How to address a fragmented marketplace: Creating common platforms
IoT devices have widely varying requirements for power, data-processing speed, form factor, price, and other dimensions. Smart water meters, for instance, need to run for months, if not years, independent of power supply. They also require high-range connectivity, but data rates can be under one kilobit per second. By contrast, IoT devices used for industrial automation typically require a direct connection to a power supply and high data rates, but their connectivity range is lower than that for smart meters.
These variations in device specifications become significant when considering R&D costs for a single chip. Assuming typical integrated-circuit design costs and product lifetimes, semiconductor companies will need to ship 20 million to 70 million chips annually to break even.2 Only a few segments, such as wearables, are large enough to require so many chips, making it impractical to create customized solutions for individual applications. But rather than abandon the IoT market, semiconductor companies should investigate an approach that involves classifying devices into archetypes based on their specifications and then creating a single platform to cover each one.
Products from multiple verticals can fall under one archetype as long as they have similar specifications. For instance, many low-cost applications have common requirements for short-range, medium-data-rate connectivity and limited data processing. If semiconductor companies create a common platform for applications that fit this archetype, they will simultaneously increase demand and reduce R&D spend. One downside of a platform approach is that the chips may not deliver optimal performance for every application they cover.