Last week, investors and financial experts from all over the world descended upon Hong Kong for the 6th annual Internet of Things conference organized by GS1, a non-profit global organization of 2 million company-members whose main goal is the design and implementation of global standards across industries. I was one of the attendees.
- Venture Capital investment up 10x in two years…
- Major Silicon Valley companies all invested…
- Revenues expected to soar 5X by 2022…
- Total market cap forecast to increase by as much as 2,000% over several years…
- World Economic Forum: “This will transform the global economy”
- “The one who becomes leader in this [technology] will become ruler of the world”
… So why do only a few private investors know about this story?
It’s also home to some of the most innovative companies in the world, including Chinese e-commerce giant Tencent (Exchange: Hong Kong; ticker: 0700) and computer powerhouse Lenovo (Exchange: Hong Kong; ticker: 0992).
So I didn’t hesitate to make room in my schedule to attend the event.
Today, I’ll share some of the insights I learned there… and why the Internet of Things megatrend is just getting started…
But first, a closer look at the Internet of Things
The Internet of Things (IoT) is the term used to define the network of connected electronic devices. This doesn’t just include computers, smartphones and laptops.
It incorporates everything from smart TVs and coffeemakers to refrigerators, air conditioners, wireless speakers, smartwatches, lighting equipment and cars.
If you’ve ever used an iPhone to play music on a wireless Bluetooth-enabled speaker in your living room or car stereo, that’s a basic example of two IoT devices “talking” to one another.
Or have you ever printed a document from your computer without using a cable? Most printers sold today can connect to your home or office network so you can print wirelessly. This is another example of two IoT devices working together.
My wife uses a device that allows her to monitor and regulate how well meat in the oven is done from her phone.
They now even have a device that can connect your air conditioner to the Internet, allowing it to adjust its power settings depending on how hot, humid or cold it is both inside and outside.
But these devices don’t just talk to one another… they’re also usually connected to the Internet and send enormous amounts of data to the companies that make them to create faster future interactions between a smart device and its user.
The explosive growth in IoT
Every day, millions of these kinds of devices are being sold around the world, mostly to consumers like you and me, as well as to a growing number of businesses.
Technology research company Gartner estimates 8.4 billion smart IoT devices were already installed and being used globally last year.
And 2 billion devices were sold last year alone. That’s 5.47 million devices sold every single day, or nearly 3,800 every single minute!
Even more impressive is that Gartner estimates the number of IoT devices in use will more than double by 2020… to 20.4 billion.
And by 2020, Gartner estimates that US$3 trillion will be spent on IoT devices. That’s nearly double what it was last year.
In short, the world is now hurtling at warp speed into the Internet of Things.
So where is the IoT trend set to boom?
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Three requirements for IoT to take off in any country
The IoT market will likely boom first in places that have the necessary infrastructure set up to make the transfer of data seamless, efficient and safe for the user.
So a country needs:
1. High-speed internet access, like 5G mobile internet technology, which operates at speeds up to 1,000 times faster than the current leading 4G standard.
This is essential for real-time monitoring of data transmitted over a large area – like tens of thousands of devices in an airport, or seamless simultaneous video calls with coworkers working in a dozen different places.
2. The capability to store enormous amounts of data. IoT devices generate massive amounts of data that need to be stored and analysed for use, now or in the future.
According to Cisco, the amount of data generated by IoT devices is expected to hit 600 zettabytes – or 600 BILLION terabytes – by 2020. And if a company doesn’t have an effective way of storing this universe of information generated by IoT devices, it won’t be able to effectively use the data.
3. Secured connectivity. This is probably the most important of all the ingredients needed to foster widespread IoT adoption.
Garrick Ng, Chief Technology Officer at Cisco, said during the conference that the threat of cyber attacks in the age of IoT devices are real and alarming.
For example, a pacemaker – used to regulate a person’s heartbeat – has over 8,600 vulnerabilities.. That’s why the Food and Drug Administration recalled nearly 500,000 pacemakers last year because they were at risk of being hacked.
Other vulnerable IoT devices include network printers at the office, web cameras, wireless speakers and smart TVs.
Without reassurance that a hacker won’t be able to access your smart TV to steal your banking information from your computer on the network, it will be difficult for IoT devices to flood into households, let alone offices and government buildings.
Who’s on top?
The table below shows the top-ranked countries in internet penetration, internet speed, the most IoT devices and the Network Readiness Index, which measures the propensity for countries to exploit the opportunities of the Internet of Things.
As you can see below, Sweden and the Netherlands rank among the most conducive nations on the planet for use of IoT devices. They consistently rank among the top 10 in the world in technology readiness.
Their high internet penetration rates, fast internet access speeds and high ranking in the Safe Cities Index give them high marks in the Network Readiness Index.
But this also means enormous opportunity for countries not yet on the list of top IoT device-using nations looking playing catch-up with the trend. These countries include Hong Kong and Singapore, and they will likely invest heavily in the infrastructure needed to make IoT an everyday reality.
Hong Kong, for instance, has announced a more than doubling of its spending on research & development as a percentage of GDP this year, allocating US$6.4 billion.
At the conference, Nicholas Yang, Secretary for Information and Technology, said Hong Kong will be investing part of this money in rolling out 5G-enabled lampposts all over the city. These lampposts will collect data on car flow, air quality and crowd size. They will also be used to improve mobile internet speeds and access.
And Alex Kwan, Executive Director for Engineering & Technology at Hong Kong International Airport, disclosed immediate plans for the implementation of state-of-the-art technology capable of monitoring virtually everything that goes on inside the Chek Lap Kok airport.
The airport is getting ready to roll out everything from artificial intelligence-enabled immigration counters with advanced facial recognition, to patrolling robots designed to assist passengers and increase reaction time to security problems.
Meanwhile, Singapore has just conducted its first trial of 5G network services, where the government has waived frequency fees for the next two years to promote investment and accelerate its development.
And demand for data centers in Asia is growing by double-digit rates to address the need for IoT data storage capacity. Business consulting firm Frost & Sullivan projects that the overall Asia Pacific market will be worth US$31.9 billion by 2022, up from US$14.1 billion in 2016.
Right now, no other Asian nation ranks in the top 10 in terms of IoT devices per capita except for South Korea. But Asia’s leading economies, including Hong Kong and Singapore, are racing to catch up.
That’s why we’ll be keeping a close eye on opportunities to profit from IoT-related companies in this region.
Editor, Stansberry Churchouse Research