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LPWA, changing regulation and changing market dynamics are the main factors in changing global M2M forecasts

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By Matt Hatton, Founder & CEO, Machina Research.

The famous British economist John Maynard Keynes once said “When the facts change, I change my mind. What do you do, sir?”. This maxim applies particularly well to the forecasting of the M2M market.

Over the last few months the team at Machina Research has been completing its revisions to the annual outlook for the global M2M market. The forecasts are bottom-up, so require us to have a deep understanding of the dynamics of each of the hundreds of applications that we track. Each is covered on a country-by-country basis, requiring detailed understanding of each country’s dynamics, in particular regulation, more on which later. Furthermore we cover all technologies, from cellular and LPWA to short range (WiFi, Zigbee, BLE etc.), satellite and a plethora of others used for particular applications including Wireless HART, powerline and DSRC. We also dig in great depth into the revenue opportunity, for which we require detailed knowledge of the value chain. Keeping these forecasts up to date requires us to keep careful tabs on all the changing dynamics in the market, looking at changes in competitive landscape, local market factors and regulation, amongst other things. In this article we highlight just a few of the significant changes that have happened in the last twelve months that have caused us to adjust our views on the growth of the global M2M market opportunity.

The biggest change in the forecast over the past year relates to Low Power Wide Area (LPWA) technologies such as LoRa and Sigfox. Recent events in the LPWA space mean that we now regard widespread LPWA coverage as something that we expect to happen sooner than previously anticipated. LPWA technologies can be expected to have a significant impact on M2M markets in coming years, courtesy of low cost modules and networks and long battery life. Our expectation for these technologies has increased in the last twelve months. We expect relatively rapid roll out of LPWA networks in countries around the world in the next year or two.

What is also inevitable is that there will be some form of cross-over between what we are terming LPWA and the 3GPP cellular technologies. Releases 12 and 13 already make some moves in the direction of supporting M2M devices in a more LPWA-like way. Future developments may see the two strands converge under 5G, perhaps with LPWA technologies included within the 3GPP specifications. It is not clear exactly what that looks like at this stage, and is one of the challenges for Machina Research to ‘unpick’ in the coming few months. Watch this space.

Turning to verticals, in automotive we cannot escape the fact that we have had to rein-in some of our forecasts. The prime driver (if you’ll pardon the pun) for this is regulatory. Notable delays in the EU’s eCall initiative will lead to later take-off in adoption, which causes a reduction in overall connections across the forecast period. Other schemes around the world have also suffered, including Brazil’s SIMRAV initiative for Stolen Vehicle Recovery. We have also revised some of our other views on adoption of aftermarket connected devices, largely due to a greater expectation of alternate use of smartphone applications. The importance of regulation is also evident in our downward revision of our forecasts for smart metering. In many countries, particularly in Europe, the timetable for deployments has been pushed back by a year or two. The impact of changing mandated deployments, in all verticals, is quite significant. While it may only be a year or two of delay, the timescales for most of these deployments means that where previously we might have expected 80% penetration in 2022, maybe we adjust that to 60%, meaning a 25% reduction in connections. The market should reach that 80% figure quite soon after, but in terms of the snapshot we take, the overall impact on total connections is significant, particularly in light of the fact that these mandated applications are often the biggest global applications.

adjusting chartsIn other cases we simply revise our view on the market based on how adoption seems to be progressing. In the Building Automation space, for instance, we see slower growth than we anticipated a year ago. As a result we have revised our anticipated growth rates over the forecast period, although they remain a healthy 20-25% CAGR. Similarly the growth in the number of connected TVs seems to be somewhat slower than we might have expected, so again we have revised downwards our anticipated growth rates.

The above represents just a small snapshot of some of the adjustments we have made over the last year in our global forecasts for M2M connections, technology, traffic and revenue. We continue to monitor all aspects of the market and will continue to make adjustments as necessary.

The Machina Research M2M Global Forecast & Analysis 2014-24 report will be published on the 24th June 2015. It is based on an extract of data from Machina Research’s constantly updated M2M Forecast Database.
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