From the earliest first generation networks to today’s rapidly maturing 4G and fledgling 5G infrastructure the telecom industry has evolved to serve the needs of the smartphone consumer. That’s a particularly demanding market. For example, by 2020, it’s forecast that 3.8 billion people will own a mobile. That’s as close as makes no difference to one smartphone for every two people across the entire planet.
Smartphone subscriptions outstrip even handset sales; according to GSMA Intelligence, by the end of 2018 almost seven in ten people had subscribed to a mobile service. An increasing proportion of the world holds a gateway to the Internet and the benefits that brings to areas like education, healthcare, entertainment and banking.
It’s little surprise then that the smartphone has been the driver for the cellular semiconductor supply chain. That chain is very big business; while exact numbers for cellular semiconductors are hard to find, according to analyst The Linley Group, the market for cellular baseband processors—a key component for smartphones—was worth $21.4 billion back in 2015 and is certain to be worth a great deal more now.
Aggressive tactics by companies looking to grab a share of such a booming sector resulted in mergers and acquisitions and a pooling of design talent. Today a multibillion dollar conventional cellular business comprises a handful of arch rival cellular semiconductor giants selling to a handful of arch rival smartphone giants. While painful for the losers, for the consumer fierce competition has delivered incrementally better high-end products year-on-year while bringing the benefit of cellular technology to developing continents such as Africa through the advent of budget models.
But change is afoot – driven primarily by carriers looking to generate new revenue streams to offset the huge costs incurred by when buying the licenses to the parts of the RF spectrum that support cellular. Specifically, carriers are keen to encourage the low-power, low-date rate devices of the IoT to exploit spare bandwidth available across cellular networks alongside that dedicated to the conventional high demand traffic transported over their networks.
Cellular gains a competitive edge on other LPWAN wireless technologies by offering a ready-made solution for directly connecting the IoT sensors of long-range, low power wide area networks (LPWANs) to the Cloud. The 3rd Generation Partnership Project (3GPP)—a collaboration of telecoms standard associations—was quick to encourage companies to take advantage of this benefit by introducing a specification for two forms of low power LTE—LTE-M and NB-IoT—in Release 13 of its standard. The release was adopted in 2015 and has enabled the development of 4G LTE support for IoT applications.
The impact is already being felt. Recent research by global telco infrastructure leader Ericsson predicts a boom in the number of cellular IoT connections to 4.1 billion by 2024 (of which LTE-M and NB-IoT technologies will account for 45 percent).
These low data rate devices have no requirement for the complex and expensive cellular chipsets at the heart of handsets – opening up the market to new vendors developing small, streamlined and efficient cellular modems for the IoT and disrupting the established cellular semiconductor supply chain.
Encouraging new entrants
Among these vendors is Nordic Semiconductor. The European company is already seeing the IoT demanding a semiconductor supply model almost the complete opposite of that feeding the cellular smartphone market.
“In terms of end products and applications, the IoT—both consumer and industrial—is coming to be dominated by a large number of smaller companies and startups,” says Peder Rand, Product Manager – Cellular IoT with the company. “Certainly, there are large customers looking to apply cellular IoT to optimize large-scale operations, and these will be vitally important to the long-term success of cellular IoT wireless technology. But the typical company in the cellular IoT space now is new to cellular and looking to add it to an existing IoT product to replace, for example, Wi-Fi, or develop a brand new IoT application with global connectivity that can optimize operational efficiencies and reduce costs.
“The cellular IoT market has far more in common with the traditional Bluetooth and ultra-low power wireless semiconductor markets that are dominated by small companies and startups.”
Nordic, for example, has sampled its nRF9160 SiP to over 220 companies to date, and announced around ten cellular IoT customer products and applications that have already come to market. Of these ten IoT products and applications, almost all of them have originated from smaller companies and startups. These companies frequently cite technical support as a key enabling factor for successful commercialization.
This trend is backed up by a recent study from analyst IoT Analytics (IoT Startups Report & Database 2019) that verified and classified a total of 1,018 upcoming IoT startups and smaller companies operating around the world today of which none are more than six years old. Adding existing SMEs to the mix sees the market for cellular IoT semiconductor modules set to run into thousands of companies worldwide.
It’s a similar story on the supply side: The cellular IoT semiconductor market today comprises several vendors such as Nordic supplying to those thousands of customers, many of which are smaller companies or start-ups. And many of which require close support to get to grips with the intricacies of cellular IoT in order to build prototypes and then bring new products to market. Contrast that with the existing cellphone market—dominated by a few suppliers and a few smartphone makers with cellular expertise—and it becomes clear why a new business model is emerging.
Hiding the complexity
Nordic’s Rand concurs that a characteristic of the smaller companies integrating cellular IoT into their products is that they need all the technical support they can get to quickly bring a new LTE-M or NB-IoT product or application to market.
Unsurprising, perhaps, given the notorious complexity of cellular’s underlying wireless technology. According to Nordic’s CTO, Svein-Egil Nielsen: “Designing a traditional cellular modem into a smartphone is an extremely complex task and beyond the engineering capabilities of most companies.” This goes a long way towards explaining why there are so few companies building today’s handsets.
Nielsen says Nordic recognized very early on it had to find a way to shield its customers from the complexity of cellular wireless technology otherwise they would struggle to get started, let alone develop commercially successful products. However, the company did have a trick up its sleeve derived from its large market share in Bluetooth LE.
“Nordic helped facilitate the rapid adoption of Bluetooth across a wide range of applications by abstracting away all unnecessary technical complexity [with its Bluetooth LE software architecture and development kits] so the developer could focus on their application instead of the intricacies of RF technology,” explains Nielsen.
“Our typical customers in the cellular IoT space need exactly the same simplified approach. The nRF9160 SiP and development tools were created to support this strategy.” Nordic has also worked hard to gain certification for its SiP with major carriers across the globe (and continues to do so) such that its customers can offer their products into many international markets.
Further, the company has collaborated with eSIM supplier iBasis to ensure that companies employing the nRF9160 have a built in solution for instant network access.
But Nielsen cautions that there are some headwinds that threaten to stall rapid adoption of cellular IoT. First he notes that solutions competing with Nordic tend to assume a high degree of cellular expertise from the developer limiting the number of companies that can take advantage of their solutions. But Nielsen says technical complexity isn’t the only factor that could impede future growth, patent licensing is another.
Nordic is working with others to forge a solution. “The major cellular standard essential patents owners do not offer licensing of their patent portfolios to component manufacturers such as Nordic Semiconductor,” says Nordic’s Legal Director, Marianne Frydenlund. “Left unopposed this could exert a major drag on the cellular IoT industry and is one of the reasons I recently joined the board of the wireless technology patents watchdog, the Fair Standards Alliance.”
In at the deep end
What’s life like for firms new to cellular IoT? From Nordic’s perspective, product and application development with the company’s cellular IoT solution is proving extremely robust with a range of innovative products being brought rapidly to market across many industry sectors.
One example is a battery powered all-in-one LTE-M smart home alarm. In this product application LTE-M connectivity replaces previously used Wi-Fi to send instant alerts to the homeowner’s smartphone no matter where they are in the world.
Another example is a cellular IoT panic alarm. Designed to protect people in vulnerable situations such as lone professionals at risk of physical attack or isolated accident, and seniors living at home, the alarm requires no user setup. Activation is via a double button press that then notifies an emergency response center of the user’s identity (via a unique user ID) and their GPS location.
Customer reaction to Nordic’s solution has proved very positive: “I was really impressed with the overall commitment Nordic as a company have made to cellular IoT,” says one. “Nordic has adopted a strategy that matches how cellular IoT is changing the cellular sector and I respect how much R&D investment Nordic put into developing its cellular IoT solutions for years before commercialization. They’re taking this very seriously. And they’ve made good on all their promises too, not least of which was providing us with excellent technical support.”
Move over smartphones
The early product applications demonstrate how cellular IoT is opening up new opportunities for companies adopting the technology for applications beyond the conventional smartphone market. The list of potential applications are also truly enormous and likely to touch every major sector including agriculture; automotive; infrastructure; building maintenance; consumer electronics; energy and utilities; healthcare; industrial, and security applications. This growing list of emerging IoT applications demand a different business model for cellular IoT. But this list is only the start and doesn’t include the new applications that cellular IoT will now make commercially viable.
However, cellular IoT wireless technology will not exist in isolation; it will need to co-exist with a wide range of other wireless technologies underpinning the IoT such as the short-range, low power protocols Bluetooth LE, Bluetooth mesh, Thread and Zigbee. In complementing other IoT technologies, cellular IoT will be further drawn into the established supply chain for that sector’s silicon, further upsetting the existing cellular supply chain status quo.
Smartphone modems were designed to meet the needs of a specific application—high throughput cellular communication—and a handful of equipment makers. Cellular IoT, in contrast, must meet the needs of thousands of applications and thousands of customers. And that’s a different ball game entirely.