Global spending on the Internet of Things (IoT) is forecast to reach $772.5 billion in 2018, an increase of 14.6% from the previous year, according to a new report by IDC.
IDC’s Worldwide Semiannual Internet of Things Spending Guide forecasts worldwide IoT spending will sustain a compound annual growth rate (CAGR) of 14.4% through 2017-2021, surpassing the $1 trillion mark in 2020 and reaching $1.1 trillion in 2021.
IoT hardware will be the largest technology category in 2018, with $239 billion going largely toward modules and sensors along with some spending on infrastructure and security.
Services will be the second largest technology category, followed by software and connectivity. Software spending will be led by application software along with analytics software, IoT platforms and security software. Software will also be the fastest growing technology segment with a five-year CAGR of 16.1%. Services spending will also grow at a faster rate than overall spending with a CAGR of 15.1% and will nearly equal hardware spending by the end of the forecast.
"By 2021, more than 55% of spending on IoT projects will be for software and services. This is directly in line with results from IDC’s 2017 Global IoT Decision Maker Survey where organizations indicate that software and services are the key areas of focused investment for their IoT projects," IDC VP for IoT and mobility Carrie MacGillivray said.
The industries that are expected to spend the most on IoT solutions in 2018 are manufacturing ($189 billion), transportation ($85 billion) and utilities ($73 billion).
IoT spending among manufacturers will be largely focused on solutions that support manufacturing operations and production asset management. In transportation, two thirds of IoT spending will go toward freight monitoring, followed by fleet management. IoT spending in the utilities industry will be dominated by smart grids for electricity, gas, and water.
Cross-Industry IoT spending, which represent use cases common to all industries, such as connected vehicles and smart buildings, will be nearly $92 billion in 2018 and rank among the top areas of spending throughout the five-year forecast.
Meanwhile, consumer IoT spending will reach $62 billion in 2018, making it the fourth largest industry segment.
Marcus Torchia, IDC’s research director for customer insights and analysis, said the leading consumer use cases will be related to the smart home, including home automation, security and smart appliances.
Among them, smart appliances will experience strong spending growth over the five-year forecast period and will help to make consumer the fastest growing industry segment with an overall CAGR of 21%, Torchia said.