Artificial Intelligence (AI) and the Internet of Things (IoT) are two of the most transformative technologies of our era. Increasingly, they’re being combined in what’s now commonly referred to as the AIoT.
IoT devices generate vast amounts of data with significant potential value. AI can analyse this data across various environments, from cloud data centres to network edge locations, and even directly on the IoT devices themselves. Each approach offers unique opportunities to extract insights and drive value from IoT data.
When we talk about AIoT, we’re specifically referring to the deployment of AI use cases directly on IoT devices. Running AI at the source offers a range of benefits, such as faster performance, better compliance, enhanced privacy and security, and often lower operational costs.
Learn more here.
The growth potential for AIoT is substantial. Transforma Insights projects that the number of AIoT connections will surge from 1.4 billion at the end of 2023 to 9.1 billion by the end of 2033, a more than sixfold increase over a decade, representing a compound annual growth rate (CAGR) of over 20%. This makes AIoT a rapidly expanding market, with annual net additions climbing from under 500 million in 2023 to just over 900 million in 2033.
To put this in perspective, we expect the total number of IoT devices to rise from 16 billion in 2023 to 39 billion by 2033. Based on this, we expect that the share of IoT devices equipped with on-board AI will grow from 9% in 2023 to 23% by 2033. While AIoT adoption accelerates significantly in the near term, the rate of growth tapers toward the end of the period, largely due to the saturation of AI capabilities in key consumer IoT applications.
Clearly, AIoT is not equally well-suited to different IoT applications and rates of adoption of AIoT will vary widely across different IoT Application Groups. The infographic below highlights how the adoption of AIoT varies across the biggest IoT Application Groups.
In the case of AV Equipment, for example, we expect that by 2033, approaching 4 billion of a total of 5.6 billion IoT devices will have AI capabilities onboard and so be AIoT. This application group refers to televisions, smart speakers and more and AIoT offers improved user interaction.
Similarly, a very significant share of Vehicle Head Unit and IT Infrastructure IoT devices will be AIoT. Conversely, a negligible (or zero) share of Inventory Management & Monitoring, Building Lighting, and Track & Trace IoT devices will have AI capabilities onboard.
As with IoT more broadly, consumer devices currently lead the AIoT space, accounting for 85% of connections in 2023. However, their share is expected to decline slightly to 81% by 2033. This trend reflects a fundamental dynamic which has also shaped IoT over recent years: the addressable market for consumer devices such as smartwatches, smart TVs, and smart speakers, essentially individuals and households, is significantly larger than that for specialised industrial equipment, like autonomous farming vehicles.
