2024 in Review: Wider Factors are Enveloping the IoT Industry

An important lesson from 2024’s IoT corporate initiatives is about an industry that is evolving to a post-connectivity world. This is due to the dynamics of market-demand, one of which is to treat IoT connectivity as a component in a system-level application. An example would be the case of connectivity being a part of an electric vehicle, IoT system. The introduction of regulatory protections represents another market driver. Here, examples are evident in consumer education and consumer protection initiatives.

The impending arrival of 6G is another factor. In anticipation, the communications industry is adjusting to the commercial necessities for 5G through by focusing more on enterprise customers and business modernization requirements. Examples here relate to private networks for smart factories and digital transformation. 

As a standalone technology, IoT is no longer a magnet for hype. Topics such as AI (generative and traditional), digital twins, and enterprise or private networking are generating plenty of noise. 

Noteworthy Developments of 2024 

Among the IoT corporate events of 2024, two categories dominated – partnering and product innovation. Initiatives involving acquisitions and investments took third place. Looking across over fifty corporate initiatives, several items caught the eye for what they imply in the year ahead. 

A Ten-year Business Commitment 

Early in 2024, Vodafone and Microsoft announced a 10-year strategic partnership to build on their combination of scaled digital platforms for businesses, public sector organisations, and consumers across Europe and Africa. IoT featured in this initiative with Vodafone planning to create a stand-alone IoT business unit and Microsoft committing to invest in Vodafone’s managed IoT connectivity platform. This was a significant announcement because of its decade-long commitment and plans for co-investment. It is worth repeating that this is more of a business decision than a technology choice. The development also offers executives an opportunity to unencumber an IoT business unit so that can better innovate with models and management incentives attuned to IoT market characteristics. 

Regulatory Help for IoT Users 

Regulatory developments reflect the mainstreaming of IoT in consumer applications. In anticipation of potential harms and to mitigate negative externalities, there is a need to incentivize consumer protection measures in IoT product design and through-life support. The UK government launched a product security regime which will affect businesses involved in the supply chain for consumer connectable products. In the USA, the FCC rolled out its voluntary cybersecurity labelling program for wireless consumer IoT products. The intention is to help consumers make informed decisions and, like the ENERGY STAR program, to incentivize manufacturers to supply more secure smart products. 

There is also a knock-on effect of broader regulatory developments on the IoT market. Provisions in the EU’s Data Act led Microsoft to alter its terms of business and make it easier for customers to migrate their data to competing cloud platforms. In the coming years, data interoperability provisions in EU regulations will allow factory operators to access machine data and by-pass maintenance service lock in provisions. This has the potential to increase the scope for competition and innovation. 

Government Agency Support for SME IoT 

The Vodafone-Microsoft tie-up is significant at the large enterprise end of the market. The combination will appeal to large (user) organizations seeking scale and global coverage, for example. The development simultaneously challenges and presents opportunities for small and medium-sized IoT companies. How might smaller connectivity providers compete? Are there localised scale or specialization opportunities to target? 

Two developments illustrate how governments are trying to develop the smaller end of the market. In Scotland, the city of Glasgow is gearing up to become Europe’s hub for IoT innovation via a £2.5 million partnership between the public and private sectors. Elsewhere, the ‘Design in Saudia Arabia’ government agency launched an AI and IoT startup incubator through a partnership with Aramco and Qualcomm. 

Targeting its SME sector, local mobile network operators SK Telecom, KT, and LGUplus signed up to work with the Radio Promotion Association of Korea to speed up the development process and lower costs of developing 5G IoT products. 

Elsewhere, China's Ministry of Industry and Information Technology has a more ambitious plan to boost its mobile IoT ecosystem by establishing more than five mobile IoT industrial clusters and over ten mobile IoT industry demonstration bases. By creating a favourable development environment, China aims to exceed 3.6 billion IoT terminal connections by 2027.

IoT as a Systems Component 

Two developments illustrate how the IoT market is positioned to respond to external market dynamics. The first relates to an announcement made by Xiaomi, the Smartphone manufacturer, in its plans to enter the electric vehicles (EV) market. Central to Xiaomi’s intent is its HyperOS IoT ecosystem to revolutionize the in-car experience and to enable a smart ecosystem. With a goal to link “human-to-car-to-home”, Xiaomi’s customer-facing concept relies on IoT capabilities beyond devices and connectivity. These include service enablers for automatic discovery (between IoT devices and applications), password-free access, and the ability for users to program automation scenarios. 

The commercial availability of LEO satellites destined for enterprise and consumer broadband connectivity has stimulated the market for global connectivity through satellite IoT. This has led to partnerships between several satellite and terrestrial network operators. The combination of satellite and terrestrial networks will go from strength to strength because of technological innovation and the standardization of non-terrestrial network (NTN) systems via 3GPP. Here is an example of (terrestrial) cellular IoT being a component of a broader IoT solution. 

The Bigger IoT Opportunity 

While satellite connectivity in remote and difficult-to-reach regions constitute edge-cases for IoT systems, the core IoT market received a boost from Qualcomm towards the end of 2024. Through an Investor Day announcement, Qualcomm Technologies committed to an evolution beyond connectivity for devices. Its new strategy aims to enable intelligence in IoT and serve a much wider number of verticals. Qualcomm intends to explore markets beyond the chipset and focus on end-customer solutions. The context for this strategy is a $3.4 trillion addressable market for digital transformation. The strategy has commercial and business model implications. It will entail moving up the value chain and technology stack while involving complementary areas expertise. 

IoT Industry Implications 

Qualcomm’s broader and ‘big picture’ perspective contrasts with other industry developments that witnessed organizations pruning their IoT operations by exiting certain segments of the market. By way of example, there were three such developments, concentrated in October. One was Cisco’s decision to pull out of the LoRa WAN market. A second was the demise of IOTEROP, an LWM2M pioneer. And lastly, Amazon gave one-year’s advance warning about the end-of-life for its IoT Device Management Fleet Hub. 

These developments highlight the opportunity and pitfalls for suppliers and users of IoT solutions. What options are there for smaller entities given the financial challenges that apply to small and the largest of industry participants alike? Small providers could carve out a specialization or focus on a niche segment that aligns closely with a key customer or supply-chain ecosystem. By following this path, there also remains a longer-term possibility of being acquired. 

At the other end of the spectrum, larger suppliers focus on scale. This has downstream consequences in relation to customer acquisition in a market characterised by fragmentation; each customer presents a unique use case for business-model, operational and technical reasons. One way these challenges might be overcome is through IoT business unit separation which alters the business model context and framework of incentives. Now, there might be more scope to invest in horizontal capabilities. 

Finally, China’s part in the global industry ecosystem is liable to trigger far reaching change. This is due to its economy-wide modernization goals and commitment to strategic technologies. Supported by IoT scale economies and improved affordability, spill-over effects could drive adoption, technology leapfrogging, and supply-chain innovation not just in China but across global South and trading partner geographies.