Due to supply shortages, the demand for 20 million cellular IoT chipsets will not be met in 2021. According to IoT Analytics’ latest report on cellular IoT chipsets, the industry is expected to grow at well below 9% year-on-year in 2021, and at the same time, prices are expected to rise significantly.
In 2020, Qualcomm led the global cellular IoT chipset market with a 43% market share (based on shipments). IoT Analytics expects the global cellular IoT chipset market to grow at a compound annual growth rate (CAGR) of 28% between 2021 and 2026.
What is a Cellular IoT Chipset?
Every IoT device that uses cellular connectivity, such as 2G, 3G, 4G, 5G, LTE-M, and NB-IoT, uses a cellular IoT chipset. The chipset can be embedded directly into the device’s printed circuit board, or into an IoT module within the device. The research presented in this article focuses on the larger of the two: cellular IoT chipsets embedded in IoT modules.
Current market environment: affected by global chip shortage
In 2020, COVID-19 impacted the demand and supply of chips. Supplies are reduced as production is sometimes halted, and supply chains and access to raw materials are also deeply affected. In the first half of 2020, chip demand fell due to uncertainty and budget constraints. In the second half of 2020, demand recovered, but supply was frequently disrupted. This resulted in supply shortages that first affected the automotive industry and then expanded to other areas such as smartphones, TVs, gaming, and the Internet of Things. Lower demand in 2020, combined with supply shortages at the end of the year, resulted in a shortfall of 33 million cellular IoT chipsets that would have been shipped if all had gone well.
In 2021, the chip shortage continues. Of the more than 3,000 listed companies analyzed, 11% mentioned “chip shortages” in conference calls in the second quarter of 2021 (Q2).
Commenting on the findings, IoT Analytics CEO Knud Lasse Lueth said: “IoT Analytics expects an additional shortage of 20 million cellular IoT chipsets due to limited production capacity and ongoing COVID-19 restrictions in some regions, which has resulted in Serious supply chain issues such as lack of ships and containers and port congestion.”
Satyajit Sinha, senior analyst at IoT Analytics, added: “The market is expected to grow 9% year-on-year in 2021, but the growth will be more if there are no supply constraints.”
Qualcomm Chief Financial Officer Akash Palkhiwala said: “Until the beginning of 2022, our options are limited. Starting in the second half of that year, many investments will start to bear results and things will improve.”
TSMC CEO CC Wei said: “Due to geopolitical and pandemic uncertainty, customers are preparing for higher levels of inventory to ensure stable supply. Therefore, our production capacity will remain tight throughout 2021” .
Cellular IoT chipset market: Qualcomm leads the way
Five vendors currently dominate the cellular IoT chipset market: Qualcomm, MediaTek, HiSilicon, Intel and UNISOC. These five companies accounted for 93% of global cellular IoT chipset shipments in 2020.
In 2020, Qualcomm led the market with 43% market share (based on shipments). Key to the company’s market success in recent years has been its global scale and reach, deep partnerships with module manufacturers and numerous operator certifications. Qualcomm also shortens its innovation cycle, regularly launching new IoT chips and often upgrading existing chips in cycles of less than a year. 4G LTE IoT chipsets have driven Qualcomm’s sales in the past, but the future depends on how quickly 5G develops in the market. Compared with Qualcomm, the sales of MediaTek and HiSilicon are mainly driven by NB-IoT chipsets.
Connectivity technology trends: NB-IoT, LTE-Cat 1 and 5G
The technology portfolio for cellular IoT connectivity remains very active. In addition to the rise of 5G and the dramatic decline of 2G and 3G, here are some current trends:
In 2020, NB-IoT chipsets accounted for more than one-third of global cellular IoT chipset shipments.
LTE-Cat 1 (a subset of 4G technology) grew 43% year-on-year in 2020, and the Qualcomm MDM9207-1 chipset, in particular, contributed significantly to the growth of LTE-Cat 1. Adoption of another chip, UNISOC 8910DM, grew 300% in 2020 (year-on-year) and now accounts for 23% of all LTE Cat 1 shipments.
Mass distribution of 5G chipsets is expected in 2021. IoT Analytics predicts that 5G IoT chipsets will account for nearly half of global cellular IoT chipset revenue by 2021.
Industry Adoption Trends: Tracking Automotive Industry Applications and 5G
Cellular IoT connectivity technology is present in nearly every vertical, from asset tracking in the transportation, supply chain, and logistics industries to remote monitoring in the healthcare industry. Among other things, our research shows two recent trends:
Transportation and logistics use cases are on the rise. The transportation, supply chain and logistics vertical industry contributes 30% of the global cellular IoT chipset shipment market. In this segment, what will grow in 2020 is not traditional automotive and telematics applications, but tracking applications that help companies locate goods in the supply chain. Chipset shipments for tracking applications grew 22% year-on-year in 2020, compared with an overall market growth rate of 3%.
Application of 5G in automobiles. In 2021, despite the ongoing chip shortage in the automotive sector, the adoption of 5G in the embedded automotive sector is expected to grow by more than 50% year-on-year.
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It is expected that by 2025, IoT devices will reach 30 billion units, and the demand for chips will be huge, thus driving the overall demand for IoT semiconductors. While cellular IoT accounts for only a small portion of these 30 billion devices, it is one of the most dynamic technology areas, with technology moving towards NB-IoT and 5G as well as specific verticals such as transportation, where adoption Way ahead of the curve.
As a result of the aforementioned disruptions, the market has experienced structural changes over the past 1.5 years. Chipset vendors need to rethink their positioning in terms of the technologies they offer, the vertical markets they address, their reliance on specific suppliers, and where their production capabilities come from.
From a broader perspective, the current supply challenges and lack of 20 million chipsets are particularly relevant today as the market grows significantly. However, in the coming years, as disruptions are resolved and suppliers respond to structural changes, they will become less important. Until then, 2020 and 2021 will look like dents in the curve and nothing more.
Trefwoorden: Internet of Things devices