the internet of things - industry trends and key players

SYNC.

Global investment themes: Telecoms, media and technology

The Internet of Things as an investment theme

10 March 2015 Cyrus Mewawalla Director of Research [email protected] +44 (0) 20 3393 3866

CM Research 56 Broadwick Street, London W1F 7AJ

www.researchcm.com Authorised and regulated by the Financial Conduct Authority

Elgen Strait Director of Sales [email protected] +44 (0) 20 3744 0105

The Internet of Things as an investment theme 10 March 2015

www.researchcm.com 2

Contents

DEFINITION....................................................................................................................................................3

MARKETSIZE.................................................................................................................................................4

TIMELINE.........................................................................................................................................................5

STANDARDS....................................................................................................................................................6

VALUECHAIN.................................................................................................................................................7

DEVICELAYER...............................................................................................................................................8

CONNECTIVITYLAYER................................................................................................................................9

DATALAYER.................................................................................................................................................10

CONTROLLAYER.........................................................................................................................................11

KEYPLAYERS...............................................................................................................................................12

2015INVESTMENTTHEMES...................................................................................................................13



Definition

Automated home Industrial Internet Driverless car

Definition Ambient Commerce Wearable technology The Internet of Things (IOT) refers to the concept of connecting physical objects – like clothes, watches, cars, fridges, heaters and factory machines – to the internet. By collecting and analysing the data they transmit, consumers and businesses will be able to monitor, maintain and upgrade these “things” much more efficiently.

Source: freshome.com, Google, Zdnet, pedalo.co.uk, just perfect



Market Size Ericsson: There will be 50bn connected devices by 2020, up from 12.5bn in 2013 (Cisco agrees) Gartner: There will be 26bn IoT installed devices by 2020, up from just 0.9bn in 2010 Intel: There will be 200bn connected devices by 2020 IDC: The IoT market will be worth $8.9 trillion by 2020, up from $1.9 trillion in 2013

Even the most pessimistic industry commentators expect the market for the internet of things to quadruple from today’s levels over the next five years. IDC expects the IOT market to almost quadruple from $1.9tn in 2013 to $8.9tn by 2020. Cisco is more optimistic.

Accenture expects smart thermostats to be one of the first IoT products to go mass market, followed by smart fridges.

Source: Cisco, McKinsey, IDC, Accenture (2014 State of the Internet of Things Study), CM Research

0

5,000

10,000

15,000

20,000

2013 2020

$bn

Growth forecasts for IoT revenues

Cisco McKinsey IDC

0%10%20%30%40%50%

Smart thermostat Smart fridge Smartwatch Wearable headsup display

Projected adoption of connected technology by US consumers

By 2015 By 2020 After 2020



Timeline The Internet of Things was born in 2009... ...when the number of connected devices exceeded the world’s population for the first time. Today, PCs and mobile phones account for three quarters of all connected devices ... ...but, in future, they will be physical “things”.

1995 2000 2005 20152010 2012 2013 20142011

1995: Siemens launches "M1", a GSM data module for machine‐to‐machine applications

1999: Procter & Gamble's Kevin Ashton coins the phrase "internet of things", referring to RFID technology in P&G's supply chain connected to internet

2003: BigBelly Solar creates smart solar‐powered trash cans which tellrubbish collectors when they are full

2005: The UN publishes a report on the Internet of Things via the ITU, for the first time

2010: The ZigBee Alliance and IPv6 Forum create partnership with IPSO to help smart objects talk to each other

2014: Intel and others set up Open Interconnect Consortium in direct competitionwith the AllSeen Alliance

2012: Google begins testing prototype for Google Glass, an optical, connected head‐mounted display

2012: Proteus Digital Health gets FDA clearance for an ingestible medical device wireless connected to a mobile phone

2012: IPv6 is launched worldwide, providing virtually unlimited IP addresses enabling billions more devices to be connected to the internet

2000: LG announces research on world's first connected fridge

2013: Qualcomm and others form the AllSeen Alliance to develop an open framework for IOT

2011: Nest Labs launches its Learning Thermostat with sensor algorithms, machine learning and cloud computing technologies

2014: Google Glass goes on sale to general public at $1,500

2008: The IPSO alliance is founded to promote the use of networked devices

2014: Apple launches HomeKit, an app to control the smart home, working with AppleWatch

2008/9: Thenumber of connected devices exceeds world population for the first time

2014: Samsungacquires SmartThings, a smart home hub for connected devices



Standards The market for the Internet of Things can only take off once all connected devices speak the same language. This has kicked off an intense battle for domination of the communications protocol that will govern the IoT.

Standards body Description Members

AllSeen Alliance (a.k.a. AllJoyn Alliance) Founded 2013

A Qualcomm-led open source project aimed at enabling compatible smart devices to "recognize each other and share resources and information across brands, networks, and operating systems."

Qualcomm Cisco Microsoft

Electrolux LG Sony

HTC Haier Panasonic

Open Interconnect Consortium Founded 2014

An Intel-led project aimed at creating a new standard by which household gadgets communicate with each other.

Intel Samsung

Atmel Broadcom (left after disagreement over IP)

Dell

The Physical Web Founded 2014

A Google-led project aimed at allowing users to communicate “with any smart devices without having to download an app first.”

Google

Industrial Internet Consortium Founded 2014

An Intel-led project with whose aim "is to accelerate the development and availability of intelligent industrial automation for the public good."

Intel Cisco AT&T

IBM Microsoft GE

Samsung VMware

Thread Founded 2014

A Google-led project aimed at creating a new IP-based wireless networking protocol.

Nest (Google) Samsung

Freescale Semiconductor ARM

Silicon Labs Yale Locks

IPSO Alliance Founded 2008

Formed in 2008, the Internet Protocol for Smart Objects (IPSO) Alliance was one of the first IoT alliances. Its aim is to establish Internet Protocol as the basis for the connection of smart objects.

ARM Atmel Bosch Cisco

Freescale Semiconductor Fujitsu EDF Ericsson

Google Nokia Oracle Texas Instruments

Weightless Founded 2011

A consortium promoting the Weightless-N long range (5km) wireless communication standard.

ARM Accenture

Cable & Wireless CSR (Qualcomm)

Neul

Source: CM Research



Value Chain We split the value chain for the Internet of Things into four layers: devices, connectivity, data and control.

Connectivity Layer Data LayerDevice Layer Control Layer

Applications

Operating System

Controller devices‐ smartphone‐ smartwatch‐ tablet‐ homehub

Connected "things"

Sensors, cameras & antennae

Embedded chips

Internet infrastructure

Edge devicesDatabase

Security

Storage

Analytics

Integration

Telecom networks

Network



Device Layer Today, most connected devices – such as smartphones, tablets and laptops – are controlled by humans.

In the Internet of Things, most connected “things” will be run by other connected “things”.

Source: CM Research

Apple Google LG MicrosoftFitbit Samsung HTC Xiaomi

Apple Microsoft Sony ElectroluxNest (Google) Sonos Samsung Dropcam (Google)

Autoliv Elektrobit Audi FordDelphi Takata BMW General MotorsDenso Valeo Fiat Mercedes

Google GE Fanuc ABBIBM Rockwell Kawasaki Kuka

InvenSense Renesas Asia Optical NXPMobileye ST Microelectronics Largan Precision TomTom

ARM Intel Atmel MicrochipBroadcom Qualcomm Freescale Micronas

Device Layer

Connected Things

ElectronicComponents

Wearable Technology

Industrial internet

Connected car

Automated home

Market leaders Challengers

Embedded chips

Sensors, cameras & antennae



Connectivity Layer Makers of edge devices like Cisco provide routers and gateways that act as the first point of entry into a data network. Internet infrastructure providers like Amazon Web Services provide the back-end systems which power the IoT. Telecom operators provide the pipes through which all this data travels.

Source: CM Research

Alcatel Lucent Juniper Networks Alibaba FacebookCisco Nokia Amazon GoogleEricsson Sonus Networks Apple Huawei

Akamai Google Equinix IBMAmazon Microsoft HP Rackspace HostingF5 Networks Tibco Software Infoblox Telecity

BT Softbank Bharti Airtel KDDIAT&T Telefonica China Mobile MTN GroupLevel 3 Verizon China Telecom OrangeNTT Vodafone Deutsche Telekom SingTel

Connectivity Layer

Telecom networks

Internet infrastructure

Edge devices




Data Layer In the age of PCs and laptops, many of the applications we used were run locally on the computer.

With the Internet of Things, most of the data is processed in the cloud – the devices are just a collection of sensors.

Source: CM Research

Amazon IBM Qlik Tech TableauGoogle Microsoft Splunk Verint Systems

IBM Oracle Cloudera MongoDBMicrosoft SAP Hortonworks MarkLogic

Citrix Systems Red Hat Information Builders SASInformatica VMware MobileIron Teradata

Aruba Networks Fusion IO Arris LenovoBrocade Comms Riverbed Tech Huawei ZTE

IBM Check Point Software FireEye Palo Alto NetworksFortinet Trend Micro HP Qihoo 360

EMC NetApp Amazon MicrosoftHP Nimble Storage Google Qlogic

Data Layer

Insight

Management

Infrastructure

Analytics

Storage

Security

Database


Integration

Network



Control Layer The control layer is likely to become the most profitable segment of the IoT value chain. As more machines connect to the internet, the big technology giants may seek to act as gatekeeper for after-sales

services, weakening the original equipment manufacturer’s relationship with its customers.

Source: CM Research

Alibaba Facebook Samsung Amazon Huawei Schneider

Apple Baidu IBM SiemensGoogle Cisco LG Sony

GE Microsoft Twitter

Belkin iControl UbiBosch Revolv XiaomiEvrythng Supermechanical

Control Layer

Apps

Control hubs‐ home hub‐ smartphone‐ smartwatch‐ tablet

Operating systems




Key Players Devices Connectivity Data Control

Philips Electronics

LG Electronics

Pace

Connected things Panasonic

Pioneer

Samsung Electronics

Sony

ARM

Atmel

Freescale Semi

Sensors, Infineon

microcontrollers Intel

& embedded InvenSense

chips MediaTek

Microchip Tech

Micronas Semiconductor

Nvidia

Qualcomm

Renesas

STMicroelectronics

Texas Instruments

Alcatel Lucent

Cisco

Edge devices Ericsson

Juniper Networks

Nokia

Sonus Networks

21 Vianet

Akamai

Internet / Cloud Amazon

Infrastructure F5 Networks

Google

Infoblox

Rackspace Hosting

AT&T

BT

China Mobile

Telecom China Telecom

operators Deutsche Telekom

Level 3

NTT

Softbank

Telefonica

Verizon

Vodafone

Qlik Tech

Analytics Salesforce.Com

Splunk

Tableau

IBM

Database Oracle

SAP

Citrix Systems

Informatica

Integration Mobile Iron

Red Hat

VMware

Arris

Aruba Networks

Network Brocade Comms

Riverbed Tech

ZTE

Check Point Software

FireEye

Security Fortinet

Palo Alto Networks

Trend Micro

CommVault

EMC

Storage Hewlett-Packard

NetApp

QLogic

Alibaba

Amazon

Apple

Apps, Baidu

operating systems, Cisco

& control hubs Facebook

GE

Google

IBM

Microsoft

Samsung Electronics

Sony



2015 investment themes

Social‐ Crowd funding‐ Virtual currencies‐ Sharing economy‐Music, video, games

Cloud‐ Enterprise software‐ Internet of things‐ Automated home‐ Cyber security

Mobile‐ operating systems‐maps‐mobile payments‐messaging

Big Data‐ Artificial intelligence ‐ Ad‐tech‐ Software analytics‐Wearable tech

Ecosystems‐ Ecommerce‐ Enterprise software‐ Automated home‐Mobile internet

Internet of Things‐ Automated home‐ Artificial intelligence‐ Ambient commerce‐ Cyber security

Adv. Manufacturing ‐ 3D printing‐ Artificial intelligence‐ Robotics‐ Driverless cars

Software DefinedNetworking

‐ Service enhancement‐ Network function virtualis‐ Cost reduction

Wearable Tech‐ Google Glass‐ Smart watches‐Med‐tech‐ Internet of Things

Internet TV‐ Video streaming platform‐ Second/third screens‐ 16k / flexible screens‐ Ad‐tech

China‐ Alibaba IPO ‐ Telecom equip trade wars‐ Variable Interest Entities‐ Accounting risk

Regulation‐ Net neutrality‐ Data privacy‐ Patent litigation‐ Anti‐competition law



About CM Research CM Research is an independent research provider with a blue chip list of institutional clients. We analyse emerging trends in the technology, media and telecom sectors and develop them into global investment themes, highlighting the winners and losers. Our focus is on disruptive technologies. Our clients include institutional investors, corporations, consultancies and governments. At a time when many of our competitors have had their reputations mired by conflicts of interest, we fiercely guard our independence. Our business model is based on independence, exclusivity and experience.

Contact CM Research Research: Cyrus Mewawalla [email protected]

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