28 February 2022
Econ 4.0: Plan to tee with IoT?
Here’s a gaming story with a gestational twist: A youthful golfer sliced his golf ball into a chicken coop where it struck one of the hens and killed it. The golfer was apologetic and wanted to compensate the poor farmer. “I’m terribly sorry,” the golfer said. “My tee shot accidentally hit one of your hens and killed it. Can I replace the hen?” The farmer scratched his head. “I don’t know if you can, young man. How many eggs a day can you lay?”
If that quip made you smile, this should make you snigger: The most intuitive process to analyse your swing would be to embed Internet of Things (IoT) chips in your club, right? True, but that’s passé. The modern method is to bundle a bunch of IoT chips inside the golf ball. That innovation comes from Graff Golf, a company set up by students from Johns Hopkins University in the US.
“Whether you’re hitting shots into a backyard net or playing your local course — your Graff smart golf ball is recording your shot data,” the company’s website promises. “The app lets you set shot shapes, add courses with scorecard tracking, and tracks your ball location up to 300ft.”
The keyword is “actionable insights”. That’s the promise of IoT. That it will free us from mundane jobs and automate processes in a wide range of industries — from manufacturing and mining to home care and healthcare. And that it will transform lives, change the face of business and lead us to the next global economic revolution.
US technological research and consulting firm Gartner says the market for IT services for IoT has been growing at a 34% annual clip since 2020, and will reach US$58 billion (RM242.84 billion) by 2025. The German market and consumer data outfit Statista says the total installed base of IoT-connected devices worldwide may cross 30.9 billion units by 2025, up sharply from 13.8 billion units in 2021. A significant catalyst will be 5G.
“The development of faster and more reliable networks, especially with the extensive rollout of 5G, will accelerate the pace of IoT deployment,” Statista reports. “Many vehicles are becoming connected, a trend that is forecast to continue both in the commercial and consumer connected car markets.”
What about Asia-Pacific? Global market intelligence firm IDC predicts that the region (excluding Japan) will see IoT revenue of US$437 billion by 2025, with a compound annual growth rate (CAGR) of 12.1% between now and then. The top drivers? Increased adoption of location tracking, facial recognition, remote working, cold chain logistics and monitoring of vaccines, video-centric applications, and deployment of 5G in the region.
“IoT in the Asia-Pacific region continues to grow steadily across multiple industries,” says Bill Rojas, adjunct research director at IDC Asia-Pacific. “They include transport, retail, manufacturing, resources and utilities — driven by the increased capacity and reliability of fibre and cellular network infrastructure.”
In the first phase, companies focused on a single use case and acquired the data streams from a single source. In the second phase, organisations gain a deeper data-driven understanding of their operations. They can then start to use other data sources — such as geolocation, machine maintenance data, weather, transactions data, vehicular telemetric traffic data — to improve their analytics and expand beyond the original use case.
Which sectors will lead the charge? Discrete and process manufacturing will see the most significant IoT spending in the Asia-Pacific, accounting for up to 33% of the total. Following that will be consumer devices and government-based projects. “Accelerating technology investments, especially in manufacturing, retail, transport, construction, and consumer sectors, will be in focus,” Rojas says. “Industries that will experience the fastest growth are construction and retail, with a growth of 13% each.”
Management consultant McKinsey notes that IoT stands at the forefront of our ability to bring together the digital and physical worlds in a manner that could have profound implications for both society and the economy. The benefits could be to improve operations, manage physical assets, as well as health and well-being. Against that backdrop, IoT can be the beating heart of digital transformation.
Manufacturing will be the epicentre. IoT-powered factories represent the most potential. By 2030, they could generate between US$1.4 trillion and US$3.3 trillion in value — or 26% of the total.
“The greatest potential for value creation in the factory setting will be optimising operations in manufacturing — making the various day-to-day management of assets and people more efficient,” McKinsey notes. “Overall, ops management applications in manufacturing could account for around 32% to 39% of the total potential IoT economic value created in the factory setting, or between US$500 billion and US$1.3 trillion, by 2030.”
This is vital because manufacturing is a crucial component of Malaysia’s economy and contributes about 23% to its gross domestic product. Up to 98% of companies in the manufacturing sector are small and medium enterprises, which are primarily Malaysia-focused but with great potential for export. The manufacturing sector employs 17% of the country’s workforce, compared with the services sector at 62%. That is natural, given that services need a substantial human component while manufacturing requires a significant capital outlay.
The second largest IoT value involves applications deployed in and affecting the human body. McKinsey estimates that IoT economic impact in the healthcare sector could reach around 14% of the total, or between US$500 billion and US$1.8 trillion, by 2030.
The concern? Sidestepping vulnerable sections of society.
Among the most vulnerable victims of the current pandemic are the aged and infirm. According to recent UN data, one in six people worldwide (close to 17% of the global population) will be 65 or more by 2050. That’s up from one in 11 in 2019 (9% of the worldwide population). Those aged 80 years or more may triple — from 143 million in 2019 to 426 million in 2050.
For perspective, about 2.1 million (6.5%) of Malaysia’s population was aged 65 and above in 2018. The country will have more than 15% of its population in this age group by 2035. Based on UN projections last year, Singapore’s population will reach 6.34 million in 2030. By 2030, there will be 806,000 people under 15 and 1.8 million aged 65 or older (28%). By 2050, the numbers will reach 722,000 and 3.08 million respectively, out of 6.58 million. In 30 years, almost half of Singapore’s population will be at least 65 years old.
The bottom line: What are the risks of IoT that we need to worry about? Are we opening a Pandora’s Box without mitigating the risks? The biggest bottleneck to IoT adoption is security — or lack of it. The IoT Cybersecurity Improvement Act of 2020 (IoT CIA) is the first US federal law regulating the security of IoT devices. Signed by President Joe Biden on Dec 4, 2020, the IoT CIA relies on the National Institute of Standards and Technology (NIST) to formalise IoT regulations in coordination with academia and the private sector.
According to a PwC study, California and several other US states, the European Union and the UK have been moving to regulate the largely unregulated IoT sector. “Their actions have had a big impact on global privacy and security law,” PwC notes. “The NIST recently drafted a proposed standard for IoT and has helped develop frameworks for best practices in cyber and privacy.”
Since we started with golf, let’s also end with it. An apparel retailer and a poultry farmer met for drinks after a game of golf. “Do you know why a golfer needs two pairs of trousers?” the retailer asked. “In case he has a hole in one.” The farmer nodded. “Why are golf balls like eggs?” the farmer asked. “Because they are white, sold by the dozen and a week later, you have to buy some more.” It was the beginning of a beautiful friend-chip.