Artificial Intelligence (AI) and the Internet of Things (IoT) are two of the most impactful and far-reaching technology developments of our time. Increasingly these two technologies are deployed together and the term ‘AIoT’ has come to the fore.
IoT devices can generate significant amounts of potentially valuable data and AI can be applied to this data in many locations, including ‘cloud’ data centres, various network edge locations, and on board the actual IoT devices themselves. All of these approaches have the potential to unlock significant value and new insights from IoT data.
When we refer to ‘AIoT’ we mean the deployment of AI Use Cases on board IoT devices.
Applying AI to IoT data on board the source IoT devices can bring significant benefits, including improved performance, enhanced compliance, privacy and security and potentially reduced operational costs.
The potential for AIoT is significant. As illustrated in Figure 2 1, below, Transforma Insights forecasts that total AIoT connections will grow from 1.4 billion at the end of 2023 to 9.1 billion at the end of 2033. This is a more than 6-fold growth in 10 years, resulting in a CAGR of over 20%. Overall AIoT represents a significant market with net additions growing from less than half a billion in 2023 to just over 900 million in 2033.
For context, we forecast a total of 39 billion IoT devices at the end of 2033, up from 16 billion at the end of 2023. Accordingly, as illustrated below, we forecast that 9% of IoT devices have on board AI in 2023, rising to 23% in 2033. The rate of growth of AIoT penetration of IoT devices slows towards the end of the forecast period, primarily due to the AIoT penetration of key consumer IoT applications reaching saturation.
As is the case with IoT, consumer devices dominate AIoT although the share does decline, falling from 85% in 2023 to 81% in 2033. This is mostly a result of a simple underlying dynamic, which is that the addressable markets for devices like smart watches, smart TVs and smart speakers (i.e. individuals and households) are far larger than the addressable market for, say, autonomous agricultural vehicles.
Accordingly, by 2033, the most numerous AIoT applications will be those that are used by consumers, including AV Equipment, Vehicle Head Unit (i.e. connected cars), IT Infrastructure, and Personal Portable Electronics. However, more industrial applications such as AI-enabled CCTV and Usage Based Insurance will also contribute significantly to the market, with non-consumer contexts accounting for approaching 20% of the installed base of AIoT devices by 2033.
