The global semiconductor industry, which reached revenues of $521.3 billion in 2023, faced an 8.8% decline year-on-year, demonstrating the volatile nature of tech markets. Despite this downturn, the cellular Internet of Things (IoT) segment grew robustly, increasing by 24% from the previous year to reach 3.3 billion connected devices. Projections indicate that by 2030, this figure will soar past 6.2 billion, supported by a compound annual growth rate (CAGR) of 10%. Concurrently, the global income generated from cellular IoT also witnessed a significant rise, hitting $13.7 billion in 2023—a 17% increase compared to the previous year—and is expected to exceed $26 billion by 2030.

China stands out as a colossal market for IoT technology, as evidenced by data published by the Ministry of Industry and Information Technology (MIIT). By the end of July 2024, China had a staggering total of approximately 11.93 million mobile communication base stations. Additionally, the number of mobile IoT terminal users in China reached around 2.547 billion, representing 59% of mobile terminal connections. Such statistics not only underline the expansion of mobile connectivity but also highlight the country's emphasis on harnessing IoT for various applications.

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Looking towards the future, the MIIT has set ambitious targets for 2027. These include further developments in a comprehensive mobile IoT ecosystem built on 4G (including LTE-Cat1) and 5G (incorporating NB-IoT and RedCap) capabilities. Major initiatives aim at achieving deep coverage in critical scenarios with 5G NB-IoT networks and ensuring that nationwide county-level entities benefit from a robust RedCap infrastructure. The goal is to see total mobile IoT connections hit over 3.6 billion, with 95% attributed to 4G and 5G devices. Additionally, there are plans to foster more than five mobile IoT industrial clusters and to establish upwards of ten industry demonstration bases, ultimately nurturing applications that connect millions of devices.

This union of market demand and supportive policy frameworks is propelling IoT forward, granting semiconductor manufacturers exceptional opportunities. The demand for IoT chips, essential for the progression of numerous industries, is on a steep upward trajectory. From manufacturing and agriculture to healthcare and urban planning, the scope of IoT applications is broadening, with consumer trends increasingly leaning towards smart homes, smart cities, and industrial automation as primary sectors driving chip market growth.

Taking smart homes as a specific instance, IoT technology facilitates the interconnectivity of household devices. Users can remotely control their home air conditioning units, televisions, and lighting via mobile applications, amplifying convenience and efficiency. Furthermore, smart home systems can integrate with smoke detectors and security cameras, enhancing safety measures. They also monitor the living environment, adjusting devices like air conditioners and humidifiers to optimize comfort levels. As IoT applications in smart home technology continue to evolve, demand for specialized IoT chips is set to rise.

The semiconductor industry has noted a significant uptick in revenue forecasts for numerous IoT chip manufacturers in 2024. For instance, companies like Aojie and Chipsea have reported a doubling of revenues in certain quarters. In particular, a majority of firms experienced growth in the second quarter, with Chipsea sustaining its revenue uplift from a remarkable first-quarter performance.

Several companies attribute their favorable financial outcomes to the thriving IoT chip market. For example, Aojie's revenue surged to approximately 1.655 billion yuan in the first half of 2024, reflecting a year-on-year growth of about 56.62%. The company enriched its IoT product lineup substantially, with sales of cellular baseband chips soaring over 80% compared to the previous year, while non-cellular IoT chip sales climbed more than 70% year-on-year.

Another player, ZTE Microelectronics, operates predominantly in the field of radio frequency components and modules, catering to mobile smart devices, wearables, communication base stations, automotive electronics, Bluetooth headsets, and more. The company anticipates continued expansion in its radio frequency chip market as 5G adoption increases, alongside rising trends in domestic replacements. ZTE Microelectronics aims to fortify its competitiveness in radio frequency modules and discrete components.

Tailing behind this, Tailong Microelectronics recently issued a performance forecast indicating projected revenues of around 586 million yuan in the first three quarters of 2024, marking an increase of approximately 23.14% from the previous year. The focus of Tailong lies in low-power wireless IoT chip research, design, and sales, particularly in Bluetooth solutions, multi-protocol IoT chips, and wireless audio chips. Progress in numerous IoT segments, including smart home applications and commercial intelligent lighting, coupled with collaborations with major companies like Google and Amazon, have propelled Tailong’s chips into significant production stages.

The revenue reports from these companies illustrate the extensive reach of the IoT market, revealing diverse requirements across various segments. This versatility indicates that the IoT market is relatively welcoming to chip manufacturers operating in different domains.

In a market ripe with opportunities, the ongoing expansion of the IoT chip sector raises the question: where will the next wave of growth stem from?

The burgeoning demand for IoT devices, driven by the widespread application of technologies like 5G and artificial intelligence, will significantly boost chip shipments. As IoT permeates public services, smart transportation, intelligent retail, and smart living environments, the pivotal role of mobile IoT will only grow, simultaneously enhancing the entire industrial ecosystem. The development trajectory aligns to form a comprehensive mobile IoT industry chain encompassing chips, modules, terminals, devices, and services.

Connectivity emerges as a critical component for IoT chips, heavily influenced by the various communication protocols involved. The rapid pace of upgrades across these protocol standards necessitates perpetual innovations in chip designs to keep up with evolving requirements. Current local wireless communication standards like WiFi, Bluetooth, ZigBee, and new generations of low-power wireless IoT protocols such as Thread and Matter are increasingly impacting the chip industry. Bluetooth, for example, has transitioned from version 1.0 to 5.4, reflecting the vibrancy and pace of advancements in wireless standards.

For the manufacturers crafting IoT chips, the advent of these new demands and protocols may serve as key motivators for product iterations. Essentially, companies that position themselves to adopt and integrate these new standards stand to claim substantial market advantages. Traditional mobile communication only covers a meager 6% of the earth's surface, yet satellite internet can offer global connectivity, especially beneficial for remote zones and maritime applications. This capability addresses communication needs in regions lacking cell tower coverage, unlocking new possibilities for both chip manufacturers and service operators. IoT Analytics predicts that by 2027, the number of global satellite IoT users could leap to 22 million, with estimates indicating that China’s satellite IoT terminals may rise to 1.87 million—widely applicable in sectors such as transportation, oil and gas inspections, and environmental monitoring.

On the supply side, the IoT supply chain stakeholders are consistently pushing technical boundaries to enhance performance while reducing power consumption and improving reliability. In particular, the applications associated with smart homes have evolved significantly, establishing several pivotal standards, including Bluetooth, Zigbee, Wi-Fi, and Thread, effectively resolving foundational connectivity issues and facilitating remote management and data analysis across devices.

The emergence of artificial intelligence also prompts a demand for edge devices in smart domestic environments, further pushing IoT product performance in terms of speed and data security. Qualcomm recently introduced its industrial-grade IQ series and IoT solution frameworks designed to integrate edge-side AI into connected terminals across industries.

As more intelligent products flood the market, the need for compatibility between diverse connectivity protocols becomes paramount. Consequently, both local and international standardization efforts are underway to buttress the interoperability of smart devices. Initiatives led by the likes of Amazon, Apple, Google, and Samsung’s SmartThings, as well as the establishment of alliances such as the Star Alliance by Huawei, are proactive measures to address current siloed product issues that have persisted across the industry, promoting swifter commercialization of smart IoT technologies.

The enhancement of existing wireless standards aims to pave the way for new wireless applications by improving throughput, range, latency, reliability, energy efficiency, and scalability, while also addressing emerging environmental IoT demands as necessary.

As China sits at the intersection of global semiconductor consumption, its growing appetite for IoT technology indicates a powerful future potential for development. The chip sector relevant to IoT extends beyond communication-based chips, impacting microcontrollers, memory products, security chips, and positioning devices, thereby broadening the industry's footprint.

Yet, the current landscape reveals a dominance of foreign companies in the IoT chip domain. As the importance of IoT in manufacturing, public service, industrial internet, vehicular connectivity, smart city infrastructure, and household automation steadily intensifies, the industry is poised for substantial breakthroughs led by domestic chip producers.