The Internet of Things (IoT) is a driving force for the digitalisation and competitiveness of the EU economy. This Study aims to identify IoT-related deficiencies in various IoT-related EU regulatory areas, such as the functioning of IoT/M2M roaming provisions, numbering, security, spectrum and competition, but excluding data-related policy issues, as these are already covered by a range of advanced EU initiatives. As a first step, we analyse the structure of the IoT market, and the relevant technologies, challenges and competitive situation, distinguishing between four market layers in the IoT value chain. Models for the provision of IoT services consist of combinations between these four layers, which are described in more detail in the Study. The first layer in the value chain is IoT hardware, comprising various building blocks used to collect data and enable connectivity, such as sensors, actuators and chips. Key technological trends in this layer include the enhancement of sensor technologies, improved computation and data storage capabilities, accentuated focus on Green IoT, and the proliferation of eSIMs. The main challenges to its growth include its highly fragmented structure, insufficient interoperability, and power consumption and battery life of IoT devices. The European IoT hardware market is generally fairly competitive in five out of its main six verticals (automotive, utilities, industrial IoT, smart agriculture and smart cities), but the sixth vertical (smart homes) is dominated by three significant hardware vendors, none of them European. There are still several barriers to entry in IoT hardware market, especially for SMEs, such as the difficulties of acquiring relevant capabilities, platform fragmentation and lack of interoperability, and lower band recognition. The second layer of the IoT value chain is IoT connectivity, responsible for transferring data from IoT hardware and facilitating communication between IoT devices and networks. The technologies used for short-range IoT connectivity comprise Wi-Fi, Mesh protocols, Bluetooth and Bluetooth Low-Energy, and Radio Frequency Identification (RFID). Those used for wide-area IoT connectivity include cellular networks, Low-Power Wide-Area Networks (LPWAN) and satellite connectivity. Important technological trends in this IoT layer include the proliferation of 5G with the emergence of 6G, increased reliance on low-power and wide-area technologies (LPWAN) (thanks to their long-range and low-power characteristics) and the expected growth of LEO-based satellite IoT connectivity. Challenges, on the other hand, consist of meeting the demand for high bandwidth and data throughput, interoperability, scalability, security and coverage. The competitive landscape for short-range IoT connectivity is highly fragmented, while the one for wide-area connectivity is consolidated, primarily around the larger MNO groups. Regulatory barriers to entry are more prominent in this value chain segment than in others. The third layer of the IoT value chain includes IoT applications, a highly fragmented market segment including IoT platform providers, solution providers and integrators. Key technologies expected to unlock the full potential of IoT applications include edge computing, AI, blockchain and digital twins. On the other hand, European IoT applications providers face challenges raised by technological evolution, security threats, competition by large non-European corporations or vertically integrated solution providers, interoperability and standardization. Finally, the fourth layer of the value chain includes IoT consumer or business users. End users, and enterprises in particular, are experiencing several challenges for adopting new IoT solutions mainly because of difficulties in identifying the value proposition, security considerations, integration to legacy systems and making a financial case. That said, it is important to capture the emerging use-cases and their respective technology enablers to understand where the overall IoT market is headed in the EU. We therefore take a closer look at several examples of such emerging use-cases, such as AI-powered home health monitoring, ultra-connected smart appliances, smart energy management systems, adaptive buildings, integrated renewable energy systems, facial recognition for advanced security, collaborative robots in manufacturing, advanced process optimization, sustainable manufacturing, smart supply chain management.
