Spending on IoT Set to Surpass $1 Trillion in 2026

Worldwide spending on the Internet of Things (IoT) is forecast to be $805.7 billion in 2023, an increase of 10.6% over 2022, according to IDC. Investments in the IoT ecosystem are expected to surpass $1 trillion in 2026 with a compound annual growth rate (CAGR) of 10.4% over the 2023-2027 forecast period.

"The last few years have shown that connecting with a digital infrastructure is no longer a luxury, but a necessity," said Carlos M. González, research manager for the Internet of Things at IDC. "For organizations to excel in data-driven operations, investing in IoT projects is essential. Connecting devices to data networks to gather insight, expand operations, and increase performance are the hallmarks of executing an IoT ecosystem."

Discrete and Process Manufacturing are the industries that will see the largest investment in IoT solutions in 2023 and throughout the forecast period, accounting for more than one-third of all IoT spending worldwide. Professional Services, Utilities, and Retail are the next largest industries in terms of overall IoT spending with roughly 25% of the worldwide total. State/Local Government and Telecommunications will deliver the fastest spending growth over the five-year forecast with CAGRs of 12.0% and 11.7% respectively.

The two IoT use cases that will receive the most investment in 2023 are both closely tied to the manufacturing industries: Manufacturing Operations ($73.0 billion) and Production Asset Management ($68.2 billion). The next largest use cases – Inventory Intelligence ($37.6 billion), Smart Grid (Electricity) ($36.9 billion), and Supply Chain Resilience ($31.6 billion) – will benefit from strong investments from the Retail and Utilities industries. The use cases that will experience the fastest spending growth represent the diverse application of IoT technologies – Electric Vehicle Charging (30.9% CAGR), Next Generation Loss Prevention (14.5% CAGR), Agriculture Field Monitoring (13.9% CAGR), and Connected Vending and Lockers (13.8% CAGR).

"Updates to the IoT use case taxonomy in this release of the IoT Spending Guide reflect the evolving Digital Transformation investment objectives of enterprises. Thematically, greater investment in goods production and supply chains resulting from the COVID-19 pandemic and global reactions that caused massive business and societal disruptions are evident in the new use cases. These production and supply chain-related use cases can be seen in the Discrete Manufacturing, Process Manufacturing, Retail, and Transportation industries," said Marcus Torchia, research vice president with IDC's Data & Analytics Group. "Meanwhile, digital business investments are ramping up in other industries such as the Resource Industries. For example, IoT is helping to improve upstream supply chain processes in Agriculture, such as growing, harvesting, and delivering higher quality produce to market."

From a technology perspective, IoT services will be the largest area of spending in 2023 and through the end of the forecast, accounting for nearly 40% of all IoT spending worldwide. Hardware spending is the second largest technology category, dominated by module/sensor purchases. Software will be the fastest-growing technology category with a five-year CAGR of 11.0% and a focus on application and analytics software purchases.