I've written before about the impact the Internet of Things (IoT) will have on electronics sales including the special role played by analog devices in IoT. Most recently, in my Planet Analog blog entitled Digitizing Analog Sensor Data for the IoT, I argued that because of all the sensors, integrated packages including Analog Front Ends for sensor signal conditioning are likely to see growth. Here I want to take some of the numbers out there and bracket what the opportunity might be.
Last year IC Insights noted that global unit shipments of semiconductors could exceed one trillion devices in 2016. They also said in a mid-year update that Analog IC shipments were outstripping all other categories in terms of growth, forecasting nearly 9% CAGR (Compound Annual Growth Rate) for Analog IC sales from 2013 to 2018. Market data firm IHS said in March that all Industrial semiconductors, of which Analog is the largest category, would grow by nearly 10% a year to over $55B annually by 2018. Separately, IHS reported total semiconductor sales in 2014 were $355B; these figures put Industrial ICs at about 12% of total semiconductors. I think that all Analog IC sales are as much as 16% of all semiconductor sales. Using these figures my rough estimate is that Analog could be between $46B and $62B in 2015 growing at a 9% to 10% rate. For the sake of analysis, let me assume ASP (average selling price) of $0.5, and conclude that Analog IC unit shipments will be around 100B units in 2015.
Ron Exler, Senior Strategist with Saugatuck Technology (a Connecticut-based subscription research / advisory and strategy consulting service) said in a recent post: “The Industrial Internet is a term coined by General Electric. It involves the massive systems that make up society’s infrastructure. These systems include energy generation and distribution, transportation management, healthcare diagnostics, and manufacturing monitoring. Industrial Internet is the IoT applied to industrial applications with analytics to provide context-aware intelligence.” (Source: Saugatuck Technology Inc.)
In another post proving some of the latest findings, Mr. Exler notes: “It’s exciting and innovative. Yet IoT also has unrelenting concerns of security, connectivity, data processing, analysis, and manageability.” Referring to Figure 1, the Saugatuck article points out that Industrial IoT is likely to be on internal networks versus the public internet. The figure summarizes Saugatuck's findings that 55% of companies plan to address infrastructure to manage IoT in the next 3 years. The implication I draw from all of this is that a bubble of Industrial IoT spending is going to occur, or, looking at it the other way, a bubble of opportunity will occur for Analog semiconductor companies.
Coming at this another way, Cisco estimates the Internet of Everything (IoE) had 10B connections in 2013, and will have 50B connections in 2020 (see Figure 2). Cisco's growth curve lines up with the bubble of opportunity over the next 3 years; you can see that by around 2018 things will be leveling off.
Using Cisco's growth predictions, I estimate there are about 11B connections in 2015, growing to 30B in 2018. That is adding 19B connections from 2016 to 2018. If I conservatively consider an IoE node to have at least one Analog IC for the wireless section, one for power, and one for the sensor, the 19B connections represent 57B Analog ICs. Going back to the market data, using a growth rate for Analog IC shipment value of 9.5% per year, there will be roughly 330B Analog ICs shipped over these same 3 years. In other words, the IoT (or IoE if you prefer) could represent over 15% of Analog IC unit demand from 2015 to 2018.
So there you have it. The Internet of Things could well a harbinger of a new golden age of Analog. These applications will definitely drive ICs related to RF (wireless), power/energy harvesting, and signal conditioning (including A to D converters and others). What do you think?