IoT: The growth engine for the electronic component market
The Internet of Things (IoT) was a futuristic concept a few years back. Since then, its applications have continued to evolve with endless possibilities across different industries. This will benefit
In the past few years, the influence of the Internet of Things (IoT) has been felt in almost every sector. Now, its large scale impact is slowly being seen with countless benefits and opportunities across various industries such as smart homes, healthcare, power, agriculture, etc. The adoption of IoT in the industrial space is also increasing as connected devices provide more efficiency and convenience in manufacturing and industrial processes. The innovations in the manufacturing industry, and the advent of Industry 4.0, have also contributed to the growth of the IoT market.
According to Verified Market Research, the global Internet of Things market (IoT market) size was valued at US$ 212.1 billion in 2018 and is expected to witness a growth of 25.68 per cent from 2019 to 2026. By then, it is expected to reach a figure of US$ 1,319.08 billion. Cisco, the world’s largest manufacturer of data communications networking equipment, estimates that as many as 50 billion devices of all types, shapes and sizes will be wirelessly connected to the Internet by the end of 2020.
Narayan Kumar, group chief,
industrial devices division,
All smart devices, such as smartphones, fitness watches and even smart meters, involve constant connection and communication between them. These smart devices and products are equipped with a variety of sophisticated electronic components, without which IoT cannot work. Therefore, IoT is expected to create unprecedented business opportunities in the electronic components’ domain.
Electronic component market: Evolving with IoT technology
IoT enables smart devices to interconnect with each other. There are various electronic components that go into IoT equipment and devices, such as integrated circuits (ICs), printed circuit boards (PCBs), diodes, sensors, microcontrollers, accelerometers, etc. Other passive components that are used in IoT devices and products include capacitors, wirewound resistors, nichrome resistors, transformers and discrete inductors.
Madhukar Tripathi, head-optical business and marketing, Anritsu India Pvt Ltd
Madhukar Tripathi, Anritsu India Pvt Ltd, opines that the reach and importance of IoT in life is increasing day by day. Due to more awareness about IoT and its importance, the demand for IoT sensors and other related systems is increasing worldwide. Tripathi says, “With technological advancements, IoT components are getting smaller (miniaturisation). Energy-efficient IoT components are key for future growth. IoT is now entering many areas such as consumer appliances, industrial monitoring, automotive, environmental monitoring, health monitoring, smart cities and buildings, agricultural projects, etc.”
“With the evolution of IoT enabled products, we also see a substantial demand for electronic and electromechanical components, such as sensors, connectivity modules, switches, etc. Sensors such as the infrared grid eye sensor are used for occupancy detection (detection of human beings in the room for optimising air conditioning), PIR sensors are used for motion detection (lighting applications), and PM 2.5 sensors for air quality measurement (air purifiers),” states Narayan Kumar, group chief, industrial devices division, Panasonic India.
Components such as batteries, sensors, capacitors, connectors, tactile switches, etc, to name a few, are all used in IoT applications, and it is important to focus on miniaturising them to fit in futuristic IoT use cases.
Rabyte Electronics Pvt Ltd
Talking about the huge potential for IoT applications in various industries, Rajiv Batra, managing director, Rabyte Electronics Pvt Ltd, says, “The digital world is in for a transformation driven by artificial intelligence, cloud, and importantly, IoT, commonly referred to as machine language. The global trade in electronic and hardware products is presently estimated at US$ 2.1 trillion, and it is still growing and about to overtake the global trade in oil.
“IoT constitutes a major part of that, estimated at US$ 800 billion or so. IoT’s growth is going to be phenomenal since it has applications in all segments of human behaviour—from healthcare and manufacturing to spacecraft,” he adds.
Impact of IoT technology on the electronic component market
The demand generated by IoT is definitely creating a positive effect on the electronic component market. Components are crucial as they help collect, process and transmit real world signals and data for IoT products and their applications. This presents favourable opportunities to components’ players, and also indicates an exponential growth of component sales in the market over the next few years.
IoT investments in India were close to US$ 5 billion in 2019 and are expected to triple by 2021, according to the global management consultancy firm Zinnov. Kumar says, “In the current environment, digitisation has led to the rise of contactless technologies and connected/IoT enabled appliances. This has fuelled the demand for electronic components across industries. Use cases of IoT will bring in opportunities for the component market and also for new product development.”
The government of India has also rolled out various policies and initiatives such as ‘Digital India’ and ‘Smart Cities’ to leverage the benefits of IoT technologies in various sectors.
Batra elaborates that the new electronics policy announced by the government gives considerable importance to evolving an ecosystem that synchronises the manufacture of end products and components. “My suggestion is that when we are focusing on IoT, we have to give equal importance to developing a component industry that supports the end product, a sort of forward and backward integration. Otherwise, it will be a zero-sum game. Also, there is a huge market for IoT components globally. If India has to up its market share of
3.3 per cent in the electronics world trade, focused attention should be given to the component segment of IoT also.”
What are the challenges?
Despite the increasing demand for IoT related products and devices, there is some uncertainty about the ready inventory to meet demands.
Batra explains, “IoT and the component segment connected to IoT are currently at a nascent stage in India. We have to move in the value chain. Therefore, there is a need for customisation. Both segments will have to move together. Otherwise, we have to depend on markets like China or other countries both for IoT and components.”
“Let us take the example of how China developed its supply chain for the electronics ecosystem. The batteries that are used in electronic devices are made of lithium, which is mined from an African country like Zimbabwe. The mines are either owned by China or Chinese companies are the major importers of that mineral from that country. As a part of emerging geopolitical developments, if India stops import of goods from China, what would be the future of the electronics segment in India? To build this segment, we have to look at major sources for importing raw materials that can help us to manufacture components in the country,” he adds.
Another challenge is the lack of rigorous testing against test standards when manufacturing electronic components. Testing is essential for ensuring that electronic components are safe to use in IoT operations.
Tripathi says, “In the future, manufacturers who develop and make IoT devices expect more customer complaints such as difficult and dropped connections and short communications range, which will increase support costs.” He explains that in order to prevent this situation, manufacturers who develop and manufacture IoT devices (products) must evaluate and test the wireless communications’ quality at both the development and manufacturing stages.
He adds, “By testing IoT devices (products) thoroughly at the development stage and guaranteeing quality, after sales support problems can be reduced in advance. Also, while manufacturing IoT devices (products), defects may occur due to component or assembly failure. After sales support problems can be reduced in advance by testing and checking the wireless communications quality of finished IoT devices at the final stage.”
Apart from all this, fake IoT components and parts are a big area of concern as they increase the security risks. This usually occurs when there is a short supply of electronic components, which gives counterfeiters opportunities to source fake parts to meet the increasing demand for components.
The infrastructure for IoT devices is still new, so there are no proper regulations and authentication protocols in place to address the issue of fake IoT device components. Therefore, it is difficult to verify whether the components are genuine or not. The industry needs to tackle the issue with more accountability and transparency, to stop sub-standard fake components from getting into IoT devices.
Business opportunities for electronic component distributors
From a business perspective, IoT promises an optimistic prospect for component distributors. Due to the robust demand for components and parts for developing IoT related products, component distributors are counting on IoT to generate more sales and add new business opportunities. Distributors connect startups with established OEMs that are designing products by providing the components and services required to make connected devices.
Batra says that the demand will increase further in the near future, as business opportunities will grow for electronics distributors. Electronics has the potential to become a household industry such as in countries like South Korea. End products manufactured by MSMEs or even large enterprises need distributors for reaching out to the customers.
He adds, “I foresee a phenomenal increase in the number of distributors in the electronics hardware segment, since the volume of business and even exports are expected to register high growth rates.”
Distributors hold a vital role in the entire supply chain process as they serve the component manufacturers, suppliers as well as the end customers. Not all of them have up-to-date information related to IoT products, and therefore, they look for help from distributors. Quite often, they seek advice on IoT technologies, and the components and parts that are needed for applications. The increased demand for IoT connectivity tools has also become a catalyst in creating business opportunities for component distributors.
It goes without saying that IoT has impacted the electronic component business positively, and that there is huge potential for vibrant growth. Kumar concludes, “Indeed, it is a great opportunity for electronic component distributors. They need to ensure availability by stocking in India. This will ensure faster prototyping at the design stage and will enable smooth deliveries at the production stage.”