If you follow news about the Internet of Things, you will have read quite a few articles that attempt to predict the number of connected devices by the year 2020.
The chart displayed above, from iot-analytics.com gives a nice comparison of some of the predictions from major IoT players like Cisco and Ericsson as well as IT research companies like Gartner and IDC have made recently. The range for 2020 is between 18 Billion and 50 Billion.
The first thing we notice in the chart is - they don’t all start in the same place! The initiation point ranges from 6 B to 14 B for 2014. That’s like having 10 stock analysts predict the future price of a stock in 5 years and all 10 have a different price on their Bloomberg terminal. Certainly a cause for worry. The second key point is that the rate of growth varies tremendously - from 14% to 23%. If this were a discounted cash flow model, and these ranges were being used to predict sales growth, the model wouldn’t have much validity would it?
So why don’t we, for the fun of it, try to do the math on this one? Let's start by getting one thing straight - we will try to calculate the maximum number of connected devices by 2020. Not the mean or median or most likely - the maximum. This will make our choice of numbers way easier - we will choose the highest plausible number for each part of our calculation. Ok let's get started.
Part I - The Humans and their Toys
There are currently 7.4 Billion people on Earth. (http://www.worldometers.info/world-population/) There are 3.36 Billion people connected to the Internet (http://www.internetworldstats.com/stats.htm). In addition, there are around 2 Billion smartphones in the wild - give or take a few million. (http://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/) So - using the “maximum” adage we discussed earlier - lets assume the following:
1) By 2020, each person who currently owns a smartphone will also own a laptop or some other kind of personal computer, including tablets. (This is NOT true, especially in Sub-Saharan Africa and Latin America where smartphones tend to be the only device people own, but its safe to say this would represent a reasonable Maximum)
2) The whole population of the Earth will have access to the internet by 2020. Again - who the hell knows - but its a good maximum. The world population will be around 7.7 Billion (http://www.worldometers.info/world-population/) at that time - at least that is the highest number I could fine from a reputable looking source.
And now for the real wild assumptions. Lets say that the ratio of A) peeps who own a smartphone to B) peeps who have internet will stay the same. Now that requires an intellectual leap of faith. We know internet access will not go down, but smartphone access might hit a peak at some point before 2020. Here we are assuming it doesn’t. More people get internet, and thus more people get smartphones. Now - when we combine B) with 1) and 2) we are saying that (2/3.36)*7.7 = 4.58 B people will have a smartphone and a personal computer by 2020. So this brings us to 9.16 Billion connected devices that people use to access the internet by 2020.
Part II - The Industrial IoT
But what about the Industrial Internet of Things? Arduino, Raspberry Pi, sensors made by Ericsson, routers made by Cisco, drones, cars and planes? Well we can’t calculate that one based on the population of earth. But what about silicon chip manufacturing? Lets make some more assumptions:
3) This one is massive. Lets say 35% of all silicon chip shipments in 2020 will go into some kind of IoT device (not including those used by people directly). The raspberry pi 2 has a 900 MHz quad-core ARM Cortex A7 processor. Now suspend disbelief and imagine that every single factor floor in the world that makes silicon chips and processors will be rolling out this processor’s descendants in 2020. According to SEMI, in Q3 2015 there were 2,591 Millions of Square Inches (MSI) of silicon materials shipped. In June 2015, Freescale semiconductors revealed the i.MX 6Dual SCM processor - which measures in at 17mm X 14mm X height. (http://www.zdnet.com/article/freescale-launches-smallest-ever-dime-sized-iot-processor/) That is .66929 Inches * .551 Inches = .3688 square inches. You can make 7.025 Billion (2.591/.3688) of these processors in one quarter in 2016.
4) Great, so let's say this becomes the norm in 2020. If these IoT chips represented 35% of all the silicon chips produced in the world, that would be .35 * 7.025 Billion in one quarter and .35 * 28.1 Billion = 9.835 Billion in one year.
5) For the sake of keeping this article at less than a million pages, let's say that the number in 4) will be the number of Industrial IoT chips we have in the wild in 2020.
Great. We are done! Adding the results from part I and II we get: 9.16 Billion + 9.835 Billion = 18.995 Billion connected devices by 2020
Hey that’s just barely above the lowest number on the chart! Either our calculations are too conservative or everyone else is too optimistic.
Of course you could make the argument that using 35% in assumption 3 is a bit arbitrary. Granted. But given the fact that WSTS said smartphones and computers alone made up for 65% of all semiconductors in 2014 (blog.semiconductors.org) it doesn’t seem like such a crazy assumption. Going with the mantra of reaching the absolute maximum number given somewhat reasonable assumptions, we could say 50% (gasp!) of all semiconductor production will go towards industrial IoT in 2020 which would lead to 14.05 + 9.16 = 23.21 Billion devices. That’s still 5 billion less than the second lowest estimate (from IT research group IDC) on the chart.
Conclusion: If someone tells you there will be 50 Billion connected devices by 2020, tell them to read this article.
Originally posted on Data Science Central