Global telecom operators inject momentum into IoT application business opportunities

The IoT application market is booming. In order to seize IoT business opportunities, telecom operators around the world are working hard to build 3G, 4G and 802.11ac network infrastructure, thereby expanding the application markets such as smart industry, smart energy, smart medical care and smart security. At the same time, it also stimulates the rapid increase in M2M module shipments, intensifying market competition.

　　The global Internet of Things (IoT) market is booming. In order to expand their revenue sources, telecom operators are developing various IoT application markets such as smart industry, smart energy, smart medical care, smart logistics and smart security through wired and wireless network services, which also further drives the demand for high-performance machine-to-machine (M2M) modules.

　　According to the latest report from MIC, the global IoT market output value was approximately US$350 billion in 2013 and is expected to reach US$600 billion in 2016, with a compound annual growth rate of approximately 16%. This has attracted various telecom operators to actively seize the IoT business opportunities, hoping to increase their revenue momentum with various networking services or customized value-added services.

　　Telecom operators strive to promote the IoT market by injecting revenue momentum

　　Figure 1 Feng Minghui, director of the Institute for Information Industry's Intelligent Networking Systems Research Institute, said that telecom operators are using wired and wireless networks to develop customized IoT application services.

　　Feng Minghui (Figure 1), director of the Institute for Information Industry's Intelligent Networking Systems Research Institute, said that as the mobile Internet trend continues to grow, applications such as Internet voice and video communications have become increasingly popular, impacting telecom operators' main revenue sources such as traditional voice services and text messages, forcing telecom operators to provide users with more diverse IoT services to stimulate revenue growth.

　　In fact, the IoT architecture is divided into the sensor layer, network layer and application layer. Telecom operators are responsible for providing network layer services, using basic networks such as wired or wireless networks to charge network usage fees to IoT application service providers or users.

　　Feng Minghui further pointed out that since telecom operators have the advantage of wired and wireless network infrastructure, as well as a large customer base of corporate and individual users, they can enter the markets of smart buildings, smart lighting, smart grids and smart home appliances by integrating IoT applications with various wireless communication technologies. In addition, with the support of government policies and funds from various countries, telecom operators can easily form cross-industry alliances with the upstream and downstream supply chains of the IoT to provide users with more convenient application services.

　　It is understood that telecom operators in China, Europe, America, Japan and Taiwan have already begun to actively cooperate with M2M module operators and equipment vendors, hoping to seize the huge business opportunities of the Internet of Things. For example, Orange, one of the three largest telecom operators in Europe, has cooperated with many European automobile manufacturers on in-vehicle information and communication platforms based on the Global System for Mobile Communications (GSM) and General Packet Radio Service (GPRS) network services, and has successfully entered the European large-scale freight vehicle management market. It currently has more than three million M2M service users.

　　In addition, Orange has also cooperated with M2M module manufacturer Gemalto on near field communication (NFC) SIM cards, which can now be provided as a simple mobile payment application in banks, buses, subways and small and medium-sized stores in France.

　　As for Taiwan, Chunghwa Telecom has also begun to develop the Internet of Things market in recent years. Currently, Chunghwa Telecom is conducting a small-scale trial operation test of the smart grid with Taipower, and is also cooperating with smart home appliance equipment manufacturers to actively enter the smart home application market.

　　Feng Minghui believes that under the trend of the Internet of Everything, the core services of telecom operators have begun to expand from communication between people to communication between machines. For example, fleet management and mobile payments are both prominent examples of cross-industry cooperation among telecom operators. Only in this way can telecom operators inject new vitality into their revenue growth.

　　On the other hand, telecom operators have also begun to deploy home automation services and provide consumers with more convenient smart home services through new-generation wireless communication technologies such as Long Range Evolution (LTE) and 802.11ac, thereby expanding their revenue sources with this new business service.

　　LTE/802.11ac helps smart home applications flourish

　　Wang Jianmin, director of the Intelligent Networking and Energy ICT Technology Center at the Institute for Information Industry's Intelligent Networking Systems Research Institute, said that as home network coverage continues to rise, the trend of smart home applications has also begun to flourish, driving up demand for applications such as video streaming, home remote medical care, white appliances and home monitoring, thereby attracting telecom operators to rush into this market.

　　Wang Jianmin further pointed out that since the networking of home appliances is the core concept of smart homes, consumers expect home appliances such as televisions, refrigerators, microwave ovens, lamps or washing machines to be smoothly connected to the Internet and bring more convenience to family life. Therefore, telecom operators must provide Internet services with more stable transmission quality and larger bandwidth to meet consumer requirements.

　　In fact, telecom operators including AT&T in the United States, NTT DOCOMO in Japan, Telenor in Norway and SFR in France have begun to provide users with home automation services such as remote video monitoring, remote home appliance control, home appliance energy consumption analysis and high-definition audio and video streaming applications through LTE or 802.11ac networks. The above operations can also be performed through smartphone applications.

　　In addition to telecom operators providing a stable and reliable network, home appliances must also have reliable networking capabilities to realize various smart home applications. Therefore, equipment manufacturers are using system-level packaging (SiP) technology to highly integrate various wireless communication technologies required for smart homes, thereby achieving seamless information sharing between home appliances.

　　Figure 2 Liu Shangchun, senior associate of Jujing Technology, said that the formation of the smart home concept will help further expand the IoT application market.

　　Liu Shangchun (Figure 2), senior associate of Jujing Technology, said that since home appliances are consumer electronic products, they have very strict requirements on cost and power consumption. Therefore, equipment manufacturers must adopt highly integrated wireless communication modules to reduce terminal sales costs and save system design space.

　　Liu Shangchun pointed out that the design of wireless communication modules currently used in the smart home market focuses on integrating wireless communication protocols such as Wi-Fi Miracast, ZigBee and NFC, so that information and content can be transmitted and communicated efficiently. Through SiP technology, equipment manufacturers can introduce more sensing functions and take into account the thin and light product appearance to gain market favor.

　　It is reported that the smart TV streaming stick and wireless audio and video transmission module launched by Jujing are not only mini in size and easy to carry, but also support the Wi-Fi Miracast transmission standard. No matter whether the content played on a mobile phone, tablet or computer, it can be shared to the receiving screen such as TV, monitor or projector through wireless communication.

　　In addition, after being equipped with Internet access, the TV can also evolve into the core of smart home applications. After being connected to other home Internet devices or portable devices such as mobile phones, in addition to being able to synchronously transmit entertainment video content to each room, it can also be combined with monitoring, energy management or health care and other services, giving the TV a more diversified range of smart applications.

　　Figure 3 Wang Zhongxiang, general manager of SIMCom's module business unit, said that in order to respond to market demand, all M2M module manufacturers have begun to expand their production capacity.

　　On the other hand, as business opportunities in the IoT market continue to expand, many module manufacturers are also actively expanding their production capacity to invest in this market, thereby intensifying price competition for 2G and 3G modules and accelerating the market reshuffle.

　　Market competition is fierce and M2M module price war breaks out

　　Wang Zhongxiang (Figure 3), general manager of SIMCom's module business unit, said that despite the rapid increase in demand for M2M modules for smart security monitoring, in-vehicle information and communications, and smart grids, supported by governments and telecom operators, module manufacturers have begun to expand their production capacity. However, this has also caused a sharp price cut for 2G and 3G modules. How to stand out in the price competition has become the primary issue for module manufacturers.

　　Wang Zhongxiang further pointed out that the average price of 2G modules was about US$30 in 2008, but it had dropped to around US$10 in 2013; the average price of 3G modules was US$40-50 in 2011, but is now below US$20. It is obvious that if M2M module manufacturers cannot further reduce costs, they will be forced to withdraw from this market or be acquired by first-tier module manufacturers.

　　Figure 4 Telit Taiwan and Southeast Asia Regional Manager Wang Zhengde said that as the competition in the M2M module market becomes increasingly fierce, the challenges faced by operators with poor financial health will become even more difficult.

　　Wang Zhengde (Figure 4), manager of Telit's Taiwan and Southeast Asia region, said that because M2M modules require a long period of interoperability testing and verification with telecom operators, and emphasize high reliability and a longer product life cycle, the product development cost is very high. If latecomers are not financially strong, they are likely to face problems with cash flow.

　　In fact, currently 2G modules account for about 60-70% of the total M2M module shipments, while 3G modules account for 30%, and 4G module shipments are still quite scarce; among them, due to the increasingly complete 3G network infrastructure, the proportion of 3G module shipments has gradually increased, and the product profit is also relatively high, so it has become a key market for all M2M module manufacturers to develop with all their strength.

　　Wang Zhongxiang emphasized that cost control is a key factor for module manufacturers to gain a foothold in the M2M market. With its two self-owned production plants, SIMCom can effectively adjust production capacity in response to market demand and directly control module quality. In addition, the company has close cooperative relationships with major European and American telecom operators, so it can pass verification tests in the fastest way, accelerating the time for customers' products to be released.

　　Obviously, with the full efforts of telecom operators, the IoT application market is expanding rapidly, and at the same time, it is stimulating the increase in chip and module shipments, leading to increasingly fierce market competition. In the future, telecom operators and module manufacturers will have to maintain a close cooperative relationship in order to have a chance to seize the huge business opportunities of the IoT.