Internet of Things (IoT) Growth in Southeast Asia

The technology of the internet of things (IoT) can become a key enabling technology for dynamic digital startups. Gartner estimates that 4.9 billion connected devices (“things”) are already in use for 2015, estimating the figure to skyrocket to 25 billion devices by 2020. Additionally, IDC estimates that the IoT in Asia, excluding Japan, will climb to 8.6 billion devices by 2020, reaching a current annual market of US$583 billion (increase of 133% from US$250 billion).

Rapid growth of IoT Asia

The IoT Asia is expected to drive innovation in the region as more startups are competing with established companies to bring IoT to their business operations and existing clients.

The rapid growth of IoT Asia is driven by:

1. Urbanization

In Southeast Asia (SEA) there are 26 cities with population over 1 million people as well as densely populated cities like Ho Chi Minh (12.8m), Jakarta (10.1m), Bangkok (8.3m), and Singapore (5.4m).McKinsey estimates that urbanized Southeast Asia accounts for +65% of the 2014 SEA GDP (US$2.4 trillion), while over 90 million people are expected to relocate to SEA urban areas by 2030. Urban relocation will sustain the consuming class growth, reaching about 163 million households by 2030.

For IoT, increasing urbanization and consumer spending will require about US$7 trillion infrastructure investment, with the Internet of Things technology being the leader in the effort to bring together all the factors that make SEA a favorable region for the IoT Asia to sustain further growth.

2. Smartphone penetration growth

WeAreSocial estimates that, for 2015, Internet of Things in Southeast Asia will thrive with the 744 million mobile connections it already has, at 119% penetration. Meanwhile, Philippines, Indonesia and Vietnam collectively account for +300 million mobile subscribers, while Thailand’s compound annual growth rate (CAGR) of 3G subscribers will reach 19 million in 2015 (35% growth), according to PricewaterhouseCoopers. Above estimates exclude Japan, China and South Korea that are already IoT leadersin the region. Arguably, IoT Asia has a growth potential with its fast-developing countries in smartphone penetration and tele-density.

3. Manufacturing of things growth

Rising smartphone penetration and use of technology encourages consumer demand for “things”, thus shifting SEA from agriculture to the manufacturing of technologies. Although cheap labor costs remain appealing to the Western firms seeking to outsource their operations, SEA manufacturers target the region’s middle class by creating an interrelated space for consumers and businesses, according to the Economist Intelligence Unit (EIU). This is a huge growth opportunity for IoT Asia.

IoT / M2M future

To drive the IoT adoption, the Malaysian Ministry of Science, Technology and Innovation (MIMOS) launched the National Internet of Things Strategic Roadmap, which is expected to fund about US$2.49 billion to Malaysia’s GNI by 2020. Other initiatives include Singapore’s “Smart Nation”, Bangkok’s and Jakarta’s Smart-City Programs, and the efforts of the private sector with Ericsson and ICT, among others.

Malaysia will host MyIoT Week 2015 on August 24-26, 2015 to bring technology experts and innovators from around the world to participate in the three day event. The speakers will discuss new opportunities, challenges and latest technological advancements.

According to GSMA Intelligence, M2M (Machine-to-Machine) cellular connections will increase at a compounded annual growth rate of 30% through 2014 – 2020. The numbers are conservative and if governments’ take the necessary steps to build infrastructure, then growth could be higher. Asia-Pacific will account for approximately 45% of the global M2M connections.

IoT-related projects are infrastructure-driven and labor-intensive. As soon as above factors merge, coupled with the forthcoming 2015 ASEAN Economic Community, IoT Asia will find its suitable place among SEA industry innovators.