IoT spending to reach $1.3 trillion by 2020 on hardware investment

New research sees Internet of Things (IoT) spending growing by nearly 16% by 2020 driven by hardware investments, primarily by manufacturers.

The Journal reported on the release of the “Worldwide Semiannual Internet of Things Spending Guide” by International Data Corp.(IDC).

The IDC report found that IoT spending will reach $1.29 trillion worldwide by 2020, representing a 15.6% compound annual growth rate between 2015 and 2020.

See also: China IoT market worth over $120 billion by 2020

As improvements in sensor technology continue, IDC sees much of IoT spending going towards hardware, which comprises the largest spending category throughout the forecast.

IDC predicts hardware spending will reach nearly $400 billion by 2020. The bulk of hardware purchases will be comprised of modules and sensors that connect endpoints to networks.

And while hardware spending will dominate spending over the next five years, it will be slower growing compared to other categories like services and software.

“A fairly close relationship exists between high-growth IoT use cases in consumer product and service oriented verticals like retail, insurance, and healthcare,” said IDC’s Marcus Torchia. “As a whole, the IoT opportunity is a diverse developing marketplace for vendors and end users alike.”

Researchers found that the manufacturing industry is expected to make the biggest IoT investment over the next five years. Meanwhile, retail, healthcare, insurance and consumer industries will chart the fastest IoT spending growth.

“Cross-Industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, will rank among the top segments throughout the five-year forecast,” the report predicts.

IoT investment will come from a lot of directions

Torchia says that that opportunities driving IoT investment will continue to be derived from diverse areas.

“In some cases, these are greenfield opportunities with tremendous room to run,” he said. “In other verticals, like manufacturing and transportation, large market size and more moderate growth rate use cases characterize these verticals.”

The IDC report follows earlier research that found that the number of IoT devices will increase by 200% to 46 billion units by 2021.

Juniper Research concluded that the accelerating number of connected actuators, sensors and devices is being driven by the reduction in unit costs of the hardware.

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