As we kick off 2024, the IoT Analytics team has again evaluated last year’s main IoT developments in the global “Internet of Things” arena.
This article highlights some general observations and our top 10 IoT stories from 2023, a year characterized by multi-decade high interest rates, a challenging macroeconomic environment, and, of course, the advent and excitement of generative AI (gen AI).
General IoT 2023 market
2023 was a year of surprises—both positive and negative. The U.S. and several other Western countries proved highly resilient in the face of higher interest rates and elevated inflation, and they avoided a much-anticipated recession. The 2023 global GDP growth of 3.0% ended up more solid than many had expected at the beginning of the year but still trailed the historic average by 0.8 percentage points.
The Nasdaq Composite, one of the key indices for technology companies, rose 43% in 2023 after dropping 33% in 2022. Not only did investors celebrate the potential peak in interest rates, but they also saw new opportunities with the hype around gen AI. Chipmaker Nvidia (ticker symbol NVDA) gained 246% in 2023, Amazon (AMZN) gained 77%, Microsoft (MSFT) gained 58%, and Alphabet (GOOG) gained 57%—all outshining the Nasdaq.
Against this backdrop, IoT 2023 markets held up steadily, with the number of connected IoT devices growing to approximately 16.7 billion (exact update coming in a few weeks) with roughly $235 billion in IoT enterprise spending (IoT Analytics will publish the 2023 IoT spending later in Q1).
The public relevance of the term “IoT,” which peaked in Q1 2022, continued to see strong interest, holding steady at around 10–20% below the Q1 2022 peak despite the renewed focus on AI (see Google trend graph in the lead image of this article). We did notice, however, that the use of the term “IoT” in corporate earnings calls declined 16% from Q4 2022 to Q4 2023.
With many organizations now managing millions of IoT devices (case in point: in Q4 2023, consumer giant Nestlé announced 2.8 million connected devices through the AWS IoT platform), do not assume that IoT is fading in importance. Quite the opposite: IoT is scaling for many organizations. Our take: IoT is not the “cool” term it used to be. In 2023, companies loved talking about the AI opportunity instead, but at the same time, IoT is quietly scaling.
Top 10 notable IoT 2023 developments
Throughout 2023, we monitored significant developments regarding IoT technology as part of our continued coverage of the field. In our opinion, these are the top 10 notable developments of IoT in 2023 (in chronological order of the leading stories we highlight).
1. Most notable IoT-related regulation: The EU’s NIS2 cybersecurity directive
In January 2023, the EU’s second Network and Information Security Directive (NIS2) became active. This cybersecurity directive comes as a follow-up to the first NIS directive (introduced in 2016) to address shortcomings from the first version, namely inconsistent implementation across member states in terms of what organizations were considered essential.
The new version enforces requirements for cyber risk management and incident reporting across 15 sectors. The intent of NIS2 is to clearly define the organizations meant to comply and to force them to deeply consider their cybersecurity posture, ideally protecting citizens and essential services from cyber threats.
Each EU member state has until October 2024 to adopt laws in compliance with NIS2 by 17 October 2024, giving companies time to look ahead and start compliance without much pressure now. However, as that deadline approaches, companies will begin to feel the compliance pressure, as failure to comply with its measures can cost companies up to €10 million or 2% of their annual global revenue (whichever is higher), as well as possible sanctions and audits.
The specific covered sector in the NIS2 that impacts IoT is digital infrastructure, which covers telecoms, DNS/TLD services, data centers, trust services, and cloud services. The EU projects the annual revenue of this sector to be €85.4 billion and notes that dependence on digital infrastructure opens companies to various cybersecurity risks.
In addition to NIS2, the EU is also expected to start enforcing its Cyber Resilience Act in early 2024. This legislation targets hardware and software products sold within the EU market. Once enforced, manufacturers will have 36 months to start applying the act’s guidelines.
Other notable IoT-related regulations in 2023 included:
|Data Protection and Digital Information Bill
|Mar 2023: UK Parliament introduces the new bill, which has carried over into the new year
|Cyber Trust Mark
|Jul 2023: The Biden Administration introduced the voluntary cyber certification and labeling program
|Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure
|Jul 2023: The US Securities and Exchange Commission adopted rules requiring registered companies to report material cybersecurity incidents
|EU Data Act
|IoT data control
|Nov 2023: EU adopted the new law on fair access to and use of data
|EU AI ACT
|Dec 2023: EU agreement on the content of AI Act
2. Most surprising market destabilization: Tech layoffs
In January 2023, Microsoft announced it planned to lay off 10,000 employees between January and March 2023. Most notably for us, the third wave in March saw the largest cut for IoT-, AI-, and supply chain-focused personnel across various levels, functions, teams, and regions.
Microsoft did not have the most tech-industry layoffs—that unfortunate honor appears to belong to Amazon—but it was the most direct hit at IoT and related fields, especially from a company whose IoT services appear to be expanding, at least in the cloud (more on this below).
Google also experienced more layoffs than Microsoft. Though most of its layoffs appeared to be across the board, at times focused on their human resources and recruitment sections, Google shuttered its IoT Core service in August 2023 (also more on this below), meaning roles associated with that service either got moved elsewhere or scrapped altogether.
The fact that three companies seemingly at the forefront of the biggest tech trend in 2023, AI, laid off parts of their team shook the markets and created a lot of uncertainty. The IoT Analytics team noted that some of the laid-off people included high-performers who enjoyed industry-wide recognition, adding to the overall uncertainty of what was happening.
While the thousands of big tech layoffs represented only a small percentage of the respective company employee baseline, it was the startup scene that was most affected by the layoffs. For example, in December 2023, Israel-based grid-computing software startup Incredibuild, known for its accelerated software development technology, including for embedded IoT systems, laid off 40 employees, or 20% of its workforce (75% of which were based in the company’s HQ).
3. Most innovative IoT 2023 connectivity technology development: 5G in space
In July 2023, Spain-based low-Earth orbit (LEO) constellation satellite operator Sateliot and Spanish multinational telecommunications company Telefónica announced the success of their end-to-end test of a roaming 5G cellular network in space. The test process involved an IoT cellular device with a regular SIM card provisioned on Telefónica Tech’s Kite platform—all of this following 3GPP Release 17 non-terrestrial network (NTN) standards and leveraging narrowband IoT (broadly referred to as NB-IoT) communication technology. The device was able to switch between Telefónica’s terrestrial network and Sateliot’s non-terrestrial, low-earth-orbit (LEO) satellite network, demonstrating the integration of both network types using GSMA roaming.
The test, which the European Space Agency supervised, also involved Sateliot’s “Store & Forward” mode, a two-step authentication method developed by Sateliot to store information on a satellite when it is not in a position to connect with a ground station, forwarding the information when it enters coverage range.
IoT solution providers working with sectors that can often experience intermittent connectivity, such as transportation, logistics, or rural agriculture, will see applications to keep their customers connected when between terrestrial 5G network node ranges. Interestingly, in February 2023, Sateliot partnered with space and IoT hardware company GOSPACE LABS to provide 5G NTN NB-IoT connectivity to GOSPACE LABS’ MERATCH water management solution in the US, including water wells in rural areas, and in April 2023, Sateliot applied to the US Federal Communications Commission to bring its space-based 5G NB-IoT technology to the US market.
4. Most accelerated driver of IoT 2023 initiatives: Sustainability and ESG
Amit Kohli, Sr. Solution Director and Sustainability Leader, Orange Business:
“Gone are the [days] of greenwashing. Things are getting more serious in terms of reporting… [It’s a less] casual outlook [than] in the past.”
Europe, and international companies doing business in the EU, witnessed a wave of sustainability directives enter into effect. This is not just one news story but a series of stories that have been on the radar of many for several years.
In January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force, enacted as a legal framework that requires all EU companies, except micro-enterprises, to submit annual sustainability reports starting in 2024. Then, on July 31, 2023, the European Commission adopted the first set of European Sustainability Reporting Standards (ESRS), which act as the roadmap for CSRD compliance and require large companies and listed companies to publish regular reports on the social and environmental risks they face. The ESRS became law on 1 January 2024 and now applies directly in all 27 EU member states. Large corporations now must report various IoT-type data, including pollution levels, GHG emissions, and resource use (e.g., water and energy consumption).
Additionally, in November 2023, the EU’s Renewable Energy Directive (Revised Directive EU/2023/2413) became enforceable across all member states. The member states have 18 months to transpose the directive’s provisions into their own national laws, with some provisions having a deadline of July 2024.
With strict adherence guidelines like these, it was no surprise to find increasing emphasis and prioritization on sustainability and energy management at the Smart Production Solutions (SPS) Fair 2023 in Nuremberg, Germany, in November. Coinciding with this, we have noted sustainability and environmental concerns as key topics during CEO earnings calls throughout 2023.
Other notable sustainability ESG regulations in 2023 helping drive IoT initiatives included:
|Sustainability Disclosure Standards
|Aug 2023: The UK government introduced rules for companies to be transparent on their environmental impacts for investor transparency
|Green Credit Rules
|Oct 2023: The Indian Ministry of Environment, Forest, and Climate Change released rules aimed at sustainability, including sustainable buildings and infrastructure, through market-drive approaches
5. Largest IoT-related acquisition: Renesas acquires Sequans
In August 2023, Japan-based semiconductor manufacturer Renesas Electronics agreed to buy Sequans Communications, a France-based cellular IoT chipmaker, for $249 million. The deal, expected to close in early 2024, is poised to expand Renesas’ foray into the IoT sector. The electronics company plans to integrate Sequan’s cellular IoT products into its microcontrollers and other products, enhancing its WAN market reach.
A few months prior, in June 2023, Renesas completed its all-cash acquisition of Panthronics AG, an Austrian-based fabless semiconductor company specializing in wireless products. The deal was originally made in March 2023 for approximately $95 million, and in its announcement of the completed acquisition, Renesas released 13 designs leveraging Panthronics’ NFC technology, showcasing the “embedded processing, power, connectivity, and analog portfolios” of both companies and what customers may be able to look forward to in the near future.
These are just the latest IoT-focused acquisitions by Renesas, but they are by no means the largest by the company financially. The following is a breakdown of its other IoT-oriented acquisitions in recent years:
- 2017: Renesas began its IoT expansion journey by acquiring Intersil, a provider of power management and analog solutions, for approximately $3.2 billion, targeting larger IoT, automotive, and industrial market opportunities.
- 2019: Renesas acquired US-based mixed-signal semiconductor manufacturer Integrated Device Technology, Inc. (IDT) for approximately $6.7 billion.
- 2021: Renesas acquired UK-based Dialog Semiconductor in a nearly $6-billion deal. Dialog had been one of Apple’s major chip suppliers, and this deal sought to expand Renesas’ reach into the IoT, power management, and connectivity solutions market.
- 2022: Renesas acquired Stradian, an India-based manufacturer of 4D imaging radars, for approximately $44 million, aiming to boost its automotive and industrial sensing solution offerings.
Other notable IoT-related acquisition announcements of 2023 included:
|Sona BLW Precision Forgings (Sona Comstar)
|Happiest Minds Technologies
|Sri Mookambika Infosolutions
|Twilio – IoT business
|Greenbird Integration Technology
6. Most notable software developments: IoT cloud wars
The leading cloud providers, Google, AWS, and Microsoft, all recorded a strong slowdown in cloud revenue growth in 2023 as many organizations started to optimize their cloud spending. AWS, for example, grew by 40% in late 2021 but slowed to 12% growth in late 2023.
On the back of slowing growth, in August 2023, Google made its shock announcement from 2022 a reality and shut down its IoT Core service. The company seemingly now redirects its customers to partners such as Litmus Automation, KORE Wireless, or SoftServe to get the job done (Google’s IoT Core site lists these and other partners on its website to “meet the needs of IoT customers”)
How would Microsoft and AWS react in 2023?
AWS and Microsoft Azure did not follow suit but instead expanded their IoT cloud services in 2023:
Microsoft most notably announced Azure IoT Operations in November 2023, an expansion of its Azure IoT portfolio enabled by Azure Arc. It aims to enable “a cloud to edge data plane with local data processing and analytics to transfer clean, useful data to hyperscale cloud services such as Microsoft Fabric for unified data governance and analytics.”
AWS also announced several IoT extensions to its cloud platform services portfolio in 2023, including AWS IoT FleetWise vision system data and AWS IoT SiteWise Edge on Siemens Industrial Edge B2B marketplace (both in November 2023) as well as a new open-source, no-code IoT dashboard application, aimed at allowing users to visualize and interact with data from its AWS IoT SiteWise service.
7. Largest IoT-related funding round: Pragmatic
UK-based circuits manufacturer Pragmatic Semiconductor raised $389.3 million in 2023. Its latest funding round, Series D, closed on 6 December 2023 and raised the largest venture funding round for a European chipmaker at $206 million.
Pragmatic Semiconductor manufactures flexible, ultra-thin integrated circuits—thinner than a human hair—by leveraging thin-film semiconductors and polymers rather than silicon. The company aims to use the technology to bring intelligence to low-cost items as part of IoT applications, including smart packaging, recycling and reuse, traceability, and product authentication.
Very notable in this latest funding round was that the UK Infrastructure Bank led in investments (alongside M&G Catalyst). While the US and EU worked to establish an early warning system for semiconductor supply chain disruptions and increase investment and trade between the two on this technological front, the UK pursued its own national semiconductor strategy. The strategy aims to support UK leadership in the research, design, and advancement of chip manufacturing, and the UK Infrastructure Bank made the direct equity investment to support this effort.
Other notable IoT-related funding rounds of 2023 included:
|Caisse de Depot et Placement du Quebec
|Safety and security
|Safety and security
|Alkeon Capital Management
8. Best performing IoT 2023 stock: Samsara
After making our IoT 2022 in review list of underperforming IoT company stocks, US-based IoT solutions company Samsara, Inc. (ticker symbol “IOT”), best known for its fleet management and telematics solutions, witnessed 180% growth in its stock in 2023, rising from $11.92 on 3 January to $33.38 on 29 December. Bolstering its climb were three better-than-expected quarterly earnings reports in March, June, and November.
Founded in 2015 by Sanjit Biswas and John Bicket, Samsara specializes in telematics, or “the convergence of telecommunications and information processing,” as it defines it. However, it has expanded its portfolio in the past few years to offer a more holistic connected operations platform and target other industries, such as utilities, manufacturing, and retail.
In 2021, we listed Samsara’s IOT stock as the biggest IoT-related IPO of that year.
9. Most notable IoT 2023 project: 250 million smart meters in India
250 million (or 1.5%) of the current 16.6 billion global IoT devices could soon come from one initiative alone: the ambitious national smart meter roll-out in India. However, though approved in 2021, the project has generally sputtered along, largely due to low domestic production means for the meters while trying to cover a whole subcontinent.
This year, to help spur the project and control the costs, the Indian government opened the projects to a total expenditure (TOTEX) approach, whereby the government can issue $40 billion in grants on completion of the projects and pay per meter. The project’s goal and financial approach have also opened the project to international support. For example, in June 2023, the US International Development Finance Corporation (DFC) announced a formalized $49.5 million investment to India-based smart meter manufacturer Genus Power Infrastructures, aimed at helping the company expand its production of smart meters.
Nonetheless, capacity remained low by the end of 2023, and only 8 million smart meter installations have taken place. As a result, it appears unlikely that India will meet this goal by the end of 2025, but with the spurred investment, the goal could be met not too long after. According to the government, 99 million of the 250 million smart meter contracts had already been rewarded at the end of 2023.
10. Generative AI and IoT breakthrough: None yet
How can recent advances in gen AI, which is mostly text- or image-based, be combined with IoT data, which is mostly based on time-series sensor data? This was one of the top questions we received in 2023.
The answer is … it is complicated.
However, throughout 2023, we have seen several developments on this front, but none have reached scale just yet. Nonetheless, the following are a few initial steps in gen AI and IoT convergence that caught our attention, some of which are discussed in our Generative AI Market Report 2023–2023 (released December 2023).
a) Using national language (gen AI) to query operational data (IoT)
In June 2023, Norway-based industrial software company Cognite launched Cognite AI, a generative AI solution designed for industrial operational data. Built within Gognite Data Fusion, it is meant to enable more tailored, business-specific data retrieval and contextualization in a private, secure manner. Siemens presented a similar example in November 2023, together with Schaeffler, at the SPS fair—which we covered in our SPS 2023 report.
b) Providing guided repair or operations (gen AI) based on operational data (IoT)
In September 2023, Google’s Cloud team shared a video demonstrating their gen AI solution alerting train maintenance operators to potential train issues and proactively providing possible causes and solutions based on manuals and past issue/repair reports.
In November 2023, Microsoft announced Copilot in Microsoft Dynamics 365 Guides, a solution that combines gen AI and mixed reality to assist frontline workers in their tasks. Paired with HoloLens 2 and IoT sensors, Microsoft claims that operators can pinpoint and identify specific assets and access relevant information about them—such as operational conditions or troubleshooting guides—in real time.
c) Using generated images (gen AI) to train vision systems (IoT)
In December 2023, Germany-based engineering and technology company Bosch announced it is piloting gen AI models in manufacturing, whereby they use synthetic, gen AI-created images to develop and scale AI solutions for optical inspection and optimizing existing AI models.
d) Using natural language (gen AI) to teach and control robots with vision systems (IoT)
In February 2023, Microsoft’s Autonomous Systems and Robotics Group released a paper entitled “ChatGPT for Robotics: Design Principles and Model Abilities” (Microsoft is a major backer of ChatGPT’s parent company, OpenAI). In this paper, the research team leveraged ChatGPT’s intuitive language capabilities to control multiple robotic platforms, including arms, drones, and home assist robots. Soon after, in April 2023, Microsoft published another paper, “ChatGPT empowered long-step robot control in various environments: A case application” (last updated in August 2023), in which they demonstrate a specific example of how ChatGPT could be used to convert natural language instructions into robotic actions.
In July 2023, Germany-based AI software and robotics company Sereact announced the release of PickGPT, a gen AI transformer that combines LLMs with computer vision. By combining these capabilities, users can use simple language to instruct a robot to sense conditions or identify objects, offering many potential use cases for remote sensing and control.
We also noted a startup that, in May 2023, announced a revolutionary gen AI solution that would use gen AI to produce synthetical IoT sensor data that could then be used to train AI algorithms. The company has since deleted all references to the announcement.