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Internet of Things Prompts Soaring Demand for Innovative Sensors
Jul. 21, 2016 09:25PM PST
A new report from Lux Research identifies the market for innovative sensors as one to watch.
The Internet of Things (IoT) is one of those widely talked about developments that seems to encompass almost every aspect of technology. Needless to say, this makes it slightly challenging when deciding which areas of the existing tech market will profit the most from this future revolution.
Luckily, a new report from Lux Research titled “Sensor Innovation: Analyzing Investment Trends Across the $4.3 Billion Spend” identifies innovative sensors as one of the niches which is set to benefit the most from IoT growth. Tech investors, it’s time to take note.
Innovative sensors attract big investment
All told, there has been about $4.3 billion in funding funnelled towards sensor modules in the past decade. Remarkably, nearly 80 percent of this investment has been funnelled towards developers of innovative sensors. With $3.4 billion in investment over the past 10 years and much more of that to come, innovative sensors are becoming an appealing market for investors and major tech companies alike. The reason behind this demand? It all comes back to the IoT.
Internet of Things drives market growth
In a nutshell, the IoT refers to the proposed development of the internet in which everyday objects (think light switches, washing machines and microwaves) have network connectivity, enabling them to send and receive data. Essentially, it’s heralding a future where smartphones aren’t the only machines that are “smart.” Innovative sensors are necessary in order to make this dream of connectivity a reality.
As the IoT becomes a more imminent reality, investment in innovative sensors has really ramped up. Between 2006 and 2015, investment in this niche area has tripled. Last year alone, the market raked in a significant $486 million. In particular, large technology companies have been expressing an interest in this area. Samsung (KRX:005930) is investing $13 billion in this area. Meanwhile, Sony (NYSE:SNE) is raising $4 billion to concentrate on sensor production. Other tech giant Panasonic (OTCMKTS:PCRFY) has invested $780 million for image sensors, while IBM (NYSE:IBM) is putting $3 billion towards sensor data. Even the automotive company Ford (NYSE:F) is getting in on the action by unveiling a R&D centre on sensors for transportation.
Opportunities for new players
However, unlike some hardware markets, the market for innovative sensors isn’t exclusively dominated by huge companies. Small companies are also getting in on the action. Take First Sensor AG (FRA:SIS), for instance. Although American companies attracted nearly 80 percent of all investment in sensor technologies in the past decade, this Germany-based developer has made a name for itself as one of the market’s small cap players. The company is a developer and manufacturer of customer-specific sensor solutions. These products are used for the conversion of non-electric variables, such as radiation, light, pressure, flow rate, speed, position, and fill level into electric variables used in client’s electronic systems.
All told, Pallavi Madakasira, the Lux Research Analyst who authored the report, stated that “innovative sensor startups will continue to attract large amounts of venture investment as the Internet of Things emerges as the next major phase in computing, following on the heels of the PC and mobile eras.” From startups to small cap players, there is lots of opportunity in this market. Therefore, everybody who is looking forward to the IoT as the next big thing should consider innovative sensors as a stepping stone to the future.
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Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.