The Business Of Things

The total opportunity is huge, but you can’t get there with $100 million chips.

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By Frank Ferro
The Internet of things (IOT) will create $14 trillion dollars in business opportunities according to Cisco. Unless you are a government accumulating debt, most of us think that’s a big number—and a big opportunity. The much quoted “50 billion connected devices to the Internet by 2020” forecast is the impetus driving companies in all parts of the ecosystem including infrastructure, applications, services, systems, and semiconductors to position themselves for a share of this market.

Although much of the high-tech growth in recent years has been centered around connected consumer devices, with 1 billion units shipped in 2012 and an estimated 4.5 billion ‘connected screens’ to the Internet in 2016, these markets are maturing and consolidating. The HDTV market has matured, smart phones are next, and tablets will not be far behind. As a result, both the winners and losers in these markets are looking at the IOT as a way to leverage their technology investments.

The IOT market is, in fact, becoming a reality as new products and applications expand beyond vertical markets, making their way to the consumer. Our familiarity (affection may be a better word) with smart phones and tablets, along with the cloud infrastructure that makes these devices so useful, are enablers for the IOT. These devices provide an easy and intuitive interface to a wide range of technology products, which up to this point have only been envisioned. I am sure that your cable or Internet service provider has tried to get you to add home security to your system. These systems will allow you to monitor and control your home from any mobile device. Even my pool service company wants to sell me a controller with Wi-Fi so I can control and monitor the pool from my smart phone. I can fire up the spa on my way home from work, but of course then I would need a smart blender to prepare the margaritas!

These two simple examples begin to give us a sense of just how big this market can be. Basically any device that can connect to the Internet is fair game. This is a multifaceted challenge and is difficult to get your arms around. As briefly mentioned, there are many vertical market segments such as health care, industrial, transportation, energy, consumer and home, retail, IT and networks, to name only a few. There are also many layers of technology to deal with such as sensors, microcontrollers, power management, energy harvesting, systems, applications and infrastructure. The requirements and challenges for each of these market segments will vary, including cost, power consumption and performance.

The real question then is how can SoC companies create a successful business model around the IOT? Having a pool controller or security system that is connected to the Internet is nice, but how many of these products are sold per year? Last year for example, there were about 1 million cars sold with Wi-Fi connectivity and the number is projected to be 7.2 million in 2017. This is healthy growth, but when compared to the >500 million smart phones with Wi-Fi, this is a relatively small market. I am using connectivity (Wi-Fi in this case) as a proxy for these segments, but the same volumes generally apply to the underlying controllers, as well. Plus, the turnover rate in many segments of the IOT is much slower, with consumers owning products for seven years or longer and only one product per household versus many connected devices per person.

Because these markets are so segmented, SoC development cost no longer can be $100 million per generation if you expect to run a successful business. Chip development cost will need to be significantly lower (~one tenth) and be based on an architecture and design methodologies that are flexible enough to support a range of market requirements. Microcontroller companies have had to deal with this challenge for years, and more recently some Wi-Fi companies have adapted to these challenges. As the IOT evolves however, more complexity is being pushed closer to the end device so the requirements are no longer a simple sensor and controller.

To create SoCs that support this increasing level of complexity (e.g. low power for one application, high bandwidth for another) at a low design cost, a strategy needs to be developed that includes architecture, IP and design methodology. For example, several companies already have adopted on-chip network IP as a design methodology that provides standard interfaces with universal connectivity for IP cores from multiple vendors. Using this design approach allows IP cores to be quickly and reliably added or removed from the SoC without any significant design work because each core is isolated from the rest of the SoC. With this IP, SoCs can be quickly adapted with very little design cost to support multiple market segments along with changing design requirements.

Another good example is power management. Today this is done in an ad hoc fashion with no uniform design methodology. Some companies look to process technology and clock gating for low-power designs, others look to better architectures, and still others use design techniques such as DVFS, and some use all of the above. IP and EDA tools that can provide a unified methodology with standard power interfaces (beyond CPF/UPF) will save cost, development time and allow for chips with much lower power consumption.

It is good that semiconductor companies are talking about the IOT market as the ‘next big thing,’ but they need to take a serious look at the business model and the chip design methodologies required to support these wide ranging market segments if they want a piece of the $14 trillion pie.

—Frank Ferro is director of product marketing at Sonics.