Proving the Business Case for the Internet of Things

Berg sees high growth for cellular IoT modules and gateways

Steve Rogerson
October 25, 2018
 
Shipments of cellular IoT gateways will reach 8.6 million and of cellular IoT modules 1.1 billion by 2023, according to two separate reports from Berg Insights
 
About 3.2 million cellular IoT gateways were shipped globally during 2017, an increase of 22 per cent from the previous year. Growing at a compound annual growth rate (CAGR) of 18.2 per cent, annual shipments are expected to reach 8.6 million in 2023.
 
Cellular IoT gateways are standalone devices intended for connecting M2M applications to a cellular network. These include primarily general-purpose cellular routers, gateways and modems that are enclosed in a chassis and have at least one input-output port.
 
North American vendors dominate the cellular IoT gateway, router and modem market. Cradlepoint, Sierra Wireless, Cisco and Digi International are the largest vendors in North America, while Teltonika is the main manufacturer on the European market. Combined, these five vendors generated close to US$375m in annual revenues from IoT gateway sales during 2017.
 
Other important vendors include CalAmp, Multitech Systems and Encore Networks in the USA, InHand Networks, Maestro Wireless, Four-Faith, Robustel Technologies and NetComm Wireless in the Asia-Pacific region, and HMS Networks, Advantech B+B SmartWorx, NetModule, Matrix Electrónica, Eurotech, Gemalto, Sagemcom Dr Neuhaus, Option and Beijer Electronics Group in Europe.
 
A large number of small and medium sized vendors are active on the European and Asian markets, while the North American market is dominated by a handful of major vendors, largely due to entry barriers in the form of carrier certifications required for cellular devices in the region.
 
“The average selling price for IoT gateways remains notably higher in North America compared to the European and the Asia-Pacific markets, primarily due to a higher share of feature-rich 4G LTE devices in the product mix”, said Fredrik Stålbrand, IoT analyst at Berg Insight.
 
He added that the carrier certifications in the US created economies of scale and diseconomies of scope, which had contributed to an industry characterised by several large companies offering standardised devices.
 
“Several vendors are now starting to create strategies for specific vertical markets and have even introduced complete solutions including IoT gateways, peripheral hardware and applications as customers become more demanding in terms of product integration,” said Stålbrand.
 
Although the North American market experienced the slowest growth globally during 2017, Berg expects that it will remain the largest geographical market in terms of revenues in the foreseeable future.
 
Foe cellular IoT modules, global shipments increased by 76 per cent in 2017 to a new record level of 237 million, fuelled by exceptional volume growth in China. Until 2023, shipments of cellular IoT devices are forecasted to grow at a CAGR of 23.2 per cent to reach 1.1 billion units.
 
The 3GPP standards for LTE – Cat 1, Cat M and NB-IoT – will contribute to growth in the next coming five years. These standards are designed to be less complex to limit power consumption and are priced more favourably to address the mass market and make it viable to connect entirely new applications.
 
The results of the assessment show that the three largest module vendors have 46 per cent of the market in terms of revenues.
 
“Annual module revenues for the three largest market players Sierra Wireless, Gemalto and Telit increased by 6.9 per cent to $1.17bn, with the total market value reaching approximately $2.5bn,” said Sebastian Hellström, IoT analyst at Sweden-based IoT analyst firm Berg Insight.
 
Sierra Wireless leads IoT module revenues, followed by Gemalto and Telit. SimCom Wireless leads in shipments, but is only in fourth place in terms of revenues. Quectel is number two in terms of volumes and in fifth place in terms of revenues.
 
China has been the scene for significant M&A activity in the past years. ZTE offloaded its cellular IoT business to Gosuncn during 2016 and 2017. At the same time, Sunsea AIoT emerged as a new major industry player through the acquisitions of Longsung and SimCom.
 
While there has been some consolidation among the larger suppliers, the long tail of companies with activities in the market for cellular IoT modules is growing. A number of new players have been attracted to the market, particularly in the emerging NB-IoT segment. Examples include Nordic Semiconductor, Foxconn and WNC.