The contribution of IoT to

economic growth
Modelling the impact on business productivity

April 2019 gsmaintelligence.com @GSMAi

© 2019 GSM Association

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Authors
Mayuran Sivakumaran Pau Castells
Senior Economist Director of Economic Analysis
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 3

Summary

1 The world economy benefited by $175 billion in 2018 from the productivity
benefits to businesses from the use of IoT. This is equivalent to 0.2% of GDP.

2 Over half of these benefits are enjoyed by manufacturing businesses, making

it the sector currently gaining the most from using IoT.

3 The potential gains for businesses in developing countries are substantive:

enterprises already save 4-5% of costs with relatively low deployment.

Governments can encourage further economic growth: the right policies can
4 stimulate IoT adoption by businesses – this can sharpen their countries’ business
sector competitiveness and result in higher tax revenues.
Contents 1 IoT and economic growth

2 The productivity impact of IoT

3 Enablers in developing economies

4 Our Methodology
 5

Productivity growth Changes in productivity, 10-year moving

average of 23 countries
is slowing 5%

4%
• There is a broader slowdown in
economic productivity occurring in 3%

developed economies, but also in 2%

developing economies.
1%
• This presents a major challenge to
achieving prosperity and higher living 0%
1960 1970 1980 1990 2000 2010
standards. -1%

• IoT can support businesses across the

-2%
industry to improve their productivity.
-3%

Source Bergeaud, A., Cette, G. and Lecat, R. (2016): "Productivity Trends in

Advanced Countries between 1890 and 2012," Review of Income and Wealth, vol.
62(3), pages 420–444

IoT can change the way businesses operate
• By deploying connected devices
across their operations, businesses
are able to make improvements on
their current approach.
• The example on the right describes
the advantages of manufacturing
firms moving from ordinary
production processes to smart
production processes.
• Replicated across the economy,
these changes can lead to
improved business productivity and
therefore economic growth.
Ordinary factory
• Production line
managed manually
• Extensive manual
monitoring of processes
• Manual entry for stock
location
• Manual documents for
inventory
• Assessing faults by
audit
6
Smart factory
• Monitoring – the
performance of
equipment and
predictive maintenance
• Tracking – volume,
location of stock,
equipment.
• Quality assurance –
reducing production
waste by assessing and
acting on product quality
 7

IoT connections to grow Global number of IoT connections,

billions
to 25 billion by 2025 25

22
• Industrial IoT connections will lead overall 20
growth, on average 21% per year between 17 14
2017 and 2025. 15 12
10
• As a result of this significant growth, IoT
11
13
8
connections for industry will account for over 9 6
7

half of connections by 2025 – 14 billion 5

4
worldwide. 10 11 11
9
• This will lead a significant change in the way 5 6 7 8

that industries work.

2018 2019 2020 2021 2022 2023 2024 2025
Consumer Industrial

Source GSMA Intelligence

 8

We valued productivity In scope

based on enterprises’ Productivity

Additional output that can be
produced by companies as a result of
cost savings
experience Out of scope
• Our study focusses on the productivity gains Ecosystem The economic value added by
for businesses who adopt IoT solutions and direct companies that produce IoT devices,
contribution connections and solutions
deployed IoT devices.
• Therefore our analysis forms one part of a Indirect wider The knock-on impact of the IoT
economic ecosystem on the rest of the
wider view of IoT contribution to the global
impact economy
economy.
• Our results are driven by results from the Consumer Savings enjoyed by consumers: e.g.
welfare reduced energy bills as a result of
GSMA Intelligence IoT Enterprise Survey. benefits smart metering
Contents 1 IoT and economic growth

2 The productivity impact of IoT

3 Enablers in developing economies

4 Our Methodology
 10

Global productivity impact Economic impact of IoT on business

productivity
already $175bn, 0.2% of $ billion
GDP
0.34% GDP 371
• Productivity benefits will be worth over
$370 billion per annum in 2025 – 0.34%
of global GDP.
• This is just one part of the story of IoT’s
economic contribution:
• IoT companies will generate over $1 175 0.2% GDP
trillion in revenues by 2025
• Beyond these impacts on businesses,
there will be considerable benefits to
2018 2019 2020 2021 2022 2023 2024 2025
consumers as connections reach
over 10 billion worldwide. Source: GSMA Intelligence
Source GSMA Intelligence
 11

Governments are set to Global fiscal impact of IoT-driven productivity

growth
gain fiscally too $ billion
47
43
• Productivity gains by the wider economy 39
result in more government revenue as taxes 35
32
are payable on the wider economy’s 28
25
corporate income and sales in particular. 22

• We estimate that, solely due to productivity

gains, $22 billion was contributed to
government revenue worldwide, which will
rise to $47 billion by 2025. This figure does 2018 2019 2020 2021 2022 2023 2024 2025
not include direct and indirect tax
Source GSMA Intelligence
contributions from the IoT ecosystem.
 12

The manufacturing sectors Economic impact of IoT on business

productivity, global, 2018
lead the way
• 50% of the total global productivity impact is $ billions % of sector economic value

from the manufacturing sectors, which 100

0.4% 0.5%

themselves form a large share of total global

90

0.4%
0.4%

80

economic output.
0.4%

0.3%
70

•
0.3%

Manufacturing (including consumer 60

0.2%
0.3%

electronics and automotive) has a higher

50

92 0.2%

0.1%
0.1%
adoption rate than other sectors.
40

0.2%

0.1%
30

• Transport, Utilities and Healthcare can make 20

38
0.1%

7
further productivity gains if adoption 15
0.1%

10 10
10

increases significantly.
0 0.0%

Manufacturing Other Retail Transportation Public Sector Utilities Healthcare

(incl. enterprises & Logistics
Consumer
Electronics and Source GSMA Intelligence
Automotive)
 13

US and China contributing Economic impact of IoT on business

productivity, 2018
significantly $ billion (% of national GDP)

• In both absolute and relative share of GDP US (0.27%) 54.2

terms, the US and China are leading the
world in IoT productivity gains accounting for China (0.26%) 36.2

over 50% of global benefits together.

Germany (0.24%) 9.9
• This is due to the size of their economies as
well as the higher estimated adoption of IoT Brazil 3.6 (0.17%)
in those countries.
• Germany and Brazil also benefited from India 1.3 (0.04%)

productivity gains worth almost 0.2% in 2018

South Africa 0.3 (0.09%)
– both countries have significant
manufacturing sectors. Source GSMA Intelligence
 14

North America to gain Economic impact of IoT on business

productivity
most in the future % of regional GDP
0.46%

• North America remains the main

0.34%
beneficiary, with productivity gains
0.30%
worth 0.46% of GDP by 2025. North America 0.26% 0.28%

•
0.27%
While growth will be strong in some Asia Pacific 0.20% 0.20%
MENA 0.18%
developing regions, it is from a low Latin America 0.17%
base. Europe 0.16%
CIS 0.12% 0.11%
• These regions need more
Sub-Saharan 0.06%
widespread adoption across different Africa

industries to benefit. 2018 2019 2020 2021 2022 2023 2024 2025

Source GSMA Intelligence

Source: GSMA Intelligence
Contents 1 IoT and economic growth

2 The productivity impact of IoT

3 Enablers in developing economies

4 Our Methodology
 16

Enterprises in developing Operating cost savings from using IoT

countries making significant reported by enterprises, simple average
across sectors
savings % of gross operating costs
7%
• Globally, enterprises report savings of
6%
between 4% and 6% of operating costs on
average. 4% 4%
• But developing countries are reporting higher
3%
operating cost savings than enterprises in 3%

more developed economies

• On average, businesses are less efficient in
developing countries and therefore have the
most to gain from deploying IoT technology. South Africa India China Brazil US Germany

Source GSMA Intelligence IoT Enterprise

Survey 2018
 17

Even basic adoption can Relationship between mean cost saving and
reap great benefits deployment levels

• 6.5%

Operating cost savings

Enterprises with higher levels of deployment
make greater savings on average across the
6.0%
14 surveyed countries, supporting the view
that mass-scale deployment has the most
5.5%
significant impact on operations.
• But notably the largest gains in cost savings 5.0%
occur when enterprises shift from deploying a
minimal number of devices (less than 50) to 4.5%
deploying over 300 devices.
• This means that focussing on improving 4.0%
- 5,000 10,000 15,000
adoption will yield significant productivity
Number of IoT devices deployed
improvements.
Source Analysis based on GSMA Intelligence IoT Enterprise Survey 2018
 18

Policies designed to boost Economic impact of IoT on business

adoption can have a large productivity, Sub-Saharan Africa
$ billions
effect 4.4

• For example, if policies led to a doubling in

the growth of IoT adoption in Sub-Saharan
Africa 2.4
• The productivity impact would be +$2
billion higher in 2025
1.0

• Productivity gains will generate extra tax

revenue worth $400 million to Sub-Saharan
2018 2019 2020 2021 2022 2023 2024 2025
African governments in 2025
Baseline Double growth
• But this could increase to $730 million if
IoT adoption was higher Source GSMA Intelligence
Contents 1 IoT and economic growth

2 The productivity impact of IoT

3 Enablers in developing economies

4 Our Methodology
 20

Our modelling approach relies on three key inputs

Economic
productivity of IoT

Operating cost Businesses cost reductions from using IoT devices using outputs from
savings the GSMA intelligence IoT Enterprise Survey Q4 2018

X
IoT business The share of businesses in the economy that are using IoT: this is based
adoption rate on assumptions from existing research

X
The size of the sector’s contribution to the economy based on
Sector value add calculations from OECD Input-Output table

Modelling principles
The model is based on the following principles:
1. Businesses in many sectors of the economy
are able to make savings and run their
operations more efficiently as a result of
employing IoT technology.
2. The benefit to each of these sectors depends
on the number of businesses that adopt IoT.
3. The savings allow each sector to produce
more using the same level of inputs.
4. The impact of IoT on business productivity
will vary depending on the size of the sector
within the economy.
21
Key sources of inputs
Operating cost savings
The GSMA Intelligence IoT Enterprise survey was
carried out in Q4 2018, covering over 2,000 businesses
from 14 countries. We asked these enterprises what
reductions in operating costs in the previous financial
year they associated with the adoption of IoT.
IoT business adoption rate
Most of the research conducted on IoT enterprise
adoption is based on actual business adoption, but
some is more focussed on population, or urban
population. We have assumed in all cases that
businesses uniformly cover the population.