Semiconductors and IoT
The Internet of Things, or IoT, is poised to disrupt the semiconductor industry at industrial and business levels. IoT devices transform almost all products into smart devices, from irrigation systems to clothing. Retail, health, bioscience, consumer-based products, and industrial IoT are all in high demand.
With the growing demand for IoT solutions comes tremendous potential for profit. The McKinsey Global Institute estimates IoT applications will generate between $4 trillion and $11 trillion globally in 2025. This growth presents enormous opportunities and challenges for the semiconductor industry.
Perhaps the biggest challenge facing the industry is that IoT chips will change the kinds of semiconductors the industry has to make, demanding new manufacturing processes and techniques from chip manufacturers to produce smaller chips that consume less power.
Role of IoT in the semiconductor industry
A global IoT ecosystem will create a world in which every product, every piece of industrial equipment, and every health care device is connected to larger networks. A world of IoT devices will require sensors and integrated circuits to operate, whether the IoT applications in question are embedded in a grocery store freezer or provide information to AI software.
IoT will play a significant role in the future of semiconductors because of consumer and industrial demand for connected devices.
What is IoT?
IoT describes a network of interconnected wireless devices. Each device includes sensors, integrated circuits, and software that enables it to collect data, exchange information with other IoT applications, and take actions based on such data. A common IoT ecosystem is the modern smart house, where electronic equipment, HVAC systems, lighting, and appliances are all monitored and controlled from a central hub.
How will IoT applications affect the semiconductor industry?
IoT applications cannot work without sensors and integrated circuits, so all IoT devices will require semiconductors. The smartphone market, which has driven growth in the semiconductor industry for years, has begun to level off. The IoT market could represent new revenue for semiconductor manufacturers, allowing the semiconductor industry to maintain an average annual growth of 3 to 4 percent for the foreseeable future.
IoT devices will increase demand for sensors, connectivity, memory, microcontrollers, and integrated circuits, which could put pressure on the existing semiconductor supply chain. Semiconductor manufacturers that choose to meet IoT demands now will be well positioned to take advantage of this developing market.
Read more about semiconductors and IoT in the IRDS™ Roadmap
How semiconductors are changing what companies make to adapt to the emergence of IoT
IoT products and artificial intelligence technology will place previously unknown demands on semiconductor performance. The semiconductor industry will need to adapt to meet these demands.
How does IoT impact semiconductor manufacturing?
Smaller chip sizes
While the smartphone industry previously drove the need for ever smaller, more powerful semiconductors, IoT products put even greater demands on the industry.
IoT applications generally require the smallest possible microcontrollers for embedding in small electronics.
The result will be continued pressure on the semiconductor industry to develop the technology necessary for the smallest chip size while retaining acceptable levels of chip power consumption. The base material used in integrated circuits (silicon) may need to be replaced with a new type of semiconductor, such as gallium-arsenide.
IoT circuits need to be small: the average IoT device is about a third the size of a smartphone. In this constricted space the manufacturer requires sensors, processors, memory, Wi-Fi capability, microelectromechanical systems, and a range of analog and digital circuitry.
The most likely solution to IoT size constraints might be the use of a high-density interconnect board, which would allow the placement of more components on both sides of the printed circuit board while placing them closer together.
Other space solutions include 3-D-integrated circuits and multichip modules, increasing the number of circuits that can connect on a single die or in stacked configurations.
Diversity of supporting technologies
The growing diversity of IoT applications will require a greater diversity of new supporting technologies. For example, to support a myriad of operational technologies, smart vehicles require much, much more processing power and data collection than sensors in smart watches or clothing.
The more autonomous a vehicle—the more capable its advanced driver assistance systems (ADASs) are—the more processing power it needs. Vehicle ADASs require three functional elements: sensing, compute, and actuation.
Sensing: Smart vehicles use a smattering of radar, lidar, infrared, ultrasonic, and camera sensors to capture external environments. These sensors detect and capture data on nearby pedestrians, road signs, road obstructions, other cars, and so on.
Compute: With the data a smart vehicle captures with its sensors, it makes inferences in pattern recognition. These patterns are a mix of visual images and motion analyses.
Actuation: Finally, a smart vehicle applies calculated understanding of what its sensors are detecting to override its driver and make corrective measures. Smart vehicles connected to each other via the IoT share all this data, uploading it to the cloud for analysis and automation improvement.
Smart vehicles collecting and uploading data provide only one example of the plethora of supporting technologies that IoT applications need to function. Some IoT applications need organic semiconductor integrated circuits. And others rely on ultralow power consumption to enable moderate processing power.
All in all, each new IoT application places new stress on semiconductor manufacturers. For smart vehicles, semiconductor manufacturers will need to make chips that can support the multiple sensors and edge compute performance that generate terabytes of data per hour in a single smart vehicle.
As many IoT devices will be exposed to adverse industrial or environmental stressors, IoT integrated circuits will often require a degree of temperature, water, and/or salinity resistance not required in mass-produced chips for non-IoT applications.
Efficient power consumption will also be a consideration. The bulk of IoT devices will run on battery power. Ideally, IoT batteries will only need swapping out a few times a year, so efficient power use is a serious consideration.
Additionally, IoT demand may lead to new directions for the semiconductor industry. Rather than focusing solely on the development of chips and hardware, the industry may need to provide security and software solutions, moving from component suppliers to solution providers.
What role does IoT have in processes in the semiconductor industry?
IoT technology will play an important role. Throughout the manufacturing chain, IoT applications can be used to monitor quality, inventory control, device tests, packaging, and delivery. IoT makes preventative maintenance of equipment and predictive analysis of processes throughout the manufacturing process possible.
Demand for high-performance IoT chips in high volumes will require the streamlining of production processes. At present, it takes weeks to complete chip production cycles. Even small gains in production speed will benefit semiconductor companies, presuming speedier production does not affect chip quality.
Small IoT chip size will also affect processes. At such sizes, the risk of electromagnetic interference (EMI) issues rises significantly. Semiconductor manufacturers will need to make improvements in EMI software in the early stages of the design process to avoid such issues.
How will IoT affect the business side of the semiconductor industry?
While few doubt the coming dominance of IoT in the semiconductor market, not all companies are focusing their research and development in this sector. Part of the problem is applying the technology. A semiconductor company could previously produce integrated circuits and sensors that would work in a wide range of products and could expect a market for those devices. IoT devices tend to have specialized needs, resulting in niche markets and relatively low sales. These considerations have left many semiconductor companies to loath investing too heavily in the future of IoT.
Read more about semiconductors and IoT in the IRDS™ Roadmap
Future of IoT in the semiconductor industry
Despite these concerns, the semiconductor market will have to adjust to the rise of IoT devices. Current semiconductor trends indicate that 2020 is going to be a big year for IoT semiconductor spending, with sales expected to reach $34 billion.
China represents a huge market for IoT semiconductors, as semiconductor industry veterans are well aware. The country is considering becoming net exporters of IoT devices and semiconductors and becoming tech independent.
How could the IoT change the semiconductor industry?
The world of connected devices is fast approaching, and semiconductor companies will need to adapt or face a falloff in profits. KPMG’s 2019 Global Semiconductor Industry Outlook predicts innovation and an increase in research and development as critical for a semiconductor company over the next three years. Other strategies KPMG considers vital include the following:
- Acquisitions, mergers, or joint ventures to develop new semiconductor technology
- Increased talent development to attract and retain key personnel in an increasingly competitive job market
- Diversifying into new business areas in response to IoT and artificial intelligence
What challenges could the IoT bring to the semiconductor industry?
IoT developments will increase research and development costs, compete aggressively for talent, and add cross-border regulation, and they must overcome the physical limitations of current semiconductor materials.
Increased research and development costs are perhaps the most important issue facing the industry. While they considered it a top priority as companies move into the world of IoT, over 35 percent of KPMG survey respondents admitted their research and development spending does not align well with current and future marketing opportunities. Companies are missing out on developing aspects of the semiconductor market because their new technology isn’t keeping pace with buyer demands, or it is simply not taking IoT into account.
As chips bump up against the limits of Moore’s Law, research and development costs become progressively more expensive. Exploration into alternate materials, quantum computing, and organic semiconductor materials may provide solutions to this problem, but their widespread use may be years if not decades away.
With the widespread adoption of connected devices comes an increasingly diverse ecosystem of different products and software, all of which need to be produced by skilled employees. Expect IoT growth to only worsen the skills gap, leading to a war for available talent. Companies will need to aggressively recruit, headhunt, and retain the talent they need with competitive salaries, training opportunities, chances for career advancement, and other perks or risk losing essential talent to the competition.
Why is IoT important to the semiconductor industry?
IoT is important to the semiconductor industry because connected devices will only become more common with time. With the smartphone industry plateauing, the semiconductor industry needs to look at other avenues with growth potential. Despite the challenges associated with IoT, it’s the most logical choice for the industry.
This could lead to a research and development arms race. If existing chips and semiconductor supply chains are insufficient for IoT needs, the company that meets those needs first will have a distinct advantage in the future. IoT devices are not going away, and the race to dominate the IoT chip market is already underway. The question that must be asked is, What companies are already in the race?
Read more about semiconductors and IoT in the IRDS™ Roadmap
IoT semiconductors market leaders and acquisitions
The semiconductor industry is already working on a road map for the future, taking into account solutions for both artificial intelligence and IoT products. The companies working most effectively on solutions for IoT applications are not always the established leaders in the industry.
Which companies lead the semiconductor market?
At present, the most profitable companies in the semiconductor industry are the following:
- Samsung ($75.7 billion in sales), with a focus on the smartphone, television, and appliances as well as semiconductors
- Intel ($69.8 billion in sales), with a focus on motherboard circuits, network interface controllers, and integrated circuits
- SK Hynix ($36.2 billion in sales), one of the world’s fastest-growing semiconductor manufacturers, with a focus on automobile electronics, storage, and computing solutions
- Taiwan Semiconductor ($34.2 billion in sales), one of the world’s largest independent pure-play semiconductor foundries
- Micron Technology ($30.9 billion in sales), which produces semiconductors used in consumer electronics, automobiles, servers, communications, and computers
- Broadcom Inc. ($16.5 billion in sales), which serves the wireless communication, wired infrastructure, industrial, and enterprise storage markets
- Qualcomm ($16.4 million on sales), with a focus on mobile devices and wireless telecommunications products
- Texas Instruments ($13.9 billion in sales), which manufactures chips for mobile devices and digital signal processors
- Toshiba ($12.3 billion in sales), which creates semiconductors for consumer products as well as railway, broadcasting, elevator, and security use
- Nvidia ($11.6 billion in sales), with a focus on video graphics cards and self-driving cars
Which companies are breaking the most ground with IoT semiconductors?
Of the industry leaders, Qualcomm and Nvidia are breaking the newest ground in the IoT market. Nvidia, despite being known for high-end computer graphics cards, is seeing success with its chipsets for automated vehicles. The company’s Tegra processor can be found in some Tesla automobiles.
Qualcomm sold over $1 billion in IoT chips in 2017 and, like Nvidia, is making inroads in automotive electronics. The company also sells IoT processors, modems, and connectivity chips. Other companies at the cutting edge of IoT chip development include the following:
- Qorvo: Produces RF chips for IoT hardware. Qorvo’s nonmobile sales account for a third of the company’s revenue. The company acquired IoT RF chipmaker GreenPeak Technologies in 2016.
- Skyworks Solutions: Preparing for the widespread rollout of 5G-enabled IoT with the SKY66430-11, the world’s smallest all-in-one multiband, multichip system-in-package device.
- NXP Semiconductors: Sales of automotive chips now account for $9.41 billion in revenue. The company also supplies microcontrollers for embedded IoT devices.
- Cypress Semiconductor: Making inroads in the automotive, consumer, smart-home devices, and industrial IoT end markets. The company expects a 16–18 percent compound annual growth rate in the IoT connectivity market over the coming years.
- Semtech: Positions itself as a top supplier of RF transceivers using long-range, low-power wireless technology. Known as LoRa, this technology is a gamble for the company, as it will compete with 5G, which is designed to support IoT devices.
What do IoT semiconductor market leaders have in common?
Expect IoT semiconductor market leaders to increase acquisitions and mergers as they jockey for position. Industry leaders are also willing to invest heavily in research and development and break with the need to design a one-size-fits-all product, balancing competing in the general market and dominating niche industries. IoT semiconductor leaders are working toward the services and software solutions they’ll be required to offer in the future.
Interested in learning more about semiconductors and IoT? Consider reading the International Roadmap for Devices and Systems (IRDS™). The IRDS™ is a set of predictions that examine the future of the electronics, semiconductor, and computer industries over a fifteen-year horizon. It encompasses a number of critical domains and technologies, from application needs down through devices and manufacturing. Join the IRDS™ Technical Community to download the roadmap and stay informed of our latest activities.