First it was Cisco (NASDAQ: CSCO). Then it was Google (NASDAQ: GOOG). Now, it’s Intel (NASDAQ: INTC).
Technology bellwethers are pushing the Internet of Things (IoT) in full force — from $19 trillion industry estimates to $3.2 billion acquisitions to entire IoT platforms, like the one Intel revealed at a San Francisco launch event earlier this week.
It shouldn’t be much of a surprise that Intel (or any other big name tech company, for that matter) is betting big on the IoT market. ABI Research’s latest data shows more than 10 billion wirelessly connected devices in the market today, with over 30 billion devices expected within five years.
No doubt this will be one of the most disruptive market events in decades.
Intel’s projection is even larger, though, with an expected 50 billion connected devices within five years, 400 million of which will be wearable. The wearable market will be a major focus for the company in coming years.
According to Doug Davis, head of Intel’s IoT department, the company will be taking several steps to spearhead what it believes to be the future of the Internet.
Intel’s IoT division’s revenue is already expected to grow 18% this year to $2 billion, but the company still has much greater ambitions in mind for years to come.
Intel is approaching the IoT from multiple angles and essentially wants to be the face, body, and brain behind these connected devices. That is, the company is developing its own line of wearable devices, internal components, and a single platform for customers to create Internet of Things applications and products.
The Face
Intel is partnering with a collection of companies typically found outside the technology sector to create a line of personal connected devices — better known as wearable technology. This includes partnerships with watchmaker Fossil, fashion brand Opening Ceremony, and eyeglass maker Luxottica.
According to Vice President Mike Bell:
“… non-traditional players are realizing that these things are getting smart, technology is at the point where it can be embedded in their devices, and thankfully we struck partnerships with them to make the best wearables on the planet.”
Of course, we’ve yet to see any of these products just yet, but 2015 and 2016 should be exciting years for Intel’s product line.
Body and Mind
As for the company’s IoT platform, it’s essentially a set of “building blocks” centered on Intel’s components and software. The idea is that the platform will make it easy for companies to create wirelessly connected devices, but only if they use Intel’s chips and infrastructure.
This strategy of establishing a common platform could put Intel at an extreme advantage when it comes to the Internet of Things — much in the way Windows/MS-DOS allowed Microsoft to establish dominance on the PC and how Android allowed Google to establish dominance in mobile.
As for partnerships with established tech companies, Intel announced it will be working with Accenture (NYSE: ACN), Booz Allen Hamilton (NYSE: BAH), Capgemini, Dell, HCL, NTT DATA, SAP, Tata Consultancy, and Wipro (NYSE: WIT).
Notably, the announcement of these partnerships comes less than a month after initial rumors that Intel will be powering the redesigned version of Google Glass.
Judging by the level of interest Intel is seeing right now, we could be looking at a rare growth opportunity for the already well-established technology company.
Intel currently trades at 17.6 times its annual earnings, making it relatively cheap compared to players like Google and on par with high-performing tech companies like Apple (NASDAQ: AAPL).
In the world of large-cap technology companies, Intel is a must-own.
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Putting Your Chips on Chips
In the same week Intel announced its ambitions for penetrating the IoT market, KPMG Research released its annual Semiconductor Industry Confidence Index.
A few interesting pieces of information from that here:
- 76% of 155 businesses surveyed expect to be in expansion stages in 2015
- 80% expect an increase on the top line
- 61% predict sensors will provide the strongest sector growth opportunity in 2015
KPMG points out in the survey release that sensors are crucial to automotive technology applications, touchscreens, wearables, and — of course — the Internet of Things.
Specifically, we’re going to see an uptick in the production of things like accelerometers, gyroscopes, magnometers, and other micro machines capable of transforming physical information into the digital realm.
The companies behind these technologies won’t be making headlines like Intel, but they will no doubt be crucial to the rollout of the IoT.
We recommend you keep an eye out in the coming months for our incoming IoT stock picks.
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Until next time,
Jason Stutman
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