IT market research agency IDC has revealed the global spending on the Internet of Things (IoT) for 2016.
IoT spending — hardware, software, services, and connectivity — is forecast to reach $737 billion in 2016.
Global IoT spending will experience a compound annual growth rate (CAGR) of 15.6 percent over the 2015-2020 forecast period, reaching $1.29 trillion in 2020, said IDC.
China and the United States will be making investment in IoT solutions to account for double-digit annual growth rates and over half of the IoT spending.
Manufacturing will be making $178 billion towards IoT investments in 2016.
Transportation’s IoT spending will be around $78 billion.
Utilities will be spending $69 billion towards IoT.
Consumer IoT purchases, the fourth largest market segment in 2016, will become the third largest segment by 2020.
IDC said Cross-Industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, will rank among the top segments throughout the five-year forecast. Insurance, consumer, healthcare, and retail will see the fastest IoT spending growth.
Manufacturing operations is the IoT use case that will see the largest investment of $102.5 billion in 2016. Other IoT use cases being deployed in Manufacturing include production asset management and maintenance and field service.
Freight Monitoring with $55.9 billion will drive much of the IoT spending in the transportation industry.
In the Utilities industry, combined investments in Smart Grid for electricity and gas will total $57.8 billion in 2016.
Smart Home investments by consumers will more than double over the forecast period, reaching more than $63 billion by 2020.
In the Insurance industry, telematics will be the leading use case while remote health monitoring will see the greatest investment in the Healthcare industry.
Retail firms are already investing in a variety of use cases, including omni-channel operations and digital signage.
Hardware will remain the largest spending category throughout the forecast, followed by services, software, and connectivity.
While hardware spending will nearly double over the five-year timeframe, it represents the slowest growing IoT technology group.
Software and services spending will both grow faster than hardware and connectivity. Hardware spending will approach $400 billion by 2020.
Modules and sensors, that connect end points to networks, will dominate hardware purchases, while application software will represent more than half of all IoT software investments.
Asia Pacific (excluding Japan)will see the greatest IoT spending throughout the forecast, followed by the United States, Western Europe, and Japan.
Nearly a third of IoT purchases in APeJ will be made by the manufacturing industry, while Utilities and Transportation will change places as the second and third largest IoT industries by the end of the forecast.
In the United States, Manufacturing will be the industry with the largest IoT investments throughout the forecast but with a lower share (roughly 15 percent) of total spending.
In Western Europe, Consumer IoT spending will overtake Transportation and Utilities to become the second largest IoT industry in 2020.
“It is great to see that the Internet of Things will continue to fuel both business transformation and innovation acceleration markets such as robotics, cognitive computing, and virtual reality,” said IoT research fellow and senior vice president Vernon Turner.