Discrete and Process Manufacturing invests more in IoT

IoT and IIoT market
Sheila Zabeu -

June 23, 2023

Worldwide spending on the Internet of Things (IoT) is expected to total US$805.7 billion in 2023, up 10.6% year-on-year. Investment in the IoT ecosystem is expected to exceed US$1 trillion by 2026, with a compound annual growth rate of 10.4% over the 2023-2027 forecast period. The forecasts are from International Data Corporation (IDC).

“The last few years have shown that connecting to digital infrastructures is no longer a luxury, but a necessity. And for organizations to excel in data-driven operations, investing in IoT projects is essential. Connecting devices to data networks to get information, expand operations and increase performance levels are the hallmarks of IoT ecosystems,” highlights Carlos M. Gonzalez, Research Manager for Internet of Things at IDC.

According to the survey, Discrete and Process Manufacturing is the sector that will make the largest investments in IoT solutions in 2023 and also throughout the forecast period, accounting for more than a third of spending worldwide. This is followed by professional services, utilities, and retail as the sectors investing the most in IoT, with around 25% of the global total. State/municipal governments and telecommunications will have the fastest spending growth in the five-year forecast, with compound annual growth rates between 12.0% and 11.7%, respectively.

According to IDC, most of these investments seek solutions that help organizations achieve specific business goals, such as cost savings or supply chain efficiency. Use cases are the primary focus of most IoT investment plans.

Two of these IoT use cases that will receive the largest investments in 2023 are closely linked to the manufacturing sectors: factory operations ($73.0 billion) and production asset management ($68.2 billion). Other prominent use cases are smart inventories ($37.6 billion), smart grids (energy, with $36.9 billion) and resilient supply chains ($31.6 billion) in the retail and utilities sectors. The use cases that will have fastest growing investments comprise diversified applications of IoT technologies, such as electric vehicle charging (CAGR of 30.9%), loss prevention (CAGR of 14.5%), agricultural field monitoring (CAGR of 13.9%) and connected vending machines/lockers (CAGR of 13.8%).

This edition of the survey also included the forecast for video analytics, which was intended to provide insight into a widely adopted use case. Video analytics refers to the use of Artificial Intelligence (AI) and other advanced algorithms to recognize, detect and analyze live or stored video in a variety of applications such as business analytics and security surveillance, among others. These uses are found in a variety of situations, for example business analytics in manufacturing and retail, crowd control and traffic congestion.

Spending on video analytics solutions across all industries is expected to exceed $23.5 billion by 2023. Future versions of the study will include other widely adopted use cases, such as smart buildings, IDC says.

Forecasts by IoT category and geographic region

IoT services will take the lion’s share of investments in 2023 and also by the end of the forecast, accounting for almost 40% of global spending. Hardware will be the second-largest technology category that will be the focus of investments, dominated by module/sensor purchases. Software will be the fastest growing category of spending, with a CAGR of 11.0% over five years, primarily applications and analytics software.

Western Europe, the United States and China will account for more than half of all IoT spending over the forecast. While the first two regions currently have similar levels of investment, Western Europe should gain the lead with a CAGR of 11.0% over the 2023-2027 forecast, compared to a CAGR of 8.0% for the United States. China’s IoT spending could surpass the United States by the end of the forecast, with a CAGR of 13.2%.

IoT in the manufacturing world

Considering the importance of IoT for the manufacturing universe, Microsoft, Intel and IoT Analytics published in August 2022 a report focused exclusively on this sector. Decision-makers working in discrete, hybrid or process manufacturing were interviewed, with the aim of identifying learnings and insights into the current and future state of IoT technology in manufacturing companies’ plans.

IoT Signals - Microsoft, Intel, IoT Analytcs 1

Briefly, the five main results of the survey were:

1. Manufacturing companies are investing more in their Smart Industry efforts in the post-Covid-19 period. Almost three quarters (72%) have moved beyond the proof-of-concept (PoC) stage and are already at different stages of strategy implementation. Expected progress in three years is 66% higher than the level of improvement they have already achieved in the previous three years.

2. Operational gains remain the primary goal. Four out of five manufacturing companies consider Overall Equipment Effectiveness (OEE) to be the most appropriate KPI for measuring the success of Smart Factory strategies. They expect major breakthroughs in three years to occur in the areas of cybersecurity, sustainability, and quality.

3. Investments are shifting towards automation-based process control. Quality control and condition-based maintenance have been the focus of most Smart Factory projects. The need for more agility and modularity is leading factories to change the focus of investments (e.g. investments in cloud-connected gateways and software-based PLCs). The intention is to increase investments by 29%.

4. The challenges to scaling up Smart Factory initiatives are changing. Manufacturing companies have overcome challenges related to gathering data and interfacing with cloud infrastructures. Today, half of respondents face challenges associated with developing new software applications. Eight out of 10 respondents reported lacking skills in at least one essential area, the main ones being related to data science, Artificial Intelligence and cybersecurity.

5. IT-OT convergence is underway. With 76% of manufacturing assets connected, many workloads and applications are migrating from on-premises infrastructure to public and private clouds. Software as a Service is becoming the dominant type of deployment. In addition, IT tools such as containers are coming to factories. 6. Big investments must happen in smart technologies. Manufacturing companies are optimizing not only operations, but also generating new revenue streams from smart IoT products sold to customers. Those already doing this expect to increase their current share from 33% to 47% by 2025, with more intensity in value-added services such as remote support or predictive maintenance.