The difficulties confronting chip makers in 2018 are well documented. Sales have slowed, margins have been squeezed, and many companies have turned to acquisitions and industry consolidation as the only way to drive meaningful revenue growth, a solution of questionable sustainability in the long term. But there could be another way.In two short years the Internet of Things (IoT) has shifted from a hyped but embryonic technology to the headline act, in turn presenting a huge opportunity for chip makers to not only supply the silicon that will power the IoT, but also to develop alternative, non-traditional revenue streams, not least in the provision of services.
Analysts are still firmly hedging their bets when it comes to predictions for the IoT. For instance, McKinsey Global Institute (MGI) estimates that by 2025 the IoT could have an annual economic impact of somewhere between $3.9 and $11.1 trillion, pretty wide goalposts when the ‘somewhere between’ is larger than the GDP of Japan. Nevertheless, even assuming more cautious estimates the scale of the opportunity can’t be ignored, particularly if as MGI suggests, the IoT install base will increase up to 20 percent annually in the next two years alone.
If IoT installations increase 20 per cent year-on-year through 2020—some 10 billion new installations in that time frame—that is undeniably a lot of devices requiring chipsets, but moreover it is a lot of companies needing support to ensure that the security of those devices is beyond question, and the analysts advise that is where semiconductor companies should be looking to broaden their revenue base beyond the provision of silicon.
Earlier this year the Global Semiconductor Alliance (GSA) alongside U.S.-based semiconductor vendor Rambus, released a report titled Monetizing Semiconductors - From Silicon to Services, in which the paper’s authors contended that end-to-end IoT security solutions deployed as a Platform as a Service (PaaS) would be critical in helping semiconductor companies generate renewable, downstream revenue for specific services, offering their customers—IoT device manufacturers—an easy way to securely develop, run, and manage applications and devices without the complexity of building and maintaining elaborate infrastructure.
The report said semiconductor companies could help create end-to-end security offerings by not only leveraging a hardware-based “root-of-trust”, but also supporting IoT security best practice—via device identification and verification, over-the-air (OTA) updates, and disaster recovery for example—not only enabling chip makers to develop new business models and obtain their fair share of the value chain, but also eliminating the one concern more likely to derail the IoT from its growth projections than any other – security.
According to the GSA report, building security in at the design stage would help reduce potential IoT service disruptions, it would also allow manufacturers to avoid the difficult and expensive task of retrofitting security features to IoT devices after they have already been deployed.
Beyond the broad potential offered by security, services such as in-field feature configuration, advanced analytics, predictive maintenance alerts, self-learning algorithms and intelligent, proactive interaction with customers, also appear ideal for a PaaS-based business model, particularly in smart city infrastructure and its swathes of inaccessible silicon.
Other IoT verticals loom large for PaaS potential too. As the GSA report highlighted, Google subsidiary Nest Labs is already using smart home thermostat data as a platform to offer energy management services to U.S. utility companies willing to pay for meaningful and actionable customer information on a subscription basis. While implantable smart medical devices also present an opportunity for services such as the collection and analysis of relevant data and proactive maintenance and, obviously, the requirement for ‘in-field’ feature configuration and secure OTA updates. In the automotive sector, companies could deploy sensor-based vehicle systems that proactively detect potential issues and malfunctions. The list could go on, and, for certain the opportunities, will.
Nordic Semiconductor has moved a way down this road and now sees itself as much a service provider as a wireless chip maker. While Nordic’s highly-secure Bluetooth Low Energy SoCs and cellular IoT SiPs will power many tens of millions of the devices that will ultimately comprise the IoT, equally the company sees the importance of providing not just silicon but services too. The company has invested heavily in simplifying wireless product development for its customers, offering hardware reference designs, development kits, application software support, and a range of service solutions beyond purely selling chips.
Whether the IoT ultimately meets the high end, low end, or somewhere in between of analyst estimates we can’t know, but PaaS will play a critical role, and so will the semiconductor companies and their customers that shift their business models and their thinking to prepare for it.
The GSA report is available from www.gsaglobal.org