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A Market Doubled in Five Years |
NEWS |
In 2017, annual sales of cellular modules for M2M and IoT devices passed US$2 billion for the first time. From the start of the M2M module market in the mid-1990s, it took until 2012 to reach a global annual value of US$1 billion. However, the module business has come just as far again in only five years’ time. The cellular module market is also experiencing increased competition. Arguably originated by Siemens, it has been dominated by a handful of pioneering European and North American vendors for many years, but now there are upwards of 40 active vendors worldwide, many of them in the Asia-Pacific region. Indeed, the most significant individual vendors in terms of unit shipments are now from China. While those few early Western pioneers still account for 55% of shipment revenues, the big question for them is can they hold on to that market share?
A Tale of Two Technologies |
IMPACT |
Unprecedented quantities of 2G modules were shipped in 2017—approximately 100 million—which is far more than most industry observers would have anticipated. This equates to a 60% year-on-year increase, even though 2G’s market share of total shipments fell slightly. A practical truth is that 2G will persist for a long time yet as a globally-relevant technology, even if at some stage it is maintained only for the sake of the M2M/IoT market. The breadth of 2G’s availability means it remains unrivalled in utility for international roaming and fallback-reliant IoT use cases. A fact evidenced firstly by commitments from major European carrier groups to keep their 2G networks running in some state until as late as 2025, and secondly, by the first internationally-targeted cellular Low-Power Wide-Area (LPWA) modules incorporating 2G to ensure that, until Cat. M and NB-IoT are ubiquitous, the lowest priced connectivity possible will be available to IoT devices.
The second success story of 2017 was the importance of 4G. The 4G market share of cellular module shipments remained low at approximately 20%, but as a technology generation, 4G is experiencing the highest growth rate of all. The number of LTE modules shipped in 2017 was 2 ½ times greater than it was in 2016. 4G was also the most discretely valuable segment, accounting for a huge US$1 billion—almost half the entire market’s value. The stellar shipment progress of 4G is less surprising because in the early years of a technology’s adoption, growth rates will always be high as they are starting from a low base. However, the revenue opportunity for 4G is deeply impressive considering that the technology is only just taking hold of the cellular IoT module market and that the much anticipated, albeit lower value, Cat. M and NB-IoT LPWA markets have yet to proliferate in earnest.
Something Old and Something New |
RECOMMENDATIONS |
With talk of 2G network sunsets being conventional wisdom in Europe and North America, the cellular industry’s attention has shifted away from Code-Division Multiple Access (CDMA) and Global System for Mobile communication (GSM) evolved technologies. Considerable emphasis has been placed on the on the new “flavors” of LTE, Cat. M and NB-IoT specifically, as the natural replacements for those long-standing legacy technologies. However, conventional wisdom has been wrong to disregard the importance of 2G so soon. It is GSM specifically that has enabled vendors in China to steal a powerful lead in module shipments, with close to three quarters of the world’s GSM modules coming out of the Asia-Pacific region in 2017. It is in the 2G market, at close to rock-bottom prices, that the most significant Asian vendors are making their reputations and their revenues. 2G will persist long enough, in enough locations, for these inexpensive implementations to more than fulfill their Return on Investment (ROI).
Meanwhile, most 4G module shipments to date and the bulk of the revenue therein have been thanks to the sale of traditional, higher-category (“Cat”) products, which enable high-speed data transfer for expensive and/or demanding connected end-points, such as vehicles. However, 4G’s potential is so much greater as it is the first cellular generation to be “tunable.” 4G was conceived for consumer-centric, high-bandwidth applications, but it does not have to use its full-spectrum ability and performs equally well, paired back at the transceiver level, at any bit-rate. This is the reason why we have a high-Cat, a reinvigorated Cat. 1, a redundant Cat. 0, and an aspirational Cat. M and NB-IoT technology market for IoT. It is consequently a given that as 2G eventually dies out, and many carriers become even keener to refarm their 3G rather than 2G spectrum, 4G will constitute the vast majority of cellular module shipments and cellular IoT connections in the future.