Participant Summary

LPWAN Market Report – 2015

Date: 7 July 2015

2 Participant Summary – LPWAN Market Report 2015

Thank you for your participation

Lee Ratliff and Sam Lucero both thank you for your participation in the research process for producing the recently-published IHS report on the LPWAN market, entitled: “LPWAN Market Report – 2015: LPWAN services must be public, or they will be niche”. It was a pleasure to speak to you and we appreciate your time and insights. Please accept the top-line findings and forecast data below as a token of our appreciation. We look forward to future conversations.

Key Findings and Implications

During a research process that lasted from April 2015 to June 2015, IHS interviewed 25 LPWAN ecosystem players, including semiconductor vendors, LPWAN connectivity service providers, traditional operators, equipment manufacturers, solution developers, industry organizations, and application providers. These included interviews with the developers of leading LPWAN technologies currently in the market. In addition, IHS undertook extensive secondary research efforts, including examination of publicly-available company financial statements, whitepapers, product and service data sheets, press releases, and relevant trade journal articles from reliable sources. A key aspect of the secondary research processes was the synthesis of relevant finding from related IHS research programs, in areas such as smart cities, utility infrastructure, industrial automation, smart buildings, and smart homes. After evaluating these various information sources, IHS makes the following conclusions about the current status of the LPWAN market:

LPWAN is already widespread in private networks. The bulk of existing LPWAN connections are invisible or low profile, operating in private networks. Nearly 23 million LPWAN nodes are operating today and the vast majority are on private networks, using proprietary protocols or variations of standard protocols. Millions of LPWAN nodes have been deployed in water metering, gas metering, vehicle tracking, street lighting, and industrial applications. The emergence of public networks is a key inflection point for the LPWAN market, but private networks are quietly dominating the market today and will continue to play a critical role for years to come.

Public networks are critical for driving the next phase of LPWAN growth. Public networks are a prerequisite to addressing the long tail of the IoT. Public networks optimize infrastructure capex efficiency, enabling hundreds of companies to use the same network with no infrastructure investment. Because of the capex efficiency of public networks, they also tend to be more robust, with greater base station density to provide “deep coverage” and enable redundancy.

LPWAN will happily coexist with cellular M2M. Applications requiring high performance will continue to use cellular M2M, including LTE-M as it gets deployed beginning in 2017. However, LPWAN will be the best choice for the vast majority of IoT applications that do not need high bandwidth, low latency, or symmetric bandwidth. The market is big enough for both technologies to coexist without a market battle.

“Deep coverage” is a critical differentiator of LPWAN. The ability to reach nodes that are underground, in basements, or deep within large buildings, is a key selling point for LPWAN. This capability is critical for some applications such as water metering, building automation, and some industrial applications. No other technology can provide deep coverage in a cost effective manner.

3 Participant Summary – LPWAN Market Report 2015

LPWAN will be standardized. There are various standardization efforts underway for LPWAN. Ultimately, IHS believes the most successful LPWAN variant will be the one that becomes standardized through the 3GPP GERAN process, giving it instant credibility as a mainstream operator connectivity option.

LPWAN Market Forecast Overview In the report, IHS provides granular forecasts for the growth of annual LPWAN module shipments and shipment revenue, as well as cumulative LPWAN connections and connectivity service revenue, on a worldwide basis segmented by application and region, for the period from 2014 to 2019. IHS developed these forecasts using the following methodology. First, the installed base of LPWAN connections through 2014, and 2014 LPWAN module shipments, were estimated for each major LPWAN technology through a combination of primary research interviews with key players in the market and secondary research of publicly-available information sources, such as press releases, financial statements, white papers, and relevant trade journal articles. Second, IHS estimated the total available market (TAM) opportunity for each application segment listed below. In each case, IHS made use of existing forecasts from relevant adjacent IHS research programs in areas such as utility infrastructure, smart cities, industrial automation, and smart buildings. Third, IHS estimated the penetration of LPWAN module shipments into each application segment through a process of primary research interviews and secondary research, extrapolating growth from the 2014 base year. Finally, estimates of the share of connections used in public networks, trends in module average sale prices (ASPs) and connectivity service average revenue per unit (ARPU), were developed similarly through a process of primary and secondary research. IHS segments the LPWAN forecast on an application basis as spanning five broad categories: Smart Industry, Smart Utilities, Smart Cities, Smart Buildings, and Other applications.

Smart Industry – Smart Industry is the most diverse of the five application categories. It includes applications such as asset tracking, process automation, discrete automation, environmental monitoring, industrial lighting, commercial security, infrastructure monitoring, water management, and a variety of other applications.

Smart Utilities – Smart Utilities include applications related to the intelligent management of electric, water, and gas distribution, consumption, and billing. This segment is dominated by smart metering.

Smart Cities – Smart Cities include applications related to the management of municipal resources and services. Examples include street lighting, waste management, parking management, environmental monitoring, traffic monitoring, emergency management, and public transportation management.

4 Participant Summary – LPWAN Market Report 2015

Smart Buildings – Smart Buildings covers applications related to building automation, including HVAC (heating, ventilation, and air conditioning), energy management, security, lighting, and room automation.

Other – Includes all applications not covered by the categories above. Example application areas include, but are not limited to, agricultural, automotive, consumer, medical, and military applications.

Table 9 shows an overview of LPWAN global shipments across all applications. IHS forecasts total module shipments to grow at a compound annual growth rate (CAGR) of over 106%, from 2.97 million units in 2014 to over 112 million units in 2019. During the same period, LPWAN module revenue is expected to grow at an 87% CAGR, from $27.3 million in 2014 to over $625 million in 2019. Module ASPs are forecast to decline at a -9.5% CAGR during the forecast period, falling from $9.20 to $5.60 per unit. Price erosion is expected to accelerate during the forecast period as volumes increase and some degree of commoditization occurs.

The IHS forecast overview for global LPWAN connections and service revenue across all applications is shown in Table 10. IHS forecasts that total device connections will increase from 22.9 million in 2014 to 191 million in 2019, a CAGR of 53%. Total LPWAN service revenue is forecast to increase from $202 million in 2014 to $8.26 billion in 2019, a CAGR of 110%. The annual average revenue per unit (ARPU) is forecast to decline from $14.60 in 2014 to only $5.90 in 2019. Typically, in any large network, the incremental operating cost of an additional node is almost negligible, giving network operators plenty of room to lower the service price to find the optimal point to maximize revenue. This pricing flexibility increases as the number of connections increase, leading IHS to forecast that ARPU will decline at -16.5% CAGR during the forecast period. (Please note, these are ARPU per year, not ARPU per month.)

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Report Table of Contents Below is the full table of contents for the 22-page report:

Key findings and implications

LPWAN is not a new phenomena

So what has changed for LPWAN now?

“LPWAN” actually consists of a number of different technologies

LPWAN technology is best-suited for specific types of M2M and IoT applications

LPWAN technology suppliers are a mix of established and new companies

Annual shipment forecast: public networks drive triple-digit growth through 2019

Connections forecast: Smart Industry to account for 55% of all LPWAN connections by 2019

Recommendations and points for consideration

Appendix: LPWAN key actors list In addition, below is the full list of tables and figures included in the report:

Table 1. LPWAN global module shipment forecast, by application, 2014 – 2019

Table 2. LPWAN global module revenue forecast, by application, 2014 – 2019

Table 3. LPWAN global module shipment forecast, by region, 2014 – 2019

Table 4. LPWAN global module revenue forecast, by region, 2014 – 2019

Table 5. LPWAN global connections forecast, by application, 2014 – 2019

Table 6. LPWAN global connection revenue forecast, by application, 2014 – 2019

Table 7. LPWAN global connection forecast, by region, 2014 – 2019

Table 8. LPWAN global connection revenue forecast, by region, 2014 – 2019

Table 9. LPWAN global module shipments, ASPs, and revenue forecast, 2014 – 2019

Table 10. LPWAN global connection, ARPU, and revenue forecast, 2014 – 2019

Figure 1. LPWAN global module shipment forecast, by application, 2014 – 2019

Figure 2. LPWAN global module revenue forecast, by application, 2014 – 2019

Figure 3. LPWAN global module shipment forecast, by region, 2014 – 2019

Figure 4. LPWAN global module revenue forecast, by region, 2014 – 2019

Figure 5. LPWAN global connections forecast, by application, 2014 – 2019

Figure 6. LPWAN global connection revenue forecast, by application, 2014 – 2019

Figure 7. LPWAN global connection forecast, by region, 2014 – 2019

Figure 8. LPWAN global connection revenue forecast, by region, 2014 – 2019 Please contact us if you have questions about the content contained in the report.

IHS Company Overview

IHS is a U.S.-based, publically owned company, with over 8,000 employees based in over 30 countries throughout the world. IHS offers information, analytics and expertise to organizations around the world. They depend on our insights to help them make decisions about everything from day-to-day operations to long-term investments.

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Our clients include decision-makers at every level, across virtually every industry:

The IHS group is aligned into key verticals as described below:

IHS INDUSTRIES

IHS Technology provides support to our customers in the areas of component, industrial, commercial and consumer technology, including applications and sales channels to consumer markets in media, advertising, data, voice and mobile. The group is segmented according to the graphic on the following page:

7 Participant Summary – LPWAN Market Report 2015

IHS M2M Intelligence Service

The M2M Intelligence Service combines strategic analysis and real-time forecasts, allowing for unparalleled insight into all the key aspects of the dynamic and rapidly evolving M2M industry. Clients of the service receive a continuous flow of research and data, provided through a variety of deliverables, including in-depth reports, comprehensive presentations, timely analyst insights, and a regularly updated market tracker. Also, clients have direct access to our experienced team of M2M analysts, ensuring prompt responses to all of your time-sensitive questions and requests. IoT Connectivity Intelligence Service

In order to provide thorough coverage of this dynamic industry, IHS has developed the IoT Connectivity Intelligence Service, covering more than 25 connectivity technologies in 34 IoT application segments. This service, combining strategic analysis and real-time forecasts, provides clients with the insight needed to make critical business decisions and maximize growth opportunities in the burgeoning IoT market.

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Project Management and Staffing Plan

Sam Lucero – Senior Principal Analyst, M2M & IoT

Sam Lucero is a seasoned industry analyst with over a decade of experience analyzing telecommunications and networking technology markets. He has spent the last seven years assessing the markets for machine-to-machine (M2M) and Internet of Things (IoT) applications. Sam has established leading M2M market research programs and managed international teams of industry analysts.

He has authored numerous reports, forecast databases, and topical articles covering various aspects of the M2M/IoT market opportunity and has been widely quoted in news and trade journals, from the New York Times and the Economist to CNET and Wireless Week. Furthermore, Sam has moderated, presented, and judged at a number of industry events, including CTIA and Connected World. In 2014 Sam was named one of six “Augural Analysts” for M2M by Connected World Magazine.

Lee Ratliff – Principal Analyst, Connectivity & IoT

Lee Ratliff is a connectivity and communications analyst responsible for directing IHS coverage of low-power wireless, broadband, and home networking semiconductors and technologies. His coverage is focused on examining what opportunities will emerge as data connectivity reaches the most isolated applications and unlocks captive value.

Before coming to IHS as an analyst, Lee spent his career in the semiconductor industry in roles ranging from hardware and software

design to product marketing and account management. At Texas Instruments, Lee specialized in connectivity technologies such as FireWire, USB, HDMI, UWB, and others. He has extensive knowledge in semiconductor design, fabrication and operations; as well as all phases of product development and the dynamics of markets driven by consumers and service providers.