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Omdia view

This report offers an early view of how COVID-19 is likely to affect the IoT market and, more
specifically, IoT demand in various industry verticals. To be clear, the human and societal impact of
this pandemic is abundantly more important than how it affects “things.” Still, the virus is changing
how humans interact and how businesses operate. Supply chains and the labor supply have been
negatively disrupted across most industry verticals. While connectivity has helped alleviate some of
these issues, especially through remote work, it is becoming clearer that on top of the health
ramifications a recession is impending. Among other impacts, this will almost certainly slow IoT
investment and deployments. As well as extending timelines for IoT market growth in many sectors,
there may be some opportunities for IoT to shine. With major disruptions in global healthcare and
supply chains, governments, hospitals, insurers, and logistics providers are having to react quickly
and rethink how a more connected world could help better address the current crisis and avert or
mitigate future ones.

COVID-19 will disrupt IoT adoption across almost every vertical
In response to the virus, governments, businesses, and individuals have taken drastic measures to
curtail public movement and gatherings and encourage “social distancing.” Fleet and transport
companies have been hampered by restricted movement and border closings, and air shipments
drastically fell as planes were grounded for fears of further spreading the virus. These shutdowns
have given rise not only to labor shortages but also to major disruptions in supply chains. While the
short-term impact is undeniably negative, it may eventually drive greater interest in autonomous
trucking/fleets. This could spur both the efforts of and investment in companies like Daimler, Tesla,
TuSimple, and Waymo.

Automotive OEMs have struggled with production, as parts previously sourced in China could not be
delivered to production centers across the world. OEMs are also recognizing that that a virus-induced
recession will lead to drastically declining sales in the short term and potentially beyond. GM, Fiat
Chrysler Automotive (FCA), and Ford have shut down plants in North America as well as some in
Europe. The situation is likely to bring a temporary halt to the growth in IoT investment by OEMs that
Omdia observed in 2019 and the beginning of 2020, such as Toyota’s $400m commitment to
autonomous driving start-up Pony.AI in February 2020. Given slowing vehicle sales, OEMs are likely
to protect their cash positions rather than commit to new major investments. On a brighter note,
General Motors has responded to the crisis by extending free OnStar services to GM vehicle owners,
including free Wi-Fi. This may lead to more consumers electing to pay for Wi-Fi once there is a return
to normalcy.

IoT adoption may slow in some verticals but accelerate in others
Government reactions to the virus and the restrictions imposed on the public have varied greatly from
country to country. While cities are becoming increasingly “smart,” this has done little to hamper the
spread of the virus. as governments ask people to avoid public transportation and businesses ask many 
employees to work from home. For all of the talk about the race to ride sharing (whether in
person-driven or autonomous vehicles), shared vehicles present a risk and need to be sanitized, and
public interest in using such services is likely to take a significant hit in the wake of the crisis. Waymo
has already voluntarily put its ride-hailing service on hold.

Other IoT use cases may see a boost. Some public security forces, including those in China, the UK,
and Spain, have used drones to surveil areas where restrictions on movement are in place, or to
broadcast updates and warnings. Drones fitted with thermal sensors and high definition cameras are
capable of detecting a person’s temperature from as far as 100ft away and can also be fitted with jets
to spray disinfectant.

Enabling citizens to gain access to necessary food and medicines under quarantine conditions also
presents opportunities for IoT. Drones can be a potential means for delivery of critical goods in places
where movement and contact restrictions are in place, although such solutions are likely to be niche
rather than deployed at scale. In February 2020, Nuro, an autonomous vehicle company with a focus
on delivery, received approval from the US Department of Transportation and NHTSA for road testing
its next generation self-driving delivery vehicle, the R2. While the solution is unlikely to be ready in
time for the current crisis, the need for it will have been clearly demonstrated. We expect to see such
initiatives accelerate.

Many markets have been extremely slow to embrace telemedicine, often due to consumer preference,
but also due to regulation and the sway that some insurance companies and other stakeholders have
influencing legislation. While a quick pivot to widespread use of telemedicine is unlikely given the
extraordinary demands now being put on medical professionals to support the immediate needs of
very ill patients, the value of broader use of telemedicine will certainly be clear in the wake of the
crisis, and this is likely to give a boost to development and adoption.

Slowed investment, delayed deployments, but pockets of potential
Currently, the largest effect of the virus on IoT markets will be a slowing of investments and delayed
deployments. The need to maintain cash reserves for everyday operations like payroll, and difficulty
sourcing onsite labor, will see many companies pause IoT projects. This is especially true of labor intensive
efforts such as installing smart metering. The tightening of capital markets will be
challenging for start-ups in need of new rounds of funding but could actually prove an opportunity for
well capitalized companies to acquire companies and IP inexpensively.

Capital-intensive sectors such as manufacturing may pull back on IoT investment or delay
deployments for fear of recession. Automotive OEMs will likely see slower vehicle production and
sales, but most major OEMs have already invested heavily in autonomous vehicle development, so
we expect them to continue to pursue development, though this too will likely be stalled in the short term
due to workers having to remain remote. Brick and mortar retailers are moving quickly to a
cashless approach in a bid to avoid spreading germs but need to consider the impact of leaving out
the unbanked and those without adequate access/understanding of technology.

The virus will force governments, hospitals, and insurers to rethink business-as-usual with regards to
healthcare. Remote monitoring systems for patients believed to be infected could reduce risk for
healthcare professionals. As 5G rolls out it can potentially become a very powerful technology for
allowing doctors to remotely monitor patients in real-time. More use of IoT data from connected healthcare 
and other devices could enable scientists to better model contagion and help proactively slow the spread of disease.
IoT can also be an important tool for governments monitoring quarantines. For example, 5G cameras
with facial recognition could be used to recognize those who have been mandated to quarantine
entering public space, with smartphone tracking used to identify others who have come in contact with
that person. There will be limited willingness to use such systems in many countries, but in times of
crisis they could be considered a necessary evil.