Author: Zhao XiaofeiIoT Think Tank Original
Recently, the Ministry of Industry and Information Technology (MIIT) released the economic operation situation of the telecommunications industry for January to April 2024, mentioning that as of the end of April, the three major telecommunications companies have developed 2.44 billion cellular IoT terminal users, a net increase of 108 million compared to the end of the previous year, accounting for 58.1% of the total mobile network terminal connections (including mobile phone users and cellular IoT terminal users). The change in the number of cellular IoT terminal users largely represents the expansion of IoT application scale and is an important indicator and barometer for the industry to assess market size.
Nearly Triple Connection Growth in 5 Years Brings Huge Market Space for IoT Chips and Modules
Reviewing the annual “Telecommunications Industry Statistical Bulletin” published by the MIIT, there are statistics on cellular IoT. Data shows that by the end of 2018, the number of cellular IoT connections in the country was 671 million, and by the end of 2023, this number had reached 2.332 billion, nearly tripling in five years, indicating that the domestic IoT industry has experienced rapid development over the past five years.
Growth of Cellular IoT Connections from 2018 to Present
(Unit: 100 million, Data Source: MIIT)
The expansion of cellular IoT connections directly leads to large-scale shipments of IoT chips, modules, and terminals, and has become a key factor for the rapid growth of related companies. In recent years, the expansion of several domestic companies has largely benefited from the rapid growth of IoT connections.
By analyzing the publicly available IoT connection numbers, we can examine the changes in the IoT module industry. Of course, the IoT connection numbers released by the MIIT come from the three operators, mainly based on the number of cellular IoT cards activated by the operators. The number of IoT cards does not necessarily correspond one-to-one with the number of IoT modules, and multiple factors should be considered in the analysis process.
First, some manufacturers promote module chip integration in many scenarios, integrating the necessary components and functions of communication modules into a single chip through various chip packaging technologies, reducing costs and decreasing the use of modules, resulting in the number of activated IoT cards exceeding the number of IoT modules.
Second, the impact of multi-card devices. Due to network instability in some scenarios, users need terminals that can access multiple operators at any time, leading to some manufacturers providing solutions that write multiple operator IoT card configuration files into a single card for multi-network integration. During the operation of IoT terminals, they switch to different operator numbers based on the network environment. Some manufacturers also integrate multiple operator chip cards onto a single card or use eSIM technology to achieve multi-card integration. Regardless of the method, the number of activated IoT cards will exceed the number of modules.
Third, the impact of IoT cards used in illegal activities. A few years ago, IoT cards became important tools for carrying out online fraud. The Ministry of Public Security once announced the results of a special operation against online black production in 2020, preventing 18.5 million IoT cards from flowing into the black market, while the number of illegal mobile cards during the same period was 5.48 million, indicating that IoT cards have become a more common tool for online black production after mobile cards. Due to these factors, some of the IoT connections counted through IoT cards are not real connections, leading to a phenomenon where the number of connections exceeds the number of modules.
However, in recent years, regulatory authorities have implemented strict supervision over the safety management of IoT cards, significantly purifying this market. As early as 2020, the “Notice on Issuing the Implementation Guidelines for the Safety Classification Management of IoT Cards (Trial)” (Gong Wang An Han [2020] No. 1173) was issued, which has strict requirements for device-card binding to ensure that the connections formed by IoT cards are backed by effective IoT terminals.
Of course, the proportion of mismatched device-card numbers caused by the above three factors is not very high. As of now, among the more than 2.4 billion IoT connections, most are supported by IoT modules, constituting the market space for IoT chip and module manufacturers.
Analyzing the Changes in the Cellular IoT Module Market from Net Increase Data After 2020
Currently, the cellular IoT market has formed a dominant situation with LTE Cat.1 and NB-IoT. I believe we can examine the changes in the shipment volume of related modules and terminals based on cellular IoT connection data after 2020.
Why choose data after 2020? It is well known that in May 2020, the MIIT issued the “Notice on Deepening the Comprehensive Development of Mobile IoT,” which for the first time proposed the policy document to “promote the migration of 2G/3G IoT services to new networks,” providing a clear expectation for the entire industry. Before this, 2G connections dominated cellular IoT connections, but after the release of this document, NB-IoT and Cat.1 quickly shipped, while 2G connections rapidly declined, leading to changes in the market structure of cellular IoT connections. It can be said that 2020 is an important watershed that directly affects the current pattern of the cellular IoT market.
Before 2020, 2G connections were the mainstay of existing cellular IoT terminals, while the net increase in connections over the past few years has been mainly driven by Cat.1 and NB-IoT, forming the current new pattern.
According to publicly available data, the net increase in cellular IoT connections in the years following 2020 is:
Net increase of 262 million for the entire year of 2021;
Net increase of 447 million for the entire year of 2022;
Net increase of 487 million for the entire year of 2023;
Net increase of 108 million for January to April 2024.
From the end of 2020 to the end of April this year, the net increase in cellular IoT connections has exceeded 1.3 billion. Coupled with the large number of 2G terminals being replaced, the newly added cellular IoT connections in the past three years will far exceed 1.3 billion. As mentioned above, although the number of activated IoT cards by operators does not equal the number of IoT terminal chips and modules, the gap between the two will not be too large. Based on the publicly available cellular IoT connection numbers, it is estimated that in the past three years, the cumulative shipment of cellular IoT chips and modules has far exceeded 1 billion units.
So, what constitutes this shipment of over 1 billion units? After 2020, the shipment of 2G/3G chips and modules cannot occupy the mainstream, and the proportion of 5G chip module shipments used in IoT is also very small. Cat.4 has a certain market share, while Cat.1 and NB-IoT have been the main players in the past few years, together constituting a scale of over 1 billion units.
Taking Cat.1 as an example (including Cat.1 bis), due to strong demand from multiple industries, coupled with the replacement of 2G/3G and rapidly declining costs, a supply pattern has formed with multiple chip manufacturers such as Unisoc, Aowei Technology, Yichip Communication, Chip Wing Information, Zhilian An, Xincheng Technology, and Chuangxin Huilian, with cumulative shipments expected to reach nearly 400 million units over the past three years, becoming the most significant form of cellular IoT connections currently.
Previously, the MIIT published statistical bulletins that included the main application scenarios and industries for cellular IoT. For example, the 2021 statistical bulletin indicated that the terminal users of cellular IoT in smart public utilities, intelligent manufacturing, and smart transportation accounted for 22.4%, 18.1%, and 15.6%, respectively, with these three fields occupying 56% of the share. However, in the statistical bulletins of the following years, the industry application situation has not been published again, possibly due to the limitations of statistical caliber and the continuous expansion of application fields, making it challenging to conduct detailed statistics on industry application ratios.
It is worth noting that compared to the past two years, the growth rate of cellular IoT connections in January to April 2024 has significantly slowed down. The net increase in cellular IoT connections in January to April 2024 was 108 million, while the net increase in the same period in 2022 was 159 million, and in 2023 it was 167 million. If this trend continues, the net increase in cellular IoT connections for the entire year of 2024 is expected to be slightly above 300 million, with the underlying reasons being whether the replacement of existing 2G/3G connections or a decline in new demand. The decline in net increase in connection numbers will inevitably directly impact the shipment volume of chips and modules for manufacturers in 2024, posing a significant challenge for the cellular IoT industry.
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