No matter what you call it – the Internet of Things (IoT), the third wave, or my personal favorite Thing-to-Thing Communication (T3COM) – there’s no denying that we are on the cusp of a major transformation. Devices of all sorts are now connected in ways only previously envisioned in sci-fi films. And, the development of T3COM is generating a demand for component parts, including sensors, connectors, capacitors and semiconductors.
In his article for the Harvard Business Review1, Harvard Business School professor Michael Porter outlines the three IT “waves” and how the one we are currently experiencing will affect nearly every device we use in our day-to-day lives. The first wave occurred in the 1960s and 1970s when individual activities in the value chain became automated – from order processing and bill paying to computer-aided design and materials requirement planning (MRP). The second wave of transformation, in the 1980s and 1990s, was driven by the rise of the Internet and the ubiquitous connectivity it facilitated. Now, in the third wave, IT is becoming an integral part of the product itself. Devices of all sorts are now essentially designed with computers inside them and have tremendous connectivity capabilities. And the trend is growing. IBM forecasts that there will be 212 billion objects that are connected to networks by 2020 and of those, 30 billion will be sensor-enabled. That equates to 28 devices per person.
The mode of communication – Bluetooth, Wi-Fi, cellular or wired – is not nearly as important as the fact that these objects can communicate. Because connectivity typically delivers dramatic improvements in product functionality and performance, devices that communicate are simply more useful than those that can’t. So, this will drive a cycle of obsolescence and replacement across all segments.
While all component parts will potentially reap the benefit of this wave, the sensor market will be the biggest beneficiary. Overall, it is predicted that sensors will see a nearly eight percent compound annual growth rate.
How the Automotive Market Will Ride the Wave
While nearly every vertical will be affected by this transformation, it’s interesting to take a look at each one individually and one of the most fascinating is the automotive market.
The North American automotive forecast expects that market to flatten – growing about 10 percent from 17.6 million units in 2015 to 19.4 million in 2024. Yet, the electronic content in these vehicles is growing six percent per year. Electronics make up approximately 35 percent of the production cost today and that is expected to grow to 50 percent by 2030. Vehicles today include an average of 60 to 100 sensors and as many engine control units (ECU) and that number is likely to double. In total, the global market for automotive electronics is fast approaching $240 billion in value, with T3COM at its center.
By 2025, the T3COM automotive market will generate more than $500 billion and the industry will be on the brink of 100 percent of the cars on the road, not just new cars, will be connected. For this to happen, there will be a massive after-market industry develop to install connectivity in older cars. On-board diagnostics, infotainment, safety sensors, 360-degree cameras and seamless connectivity with mobile devices are all items that could be added to existing vehicles. Enhancing vehicles with T3COM goes beyond convenience and safety, one of the byproducts of better made, higher quality modern cars is that their average life spans have climbed to close to 13 years, helping consumers to more fully realize the value of their investment.
Any fan of the 1980s television show Knight Rider knows that the cars of the future aren’t just connected – they drive themselves. And Google, Volvo, Toyota, Mercedes and Tesla, to name a few, are working to make that a reality. More than just a convenience that would allow commuters to multi-task instead of paying attention to the road, self-driving cars improve safety, save money and make more efficient use of our infrastructure. Here are some impressive statistics that Google claims will result from putting driverless cars on the road.
T3COM is transforming the car, which is then going to transform elements of our lives and our environment. When you think about all the other devices – from refrigerators to thermostats and safety equipment to life-saving diagnostic medical devices, T3COM is definitely creating component demand – it is easy to see the swell of this third wave that professor Porter describes.
1 Harvard Business Review, Nov. 2014. htttps://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition