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IoT Anxieties in McKinsey-GSA Study

By 05.14.2015 0

MADISON, Wis. — As the IoT World gets its mojo working in San Francisco this week, I find myself bombarded with tweets from the show floor. And I hear the devil on my shoulder saying, “Damn, girl! You’re missing all those stories.”

As a reporter, that’s a horrible feeling. After all, I’m not there. I’m on my way to catch a flight to China.

But long trips come with opportunities. First thing, I can catch up on all the reading I never seem to have time for.

On top of my stack is an Internet of Things (IoT) Report recently put together by McKinsey & Company and the Global Semiconductor Alliance (GSA).

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This crisply written report is not just educational, but it confirms — and answers, to some extent — the skepticism about IoT and its challenges, which have worried chip industry insiders for the last few years, although few have expressed their misgivings in so many words.

What distinguishes this report from other market research firms’ IoT predictions is its sharp focus on the semiconductor industry. Rather than being just an IoT cheerleader, the report offers some surprisingly honest and insightful views on IoT from executives at GSA member companies.

As much as all of us want to believe in Cisco’s famous forecast that 50 billion devices and objects will be connected to the Internet by 2020, we also recognize our struggles in figuring out how to get from here to there.

Unresolved issues
IoT has unresolved issues that could not only trip up the nascent IoT segment, but also come back and haunt the chip industry for a long time.

As the McKinsey-GSA report points out, a major challenge is the security and privacy of user data. If that’s not a big enough headache, the report listed many other issues. They include the difficulty of building customer demand in a fragmented market, a lack of consistent standards, a fragmented marketplace with many niche products, the challenge of extracting more value from each application, and technological issues that affect the IOT’s functionality.

Such findings are no longer surprising. But I have a feeling I’m not alone sensing that a few prescient practitioners in the chip industry have begun tamping down the financial market’s high hopes for an IoT gold rush.

A good example is how NXP Semiconductors’ CEO Richard Clemmer responded to a financial analyst’s question during a recent earnings’ call.

The analyst said that some competitors are already starting to break out IoT in their fiscal numbers. When he prodded Clemmer to speculate on the trajectory of IoT, Clemmer responded: “It sounds like the dot-com phenomena.” 

He added that at NXP, “We prefer to call it the smarter world as opposed to the Internet of Things.” He added that “smarter world” is a term “a little bit more descriptive than just the IoT, which is still relatively undefined.”

Well, that’s just anecdotal evidence.

Ambiguity
Almost by necessity, McKinsey-GSA’s IoT report is full of anecdotal evidence. They compiled it by interviewing 30 GSA members who are senior executives at semiconductor companies or at companies in adjacent industries that are part of the IOT ecosystem, such as network equipment and industrial automation. They also surveyed 229 semiconductor executives at GSA member companies.

As the report points out, their interviews “revealed some ambiguity about whether IoT would be the top growth driver for the semiconductor industry or just one of several important forces.” It said, “Our survey of executives from GSA member companies also showed that they had mixed opinions about the IoT’s potential, with 48 percent stating that it would be one of the top three growth drivers for the semiconductor industry and 17 percent ranking it first.”

Many chip industry executives downplay a lack of consistent standards as a major roadblock to IoT. We all live in the world of multiple standards, they say.

But as shown in the chart below, included in the report, there are myriad competing standards for low-range and medium-low data rates. They could “hinder growth for many IoT applications,” the report pointed out. Aside from missing interoperability and consortia battles, there are “additional incompatibilities in higher communication layers, such as 6LoWPAN vs ZigBee.”

Crowding the space marked as 2 in the chart above, there is standard white space for low-data-rate, low-power, high-range applications such as smart grid. In that specified area, Wi-Fi and LTE have high power consumption, while alternatives with low power and wide range, such as LTE Cat. 0, 802.11ah, Sigfox, and OnRamp, “are in very early stages and compete against each other,” the report pointed out.

The McKinsey-GSA report suggests, “Given the current uncertainty, semiconductor players should pursue a hedging strategy — in other words, focusing on selected standards that are likely to gain widespread acceptance but planning for alternative scenarios.”

Next page: Value chain

 

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alex_m1   2015-05-14 10:03:43

>> classifying IoT devices into archetypes based on their specifications. The companies can then create a single platform to cover each archetype,

Some archetypes i can think of: bluetooth accessory. Low-power long-range(or mesh) wireless mcu for sensing in the factory.Smart, High compute(cortex-m4) sensor node with wireless. High accuracy sensing mcu. Self-powered chip.

It's not different from what the mcu business did before the IOT.

>> I don't want to be a party pooper here, but chip companies' desire to do things other than chips is admirable on its face but aspirational at best.


I think ARM(with the mbed) and Atmel(with arduino) did some good wrk, that at the very least helped them reduce support costs and make their platforms  more sticky. That's valuable financly. And i can see the mbed-os(to be released later this year) making some money for ARM.

And embedded designers today choose chips alot due to software and support, so it's not like chip companies have a choice.

Don Herres   2015-05-14 12:40:03

You can have the best mouse trap, but no mice.

Apple, Samsung and others produce the products that consumers buy.  The chip makers will be driven by their needs.

NicM   2015-05-14 13:50:59

Exactly!

junko.yoshida   2015-05-14 17:48:13

@alex_m1, thanks for your insightful comments here. You're right. After all, chip vendors in the IoT market would have to do what they already did with their MCU business before it was called IoT. They'd have to deal with more permutations, while understanding where their solutions go...

As for chip vendors' aspiration to move upward on the value chain, yes, ARM and Atmel might be good examples. But providing software support is something chip vendors have been doing for a while. The problem is, other than reducing the support cost, I don't think they are really finding ways to get a new revenue stream. Maybe I am wrong. If so, correct me.

alex_m1   2015-05-14 20:16:34

@Junko,

I think maybe ARM with the mbed can pull it off - they really know how to build ecosystems, and they aren't greedy.

Another theoretical possibility is see is someone of the really big vendors building something like ThingWorx which seems to be really great cloud development platform , with a great potential for lockup, And price it at a reasonable enough price and lower than PTC(the owner) that it makes sense for many industrial IOT developers to use it, because it really speeds time to market and once you develop something with it , it's relatively hard to build the same solution on your own.

 

y_sasaki   2015-05-15 16:30:59

Good article as usual Junko.

Being wireless technology enginner, I have mixed feeling about IoT. It is true that we receive expanding number of embedded WiFi requirement, into previously unthinkable kind of products - dish washer, cleaning robot, fish finder, even hunting rifle gun scope. It is fact that "things" are getting smarter, and "smart things" need wireless connectivity.

At the same time, I always skeptic when I hear "XX bilion devices will be connected by 20XX" "we need one-fits-for-all, cross-platfrom, universally scalable holy-grail standard for that IoT world". They are visioning next Amazon or Google will show up on IOT world, producing astronimical amount of profit from endless stream of IOT network "Big Data".

It may happen. But I feel some disconnection between the fact I see everyday and dream vision I hear from news article or keynote presentation. I could not explain very well what is the disconnection, The GSA report and your explaination clarified what I was feeling. Thank you!

junko.yoshida   2015-05-15 18:55:55

@y_sasaki, godd to hear from you, and thank you for your kind words.

The McKinsey-GSA report is actually comprehensive. It's also very constructive. But I really liked the fact that they didn't do yet another XX billion devices by 20XX, as you pointed out.

Some uneasiness you and I have been feeling about this topic was well captured in this down-to-earth report. 

alex_m1   2015-05-15 21:32:01

@Junko, don't you agree that the industrial IOT can unlock a lot of value for companies ? and require lots of IOT nodes ?

junko.yoshida   2015-05-15 22:11:46

@alex_m1, yes, by all means. But how is the Industrial IOT fundamentally different from what used to be traditionally called M2M -- in terms of its market size and potential? I have a lot of respect for Linear's Dust Networks, for example. I think they are technically solid and they have done a great job. But I think the problem with the industrial market is that it is vertical and fragmented. Each vertical market has different needs. I am not sure if Dust Networks has really opened up the huge potential IoT market we all want to see at this point and time yet.

alex_m1   2015-05-16 06:22:29

@Junko, How's the industrial IOT different from M2m:

It's different - the parts are cheaper, lower power, the development tools are better, there's a lot more awareness(especially at the CEO levels), communiction will be easier and more availble(lora/sigfox - for example easier to deploy than mesh - which is percieved unreliable according to some in the field, and are surely more complex ), smartphones are availble everywhere,  interesting business models are arising,new value is demonstarted in a veriaty of fields(smart lighting,smart agriculture,smartphones as user nterfaces for everything and google's "physical web",etc). and alot of work is being done.

Also historically speaking - this is a big chance and takes a long time - M2M just started the cycle.

Or lets ask another way - when you read about possible industrial applications, and how they show reasonable value and a large increase in the IOT nodes, don't you think they'll be deployed at some point ?

 

junko.yoshida   2015-05-16 10:59:56

I think your description on differences between M2M and IoT differences are spot on. And yet, all those elements (advantages) you mentioned about IoT do not necessarily mean that industrial IoT would take off more easily or quickly than M2M ever did.  Typically, any industrial applications take experts' knowledge, careful planning -- which take time -- and more focused niche markets. 

Of course, IIoT must be the place that IoT will start first and it makes more sense (than consumer IoT).  I am not refuting the value of industrial applications. I am not just optimistic on either about its volume or on its timet-to-implementation...

 

alex_m1   2015-05-16 13:31:17

Junko, I do agree with you on time to implementation - it can take a long time, as any tech adoption in general. As for volume , let's see:

*. There's research saying that profits can increase 30% in greenhouses , using sensors.If i'm not mistaken(but i'm not sure) , we're talking about sensor per bush.

*. The CEO of cypress has a small winery as an hobby and makes his own wine. He talked about a wireless sensor you put on each vine to help optimize wine quality. Sensor costs a few bucks.

*. All those are themes of precision agriculture , where experts in the field see alll kinds of ways of optimized agriculture(either lower costs, less pesticides, more optimal fruit, etc), and they often talk about very high density sensing(even per plant) .

*. Smart lighting - with leds which control themselves automatically according to whether there are people, whether there's enough light or not.  Already saving money for companies - in warehouses and industrial type accomodations, and maybe in many offices.

*. Predictive maintenence - the basic idea is that if you can estimate when a mechanical system in a factory is about to fail, what part of it is about to fail and fix it advance , you can save lots of money(for example by preventing unplanned shutdowns). One focus of this is putting a sensor in each ball bearing. Currently it's complex, expensive ,requires maintnence(batteries and other stuff), etc.


But what if it was cheap ? self-powered ? wireless ? and fully automated ?

why not put a sensor in each failure point - i.e. ball bearing ? And why not in other places(especially if they alreay have an mcu so adding wireless will costs very little) ?

Those are the biggest examples , volume wise, i thihk.

 

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