendor CEOs and earnings sentiment analysis confirm this. The highest sentiment is for companies that offer connectivity services (117 sentiment score), general software (115), cyber security (113), and cloud (113). “Our end markets saw strong demand again [in Q1 2022].  Overall, we continue to forecast that favorable demand conditions will continue into the second half of this calendar year.
Phil Gallagher, CEO, Avnet – April 27, 2022
“We see continued momentum in key IoT markets, including industrial, enterprise, energy, and first-tier, as more companies gather business-critical data from the network. COVID-19 is accelerating Industry 4.0.”
Phil Brace, CEO of Sierra Wireless – May 12, 2022
Regionally, North America (116) leads sentiment, with APAC (103) lagging behind, particularly in China, where new COVID-19 lockdowns are seen as the main threat to business growth in the region.
IoT to 2022: Key Macro Themes Impacting Future IoT Devices – Forecast
In our latest research, we highlight and discuss eight key macro themes to watch, many of which are interconnected. Here is a selection:
Inflation. Global growth forecasts downgrade as inflation accelerates to >5% p.a. in most of the world’s major economies, which raises expectations of rising interest rates and subsequent cooling of the economy.
The ongoing war in Ukraine. The war in Ukraine is adding to supply disruptions and inflationary concerns. India’s Minister of Electronics and Information Technology Rajeev Chandrasekhar, for example, said: “The conflict between Russia and Ukraine is affecting supply chains in many sectors, including the semiconductor industry. The conflict may particularly affect the supply of Neon and Hexafluorobutadiene gases.”, which are essential elements in semiconductor chip manufacturing, as they are used in lithography processes for chip manufacturing.
The battle for digital talent. Many companies face a huge challenge in finding a skilled workforce to keep up with the full force of digital transformation, AI, IoT, and cloud projects. IoT Analytics continuously monitors online job postings. The number of job postings that include “IoT” increased by +32% from July 2021 to April 2022. Job listings that include “AI” (+48%), “Edge Computing” (+53%), and “5G” (+52%) are in higher demand.
As a result of some of these macro factors, especially inflation, companies are forced to focus more on operational efficiency to neutralize cost pressures and ensure supplies to customers. Other State of IoT Research Highlights (Spring 2022)
Record level of VC investment for IoT companies. Based on our research, global venture capital funding for IoT companies increased to a record $1.2 billion in Q1 2022, compared to $266 million in Q1 2021, with fewer deals closed overall but more funding rounds. Recent investments have focused on artificial intelligence and analytics, cyber security, and IoT connectivity.
Several major IoT-focused acquisitions. IoT companies specializing in AI and analytics, IoT software, and semiconductors/chips together account for about 45% of all major IoT-related acquisitions between Q3 2021 and Q1 2022. Many of these deals are driven by the acquirer’s desire to create a complete technology suite or product portfolio and reduce external dependencies. Notable announcements include Panasonic’s acquisition of Blue Yonder ($8.5 billion) and Generac Power Systems’ acquisition of Ecobee ($770 million).
Growth in the number of connected devices will slow in 2021 but is expected to accelerate again in 2022 and beyond. While new headwinds such as inflation and prolonged supply disruptions have emerged in the IoT market, overall sentiment remains relatively positive, with the number of connected IoT devices expected to reach 14.4 billion by the end of 2022.