24 Oct 2022

Outsourced manufacturing makes up more than 50% of global cellular IoT module shipments

2022 has seen strong growth for global cellular IoT module outsourced manufacturing.

Reports suggests global cellular IoT module outsourced manufacturing was responsible for 52.4% of the total Internet of Things module shipments in the first half of 2022. This was one of the many insights from the Global IoT Module Manufacturing Tracker, which features research from technology analysis firm Counterpoint.

New report denotes growth for IoT module manufacturing industry

The report noted growth for many players in the global cellular Internet of Things module manufacturing industry. Original design manufacturers (ODM) saw a year-on-year growth of 45% in the first half of 2022.

Electronics manufacturing services (EMS) experienced a year-on-year growth of 30% in the first half of 2022. Meanwhile in-house manufacturers of global cellular IoT modules grew by 21% year-on-year in the first half of 2022.

Global cellular IoT module shipments share by vendor, in Q2 2022. Research and photo provided by Counterpoint.

Global cellular IoT module shipments share by vendor, in Q2 2022. Research and photo provided by Counterpoint.

Recovery observed for the global cellular IoT module market

The report reveals that the global cellular Internet of Things module market has recovered in the second quarter of 2022, after declining in the first quarter.

“In the past few years, leading Chinese OEMs have grown significantly in size. They have experience in managing supply chain partners and manufacturing allies,” said Ivan Lam, Senior Analyst at Counterpoint

“Leading OEMs have brought in multiple supplier policies to maintain their cost competitiveness, which gives them an advantage in terms of cost offering.”

The top ten leading players within original design manufacturing and electronics manufacturing services made up two thirds of the total IoT module outsourced manufacturing in the first half of 2022.

As noted by Counterpoint, leading ODM/EMS suppliers of IoT module manufacturing like Qisda and BYD Electronics hail from mainland China and Taiwan. Dominant EMS companies like USI and Jabil are said to be helping the leading OEMs in terms of international expansion.

“Manufacturing cost is still one of the key elements of an IoT module’s cost structure, apart from the cost of the components. Leading OEMs are growing rapidly in China and they are likely to predominantly hire manufacturing partners that have production sites within the country,” said Mr. Lam of the report.

“However, we observed that OEMs also hired EMSs with global production sites, such as production facilities in Mexico or Brazil to cater to the North America and LATAM markets. We forecast the manufacturing capacity utilisation in India, Southeast Asia and LATAM will continue to grow given the significant increase in IoT module applications in these markets.”

“We are expecting outsourced manufacturing shipments to grow at a CAGR of 17% between 2021 and 2026,” said Senior Analyst at Counterpoint, Soumen Mandal.

“The soaring IoT module market, driven by innovation and digital transformation, especially in the enterprise segment, will play a pivotal role in IoT module manufacturing. IoT module players may focus on building platforms and services instead of manufacturing IoT modules as they present recurring revenue generation opportunities.”

It is thought that this will be an opportunity for players with ODM and EMS to expand their operations within the module market.

“However, module players will try to increase control over the supply chain and look for vertical integration even for small components”, says Mr. Mandal.

“This will help IoT module players reduce costs and remain competitive in the market. With higher demand in the market, top OEM players are also looking to expand their EMS supplier base to tap global markets.”

IoT shipments increase in 2022

Despite a tight supply chain, as well as other global disruptions, the aforementioned global cellular Internet of Things module shipment segment grew 20% in the second quarter of 2022, when compared to the same period in 2021.

China remains the world’s largest IoT market, contributing to over 50% of the global demand. Meanwhile, North American and western European markets saw growth, while India was observed as having the fastest-growing module market, increasing by 264% year-on-year.

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