IoT connections forecast:

the impact of Covid-19

June 2020

© 2020 GSM Association

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Authors
Sylwia Kechiche, Principal Analyst
Alex Gharibian, Analyst
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1 Executive summary

2 Overall market environment

3 Effects of Covid-19 on IoT

4 The vertical view

5 Appendix: definitions

3
 Shape of the market

Macroeconomic forces at play – Forecasting the impact of the Covid-19 pandemic on IoT is difficult due to the unknowns
1 around the extent of the crisis. Our forecast is based on the views held by most macroeconomic analysts, who see a contraction
of the global economy in 2020 and a recovery in 2021.

The overall IoT market impact varies by vertical and geography – Asia Pacific will be the least affected due to strong

2 government support. The overall impact will be a mix of a short-term decline in demand and a longer term move towards the
digital transformation of enterprises. We forecast total IoT connections to reach 24.0 billion in 2025, compared to our previous
forecast of 24.6 billion. Net additions will contract by 45% in 2020.

The consumer IoT market looks relatively resilient in the long term – We do not foresee consumers giving up their
3 connected devices, but we do forecast a lengthening of upgrade cycles across several device categories. Connected vehicles will
be the most impacted vertical in consumer IoT, due to a slowdown in new car sales and stronger moves towards the sharing
economy.

Upside for the enterprise IoT market – The current crisis has shown that agility and business continuity are key. Enterprises
4 will continue their digital transformation journeys but at a slower pace. Smart city and smart building adoption will be the most
negatively affected, followed by utilities. The current crisis will also reshape retail, manufacturing and health.

Licenced cellular IoT continues to support devices requiring mobility – Licenced LPWA (NB-IoT and LTE-M) technologies
5 are still overcoming the challenges that have slowed adoption so far.

4
1 Executive summary

2 Overall market environment

3 Effects of Covid-19 on IoT

4 The vertical view

5 Appendix: definitions

5
 Extraordinary macro-environment as a result of Covid-19

• Recession looms. Global lockdowns and associated pauses in economic activity are projected to push many economies into recession in
2020. Most macroeconomic analysts share the view that global GDP will contract in 2020 (–3%) but will show a strong rebound the year after.

• Uncertainty remains. The level of uncertainty that remains for the global economy will serve to reduce consumer and enterprise spend. In
the notes accompanying its April 2020 projections, the IMF stated that “much worse growth outcomes are possible and maybe even likely”.
Any rebound in growth in 2021 is predicated on a swift resumption of economic activity – this means industries being able to adapt to new
social distancing norms, targeted support from governments, and vaccinations being developed and rolled out rapidly.

Change in GDP across the world Covid-19 stimulus packages as a share of GDP, 2020

21%

Global Euro area US China

9.2%
11%
10%
6.1% 5.8% 8% 8%
4.7%4.7%
2.9% 5% 5%
2.3% 4%
1.2% 1.2% 3%

2019 2021
-3.0%

-5.9%
-7.5%
Source: IMF
2020
6
 Consumer confidence plunge; supply-chain disruption

• The largest decline in confidence on record. April saw the Consumer Confidence Index for OECD markets
OECD’s Consumer Confidence Index fall to lows not seen since
the financial crisis. As the economic outlook remains uncertain, we
anticipate further declines in this Index over the coming months. 103
For reference, it took seven years for the Index to return to parity
as austerity measures brought in by unsustainable debt levels took
time to play out. 102
• Consumer spend contraction. All signals point to a contraction in
consumer spend – the key questions are to what degree and for
101
how long. This will vary by country, depending on the duration of
lockdown, government stimulus packages, structure of the
economy (service versus industry), ability to redeploy unemployed 100
workers, and effectiveness of measures to avoid a second wave of
infection.
• Warning from economic indicators. The Purchasing Managers’ 99
Index (PMI), which provides insight into overall economic growth,
declined in April 2020 to levels below that of the financial crisis.
• Fragility of supply chains. China’s share of global manufacturing 98
has grown from 3% in 1990 to 25%, and the country’s lockdown
has brought to attention the worldwide dependency. 97
Consequences could include a move to deglobalisation, reshoring
and/or greater diversification in supply chains.
• Increased automation. Industrial robots are becoming more 96
affordable and autonomous thanks to AI. The installed base of
industrial robots is set to increase sharply to help with reshoring.
Source: OECD
7
1 Executive summary

2 Overall market environment

3 Effects of Covid-19 on IoT

4 The vertical view

5 Appendix: definitions

8
 Short-term disruption but long-term upside potential

• In the short term, the economic uncertainty could constrain demand and funding for IoT projects. IT and IoT vendors are already
reporting project cancellations and postponements.
• However, every crisis leaves a long-lasting legacy in terms of faster innovation and a new “normal”. It is reasonable to assume that
Covid-19 will lead to faster adoption among companies of IoT, AI/ML and 5G among other technologies to drive digital transformation.

Covid-19 impact on IoT

DEMAND SUPPLY

Short term Long term Short term Long term

• Demand weakens, led by
automotive and consumer-
facing sectors.
• Demand in China stable from
March; demand from rest of
world slows.
• Rise in unemployment and
reduced consumer purchasing
power, resulting in lower spend
on connected devices and
longer replacement cycles.
• Move to the cloud hastens.
• In manufacturing and health,
IoT adoption accelerates.
• Growth returns to consumer
market.
• Supply-chain visibility,
automation and resilience drive
enterprises’ investments.
• Move towards the sharing
economy impacts smart vehicle
connections (fewer cars means
fewer connections).
- Production is impacted – - Moves to insource production
depending on sector. and geographically distribute
- Supply-chain disruption leads to supply chains.
moves to alternative sources - Renewed growth of self-
where possible. installation and out-of-the-box
- Logistics constraints. solutions.
- Government safety measures
impact travel and site
restrictions, holding back
services and project
installations across all sectors.
Source: GSMA Intelligence

9
 Connections forecast changes due to Covid-19

• Total IoT connections will double between 2019 and 2025, reaching 24 billion. We forecast growth at a slower rate compared to our
December 2019 forecast; in 2020 net additions will decline by 45%. This reflects a combination of a short-term slowdown but stronger
adoption of IoT across enterprise verticals that have to adjust to a “new normal”.
• After an initial contraction, the enterprise IoT segment will recover more quickly than consumer IoT as enterprises embrace digital
transformation and deployments scale. Smaller enterprises, which are already lagging in terms of IoT adoption, will face insolvencies
and/or the risk of bankruptcy. Those that survive will need to streamline and adjust their operations to digital channels.

Total IoT connections, 2019–2025

12,150 2× 24,030
Million

30,000
-2%
25,000 -4%
-5%
20,000 -4% -5%
-5%
15,000
10,000
5,000
0
2019 2020 2021 2022 2023 2024 2025

December 2019 update May 2020 update Source: GSMA Intelligence.

10
 Asia Pacific to lead IoT adoption; North America and Europe follow

• We have taken into account current adoption levels of 2020 forecast update impact by region
IoT across households and enterprises, and adjusted
the forecast based on the potential impact that Covid- 2019 Net adds 2020
19 will have on IoT demand by vertical and geography. December 2019 update May 2020 update
• The impact varies by region and depends on the length Asia Pacific 5.3bn 825 5.9bn
of lockdowns and fiscal stimulus packages put in place 604
to aid financial recovery.
• Asia Pacific will be the least affected region, with IoT 382 2.9bn
Northern America 2.8bn 123
being used to combat the effects of the pandemic,
supported by government measures in a number of 303
economies. For example, China will accelerate its Europe 2.4bn 2.5bn
125
investment in “new infrastructure” projects including
5G, AI and industrial internet to boost consumption and 77
Latin America 0.6bn 38 0.7bn
develop new business models. The government has
already deployed IoT and 5G tools to fight Covid-19.
79
Some of these will remain post-pandemic; e.g. facial MENA 0.5bn 43 0.5bn
recognition cameras allowing residents to enter
buildings. 48
• Europe and North America will be heavily impacted CIS 0.4bn 24 0.4bn
due to lockdowns and rising levels of unemployment.
26
SSA 0.1bn 18 0.1bn

Source: GSMA Intelligence

11
 The majority of connections are still using short-range

• Licenced cellular IoT’s share of total connections remains unchanged, but the absolute figures will double from 1.7 billion in 2019 to 3.5
billion in 2025. Cellular M2M will continue to support IoT devices that require mobility, with licenced LPWA struggling to reach expected
scale. Deployment and adoption are picking up, however, as commercial business models are proving viable.

IoT connections by technology

Million
30,000
Other techologies Cellular M2M Licenced LPWA
14%
25,000

20,000

14%
15,000
8%

10,000
Licenced cellular IoT
4%
5,000 as % of total connections

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Note: licenced LPWA refers to NB-IoT and LTE-M Source: GSMA Intelligence
12
 Licenced LPWA: challenges to overcome before scale is reached

• Deployments – there are 131 commercial licenced LPWA Licensed LPWA connections, 2018–2025
networks, the majority of which are NB-IoT (94), but operators are Millions
increasingly choosing NB-IoT and LTE-M to support a wider set of
applications.
• Coverage – remains an issue; some rollouts are limited to specific 1,200 World China
use cases (e.g. utilities).
• Module prices – suffering due to the price premium linked to limited
1,000
coverage. NB-IoT/LTE-M modules need to have a fallback option to
a legacy technology, making them more expensive than single-
mode devices. 800
• Roaming – recent agreements between Deutsche Telekom, Telia,
Swisscom and Vodafone for NB-IoT; and AT&T, KPN, Orange and
Swisscom for LTE-M are steps in the right direction but lack global 600
reach.
• Technology – back-end systems are not compatible with each 400
other.
• 2G/3G network shutdowns – LTE-M has been positioned as a
replacement technology in countries that have retired 2G networks. 200
A lack of clarity on operators' technology migration plans makes
enterprises cautious when rolling out new technologies.
0
• 5G – NB-IoT and LTE-M are part of the 5G family and will be 2018 2019 2020 2021 2022 2023 2024 2025
supported in future releases. However, a lack of education on that
front led to enterprises postponing their decisions to invest in Source: GSMA Intelligence
licenced LPWA technologies.

13
 The operator perspective on Covid-19 impact on IoT

• Operators’ reported results for Q1 2020 do not yet show For which type of service, if any, do you expect to see the strongest
an impact on IoT connections. growth in demand from your enterprise customers due to the Covid-19
• In its latest quarterly results, Vodafone highlighted that pandemic?
SMEs are requesting payment deferrals, and enterprise
customers are delaying projects. However, the operator Percentage of respondents (n=92)
also notes that this offers an opportunity for technologies
Cloud infrastructure &
supporting productivity (e.g. SD-WAN, IoT). 35%
solutions
• According to our Operator Survey, demand for IoT
solutions and services will increase in 2020 – though not 5G connectivity to
as fast as for cloud, 5G and private networks. 20%
businesses
• Some 35% of operators expect an increase in demand
for cloud infrastructure and services as a result of Covid- Private wireless networks
18%
19, as employees working from home need access to (4G/5G)
files, applications and data. Business continuity also
grows in importance as workers are dispersed around SD-WAN services 11%
the world, while collaboration with partners, suppliers
and customers requires that data is made available
securely to the right people at the right time. IoT solutions & services 9%

Edge networking 2%

Do not expect growth in

demand for enterprise 3%
services

Prefer not to answer 2%

Source: GSMA Intelligence Operator Enterprise Survey
14
1 Executive summary

2 Overall market environment

3 Effects of Covid-19 on IoT

4 The vertical view

5 Appendix: definitions

15
 Replacement cycles for some consumer devices will lengthen

Smart home
Consumer IoT connections
• Home security: acceleration in the move to self-install security
devices; professionally installed systems are delayed. Millions
• Home appliances: remain a niche product: more of a luxury
Consumer others Smart vehicles Wearables
item, with limited appeal in current climate. 11,007
• Home infrastructure: largely unaffected, though move to Consumer electronics Smart home
10,290
remote working stimulates need for reliable connections. 9,580
• Energy monitoring: will track home security. 8,866
Consumer electronics 8,184
• Home/personal entertainment: games consoles receive an 7,448
initial boost due increase in gaming sparked by lockdowns, but 7,012
handheld games consoles continue to decline.
• Smart TVs: unaffected.
• STBs: closely linked to TV ownership, so not much change,
but streaming devices potentially increase.
• Smart speakers: continued appetite among consumers
Wearables
• Fitness trackers and smart watches: battle for dominance
continues – early signs point to fitness trackers’ growing
appeal.
Smart vehicles
• Supply and demand are heavily affected by lockdowns; 2019 2020 2021 2022 2023 2024 2025
escalated slowdown in new car sales results in slower
adoption. Source: GSMA Intelligence
Consumer – others
• Growth in non-prescribed medical devices.
16
 Digital transformation on the enterprise agenda but timelines
impacted

Results from GSMA Intelligence IoT Enterprise Survey 2019

Percentage of respondents (n=2,583)

Digital transformation is on Cost saving still key Impact of Covid-19

Short term Medium term Long term

(2020–2021) (beyond 2025)
65% 35% 56% 44%
Part of Save costs Generate new
Standalone Pressure on Digital
transformation revenue Supply-chain
initiative issues capex transformation
agenda

Longer
Government replacement
HQ leads the way Benefits & compliance equal measures cycles

Need for
Projects put on
automation and

60% 40% 50% 50% hold/cancelled

Rise of software
visibility

Mandated by Driven by local Business Comply with Rise of robotics

tools: AR, AI/ML;
HQ champions benefit regulation and AGVs
growth of cloud

17
 The impact will vary by vertical

Enterprises have had to readjust their operations, focusing

more on remote access and automation. This is giving rise to Enterprise IoT connections
software tools (AR, AI/ML) and cloud in the short term and will Millions
reinforce the need to digitise over the long term.

• Smart buildings: construction delays; deferred demand and

“softness” in building solution projects; reduction in office Smart health Smart city Smart manufacturing
space to reflect remote working, but increasing digitisation. Smart retail Enterprise others Smart utilities
• Smart utilities: projects put on hold to adhere to social- Smart buildings 13,023
distancing guidelines.
• Enterprise – others: delayed deployments of fleet 11,039
management but crisis highlights benefits of IoT.
• Smart retail: near-term downturn but, longer term, retail will 9,355
accelerate move to a hybrid model of physical and digital 7,919
experiences; contactless payments on the rise but PoS
6,696
shipments down in 2020.
5,677
• Smart city: short-term budget reallocation to prioritise 5,138
fighting the virus, leading to innovation: e.g. technology use
(AI, edge) to monitor citizens with drones.
• Smart manufacturing: repurposing of production to match
demand; factory closures. In the longer term, recognition for
greater operational visibility (including supply chain).
• Smart health: growing need to digitise healthcare with IoT
to provide better patient experience; move to telehealth and 2019 2020 2021 2022 2023 2024 2025
remote monitoring to reduce healthcare spend. Source: GSMA Intelligence

18
1 Executive summary

2 Overall market environment

3 Effects of Covid-19 on IoT

4 The vertical view

5 Appendix: definitions

19
 IoT definition and segmentation

• GSMA Intelligence defines the Internet of Things (IoT) as devices capable of two-way data transmission (excluding passive sensors and
RFID tags). It includes connections using multiple communication methods such as cellular and short range. It excludes PCs, laptops,
tablets, e-readers, data terminals and smartphones.
• GSMA Intelligence segments IoT into two broad categories: consumer and enterprise. Our distinction is primarily based on IoT device
ownership but we recognise that “consumer” is a loose term as some devices (e.g. smart TVs) could be used in non-residential
environments.

Category Sub category

Consumer IoT Consumer Smart TV, home entertainment (games consoles, DVD players), personal entertainment (MP3 players, portable
electronics gaming devices), set-top boxes, streaming devices, smart speakers
Smart home Home appliances (fridges, washing machines), home infrastructure (routers), home security (alarms), energy
monitoring (thermostats)
Wearables Fitness trackers, smart watches
Smart vehicles Embedded telematics, aftermarket telematics, in-car entertainment, connected bikes
Consumer – others Children/elderly/pet trackers, drones, robots, AR/VR headsets, wireless headphones/earphones, non-prescribed
health devices
Enterprise IoT Smart city Public transport, surveillance, electric vehicle charging, street lighting, parking, waste management
Smart utilities Energy, water and gas smart metering, smart grid
Smart retail PoS, digital signage, vending machines, ATMs
Smart manufacturing Inventory tracking, monitoring and diagnostics, warehouse management
Smart buildings Heating and air conditioning, security, lighting, hot desks, office equipment
Health Professionally prescribed health devices, remote monitoring of medical devices, emergency vehicle infrastructure

Enterprise – others Fleet management, applications in agriculture, oil, mining and construction

20
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21