We at are an inflection point for the development and adoption of IoT technology, that’s the main takeaway from a new report on the Internet of Thing industry from Morgan Stanley published last week.
The IoT market has moved on significantly over the past 12 months. This time last year there was much hype surrounding the technology, although many speculated it would be years before the public widely adapted IoT devices. However, according to Morgan Stanley’s research, almost the entire semiconductor industry is preparing for the manufacture and introduction of IoT devices and related hardware to the market.
Indeed, Morgan Stanley’s AlphaWise research division survey 117 key decision-makers responsible for the engines of IoT growth earlier this year and found that 90% of designers are incorporating connectivity products into new designs. Considering the average lead time for a new product is 12 to 18 months, based on this data the inflection point for IoT devices is predicted to be the second half of 2017 with growth accelerating in 2018.
Morgan Stanley’s survey focused on the manufacturers of microcontrollers (MCUs), small, low-cost, computing devices which are embedded in a product to help control and manage its operation.
Softbank’s acquisition of ARM is a huge bonus for IoT
The growth in demand for MCUs as the IoT takes off is set to be a huge boon for the semiconductor industry. By Morgan’s estimates, increasing demand for IoT products will add 30 basis points of incremental growth of the 2% baseline for the $330 billion semiconductor industry next year — a 15% increase. Further growth is expected into 2018. Morgan’s estimates peg the IoT impact on the semiconductor market at an additional 200 basis points of growth or 35% on average.
Japanese group Softbank’s proposed $32 billion acquisition of ARM Holdings could actually be hugely beneficial for the development of IoT devices. Softbank President Masayoshi Son has indicated that he wants to put effort into areas beyond smartphones. It seems that Softbank wants to use ARM to complement its existing portfolio of mobile communications and internet services.
What’s more, it looks as if Softbank’s acquisition of ARM will help the group focus on technology first and earnings second. Mr. Son indicated that he would be involved in drawing up ARM’s longer-term strategy up ahead. He also stated that he wanted to strengthen ARM’s development organization and accelerate operations, indicating that he wanted to double the development organization centering on engineering.
By delisting ARM Softbank will create an environment where the firm can dedicate itself to the business without being preoccupied with quarterly earnings, which should be positive for the development and investment in IoT technologies. Rather than targeting earnings growth, Morgan Stanley expects ARM under Softbank to, “secure core technology indispensable to terminals that could see explosive growth in the IoT era, thereby obtaining license revenue to construct a global earnings base.” Even though this growth may come at the expense of other operators, it will certainly be a positive for the IoT sector in general.
For more on Morgan’s IoT sector survey, see the charts below: