IDC Announces Global Internet of Things (IoT) Spending Grew 17.9% to $737 Billion Last Year
The manufacturing ($178 billion), transportation ($78 billion), and utilities ($69 billion) sectors are driving investment.

According to a recent research report by IT market analysis firm IDC, global IoT spending reached $737 billion last year, up 17.9% from the previous year, driven by increased investment in IoT-related hardware, software, services, and connectivity.

In addition, the report (Worldwide Semiannual Internet of Things Spending Guide) stated that global IoT spending is projected to reach $1.29 trillion in 2020, growing at a compound annual growth rate (CAGR) of 15.6% during the forecast period from 2015 to 2020.

In 2016, the rankings for IoT investment by industry were manufacturing ($178 billion), transportation ($78 billion), and utilities ($69 billion). The consumer IoT sector, which ranked fourth in 2016, is projected to become the third-largest market by 2020. Cross-industry IoT investment, corresponding to common industry use cases such as connected cars and smart buildings, is also expected to rank high during the five-year forecast period. Meanwhile, spending in the insurance, consumer, healthcare, and retail sectors is expected to be the fastest-growing industry sectors.


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With the manufacturing sector leading the IoT industry, manufacturing operations were identified as the IoT use case that received the largest investment ($102.5 billion) in 2016. Other IoT use cases in the manufacturing sector include production asset management, maintenance, and field services. The second largest use case was freight monitoring ($55.9 billion), which is expected to further boost IoT spending in the transportation industry. In the utilities sector, investment in smart grids for electricity and gas reached $57.8 billion in 2016.

Consumer investment in smart homes is expected to more than double during the forecast period, reaching $63 billion in 2020. In the insurance industry, telematics is expected to be a major use case, while in the healthcare sector, investment in remote health monitoring is anticipated to be the largest. The retail industry is already investing in various use cases, including omnichannel operations and digital signage.

By technology, hardware is expected to remain the largest spending segment throughout the forecast period, followed by services, software, and connectivity. Hardware spending is projected to reach $400 billion in 2020, with the volume expected to nearly double over the five-year forecast period. However, growth is expected to be the slowest among IoT technology groups.

Spending on software and services is expected to grow faster than that of the hardware and connectivity sectors. Modules and sensors connecting endpoints and networks are expected to drive the hardware sector, while application software is projected to account for more than half of total IoT software investment.

▲ 2016 Market Share by Top Technology (Source: IDC)

The Asia-Pacific region (excluding Japan) is expected to have the largest IoT spending volume throughout the forecast period, followed by the United States, Western Europe, and Japan. The manufacturing sector is projected to account for approximately one-third of IoT purchases in the Asia-Pacific region (excluding Japan). In the United States as well, while the manufacturing sector is expected to represent the largest share of IoT investment during the forecast period, its share of total spending (approximately 15%) is projected to decrease. In Western Europe, consumer IoT spending is expected to surpass the transportation and utilities sectors, becoming the second-largest IoT market in 2020.

Vernon Turner, Senior Vice President and Head of the IoT Research Group at IDC, stated, "The Internet of Things is expected to continue driving business transformation and the development of innovative markets such as robotics, cognitive computing, and virtual reality," adding that IoT presents a high-potential opportunity for both vendors and end users.

He added, "IoT investments in China and the U.S. account for more than half of total IoT spending and are driving the growth of the IoT market's two-party index."