Freescale Semiconductor (and soon to be NXP Semiconductors NV) had their technology ecosystem last week in Austin, TX. The introduction this week of the new Freescale Semiconductor Single Chip System Module (SCM) has gotten me back to thinking about a question I am constantly asked, “Where is the money in Internet of Things (IoT)”. I’ve heard responses ranging from “it’s all in the analytics” to “everywhere” to “there isn’t any”. The revenue projects for IoT have caused raised eyebrows and discussions surrounding hype cycles, but realistically there are companies generating revenues today from IoT applications. The question is, with these new highly integrated offerings, can anyone make money in IoT devices?
On the Human side of IoT, we all know (and see) a wide variety of wearables and home automation devices being sold and used every day. The wearables, to me, are essentially defined by two factors–the software used by consumers to actually use them, and fashion. The devices have narrowed down to where the internal hardware is largely the same; they all have access to the same sensors at a given price point. It is the software that analyzes the data and puts it into a format I can use that differentiates and motivates users to buy. Home Automation is much the same. There’s not much differentiation in lightbulbs, light switches and cameras; it’s the software that allows me to simply set up and use the devices that differentiates the hardware. In both these markets vendors are throwing just about everything they can think of into the market to see what sticks, and it won’t be clear what will, and won’t for a while. In summary, lots of devices are being sold in Human IoT, but revenues are different from profits, and it’s not clear yet what types of profits are to be made on the Human side from all these applications.
Let’s look at the Industrial IoT. As I have said many times in the past, and to many audiences, I believe the Industrial IoT (IIoT) has the capacity to not only generate more revenue than the Human side – but it also will be a lot quicker to monetize. The typical person doesn’t see these types of deployments on an everyday basis, so the hype is less. But the payback from smart lighting, HVAC and other industrial systems is much greater than any of the Human applications. By using a combination of hardware gathering data and software, not just analyzing the data, but making decisions (sometimes in real-time), real money can be both saved and generated.
Thinking more deeply about “where is the money” in IIoT, I can reach a conclusion that there is money to be made in software that analyzes and reacts to data, but is there money (re: profit, not just revenue) to be made in IoT edge devices that only collect data? This week, Freescale Semiconductor (and/or NXP Semiconductors NV, they have agreed to merge later this year) added another dimension to my thought process on this question with the introduction of the Freescale Semiconductor i.MX 6D Single Chip System Module (SCM) for IoT.
The Freescale Semiconductor SCM is really an amazing little device. Using a proprietary process that looks like a cross between semiconductor lithography and a circuit board manufacturing processes, the SCM is an entire IoT system masquerading as a chip — replacing about 120 components and occupying a space about the size of a US dime. The Freescale Semiconductor SCM includes the Freescale Semiconductor i.MX 6Dual Applications Processor, a power management integrated circuit (Freescale Semiconductor PF0100 PMIC), flash memory, embedded software/firmware, system-level security including random number generation, cryptographic cipher engines and tamper protection – with an option to include RF circuitry as well. Device hardware designers no longer have to design an IoT system, spending hours upon hours developing the memory interface, getting the power just right or designing an RF sub-system. Freescale Semiconductor claims using the SCM will reduce hardware design times by 25%. Designers can just buy a “chip” that does it all, and in about 50% less space than any discrete design they would finally come up with.
This doesn’t mean the entire IoT design is done. We are talking IoT here, and integrating sensors for data gathering is still required. Sensor interfaces are not rocket science, so the hardware design and development task have been reduced to an area of little added value. You can also assume that Freescale Semiconductor is not done, and in the near future you can expect one or more common sensors (say an accelerometer) integrated with the current SCM. That leaves the hardware task as something a junior designer could do, with the real task being software development in generating and actually using the data collected. The more I think about this, it’s driving what I call the “genericization” of IoT hardware –All the hardware is “just about” the same, and if it’s the same, it’s hard to say it has much financial value and can generate any real revenues for manufacturers.
Does this mean that all those cool small companies that are driving innovation in the hardware endpoints will disappear? Well certainly not immediately. Over the long haul, however, I do think most of them will get snatched up by larger companies, or go out of business, as “better” solutions appear. And that may be a good thing. These companies are doing amazing things in hardware and really spurring thought as to what can be done and what types of products consumers may want over the long haul. That’s the good news. The bad news is that many of them are shortcutting designs, and forgetting about security and leaving gaping holes in the new IoT environment.
For now, there is so much going on in the nascent IoT space that there is room for companies of all shapes, sizes and technologies. As we move forward, however, only those companies that provide real monetary value will survive. Software vendors providing connectivity, management and analytics can provide unique solutions that will generate revenues and profits. With the Freescale Semiconductor SCM now entering the market, and others likely to follow, the Industrial IoT space may not hold much revenue for those looking to design and sell only hardware endpoints.