THE INTERNET OF THINGS

Steve KoenigSr. Director, Market Research

Trends, Technologies, and Opportunities

Internet of Things is more than a trend.

It’s a connected revolution fostering a global shift in the way we live, work and play.

Industrial Revolution IoT Revolution

Technology’s Magnificent Seven

2017 Global Tech Spending = 81%754 Billion USD

2017 Global Connected Device Spending = 88%827 Billion USD

2020 - Gartner: 20.4 billion2020 - Cisco: 26.3 billion2020 - IHS Markit: 30.7 billion 2021 - Juniper: 46 billion2022 - Ericsson: 29 billion2025 - IHS Markit: 75.4 billion

Sources: Ericsson: Nov 2016 Mobility Report ; Gartner: 2017 Press Release; IHS Markit: Whitepaper, March 2016; Juniper: 2016 Press Release; Cisco: VNI Forecast

How many IoT devices worldwide?

DEVICES FUTURETECH

Devices represent the visible part of the IoT ‘spectrum’.

China Malaysia Vietnam Indonesia Philippines

#1

99% 99% 97% 98% 98%

#2Desktop

89%Laptop

93%TV

94%Headphones

95%Smartphone

96%

#3Laptop

88%TV

89%Laptop

94%TV

94%TV

96%

#4Digital camera

85%Headphones

80%Headphones

91%Laptop

94%Laptop

91%

#5Headphones

83%Digital camera

80%Feature phone

88%Feature phone

85%Tablet87%

APAC Region: Top Five Tech per Country*

Source: CTA Asia-Pacific Tech Adoption Study, May 2016 * Among Online adults

Smartphones: The Heart of IoT

61 38 24 14 11 9

260 352 379 401 431 432

17%21%

3% 3%6%

0%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015 2016fcst 2017fcst

Global Mobile Spending (USD bn)

390 402 416 442 441

321

Smartphones

StandardPhones

VPS 16 eye-tracking glasses

Gear S3 smartwatch Spartan Boxer Brief

Global Wearables Market In High Gear(Units in Millions)

26 45 66 8719

38

757

8

11

14

122%

58% 50%

0%

20%

40%

60%

80%

100%

120%

0

20

40

60

80

100

120

140

160

180

2014 2015 2016fcst 2017fcst

35

77

122

184

3Others Wrist Sport Computer Smartwatch Health & Fitness Tracker y/y Wearables

Digital Assistants: Personification of IoT

Today Tomorrow

Assistance Embedded

Lenovo Smart Assistant

C Lamp by GESamsung

Powerbot VR7000

NvidiaSpot

SomfyOne

C-WayMemoo

Alexa: Rapidly Moving Beyond Devices

Ford Motors ties up with Amazon’s Alexa LG Smart InstaView Refrigerator

Home Theater: Then & Now

15%

39%

42%

45%

55%

59%

62%

66%

71%

82%

Airplay-enabled

Support for other audio/video inputs (e.g., optical audio or S-video)

Built-in streaming services

Multi-room system capability

Number of HDMI inputs

USB connections

Wireless components (such as a wireless sub-woofer or surroundsound speakers)

Smartphone or tablet connectivity

Bluetooth-capable

Wi-fi-enabled

AVR Feature Importance: Connectivity

Source: CTA, State of the Home Audio Theater, October 2016

The Next Decade Now

5G Connectivity: Coming Soon•Higher speed, greater capacity, lower latency

•Potentially 40 times faster; some say 25-30 Gb/second

•Several wireless companies investing in development• Ingredient technology:

Smart CitiesWireless VR

Self-Driving Cars

5G:How fast is it?

5G Deployment: Trend Impact

•Key ‘ingredient’ technology•Much deeper impact than personal mobile device pursuits•Connected workforce•Smart Cities•New business models

Japan Targets 2020 for 5G Deployment

•2020 launch targeted by Ministry of Internal Affairs and Communication.

•Opportunity for Japan to market its 5G standards work to global community.

•R&D tests proceeding in Japan.

Two Approaches to Autonomy

• Evolution of singular ADAS features• SAE Levels 1 and 2• Automated Driving• Step-by-Step approach• Existing automotive strategy

• Future of Mobility • SAE Levels 3, 4 and 5• Self-Driving - No operator required • Requires advanced robotics and AI• Pursued by tech industry

Self-Driving VehiclesDriver Assist Technologies

The Evolution of Self-Driving Cars

2015 20202010 2030

Leve

l of A

uton

omy

2025 2035

Level 1

Level 4

Level 3

Level 2

Level 5Self-Driving

Cars

DriverAssist Tech

2040

Fully Autonomous Vehicle Driverless door-to-door

Active (control-based) ADAS SolutionsActive lane keeping, adaptive cruise control, automatic emergency braking, etc.

Highly Autonomous Vehicle Driverless in certain areas

Conditional Autonomy Full automation on a highway –driver required to resume control

Partial Autonomy Full automation within a lane

SAE Levels

Japan Wants Self-Driving Cars for 2020 Olympics

•Government to soon release guidelines. •Road tests of driverless trucks, taxis and buses planned for this year.

•Seen as key technology in Japan’s ‘graying’ economy.

A drone test conducted in Hyogo Prefecture last October.

Drones: Flying High

Drones: What’s all the Buzz?•Commercial / Industrial Uses explored in Japan.•2017 CES Trend: Object detection and avoidance•Drones and privacy: citizen concerns• Japan: TEPCO, Zenrin to develop drone ‘highways’ along powerlines.

Artificial Intelligence

•Beyond IoT – Adding Intelligence•Deep Learning

•Software learns from data (i.e., experience)

•Neural Networks•Processing devices from algorithms to hardware

•Japan’s Abe: No Fear!

Smarter than you think!

Terminator image

What can AI do?

This is a cable harness used for suspension bridges. All of three versions can carry the same structural loads and forces.

The machine learning designed version on the rightaccomplishes the same architectural goal but weighs 75% less.

Artificial Intelligence: Trend Impact

• AI will take on all kinds of tasks, such as those we:• Don’t care to do • Can’t do• Need all the help we can get

• Data as (artificial) brain food• Greater AI integration will generate societal impacts

Robotics in the Consumer Market

Hub Robot Lawn Mowing Robot

AirbotBlack and Decker Smartech Robot VacUbtech Lynx

Mayfield Robotics Kuri Leka LG Robots at CES

Witness the ‘Robotic Revolution’

From Honda’s Asimo … To Toshiba’s Aiko…

Robotics: Trend ImpactQuickly Moving Beyond Simple Tasks

•THEN: Task oriented: mowing, cleaning windows/floors, folding clothes etc.

•NOW: Service Oriented: Companion/Service Robots• Voice activated: Mobile and conversant with ability to take videos,

pictures, monitor home and in some cases make a purchase online.• Kid Friendly: Features to engage kids to learn and play.

•Robotics personify automation.

Smart Cities: The Next Big Thing

$14.85

$34.35

2015 2020e

2013 2016170 235

Global Smart City Programs

Global Spending on Smart Cities (Billions USD)

70% of the world's population forecast to live in cities by 2050

The Case for Smart Cities

•Urban centers increasingly difficult to monitor/manage•Better, more-timely information = better choices•Optimization of public safety and services•Reducing traffic congestion•Less pollution•Competitive economic advantages

Massive Challenges exist: Market-based, Organizational, Political leadership

Smart Cities: The Greatest Expression of IoT

• IHS predicts there will be 88 Smart Cities worldwide by 2025, with 32 of them in Asia.

• In the U.S. cities must cope with legacy infrastructure and other systems.

• Integrating digitally connected systems into city infrastructure creates new pathways for adversaries to exploit.

•Privacy and ethics issues on a massive scale

Biometrics: Evolution of Human–Machine Interaction

THE INTERNET OF THINGS

Steve KoenigSr. Director, Market Research@KoenigSteve

Trends, Technologies, and Opportunities

Smartphone Ownership

HH Penetration

80%+6pts

from 2016

HH Purchase IntentAvg. Units/ Owner HH

33%2.5Installed Unit Base238M

104 Million(2012)

238 Million(2017)

Installed Base Growth

Source: CTA, 19th Annual CT Ownership and Market Potential Study

Connected Consumer Devices ForecastU.S. Shipment Volumes (millions)

Sources: CTA Market Research, March 2017 Estimate. Connected products includes, in order of 2020 sales volume: Smartphones, Tablets, Fitness Trackers, Notebook PCs, Portable Wireless Speakers, Internet-enabled TVs, Bluetooth Headsets and hands-free car kits, Wireless Headphones, Home Gaming Consoles, Smart home systems, Streaming Media Players, Desktops, Digital assistants, Printers, IP/Wi-Fi cameras, Connected thermostats, Standard Cellphones, Smartwatches, Soundbars, Connected switches, dimmers and outlets, Smart locks and doorbells, Other Health and Fitness Devices, Pet Technology, e-readers, Connected e-toys, Smart smoke/CO detectors, Hearables, Blu-ray players, Aftermarket head units with Bluetooth audio, Action Camcorders, Portable Gaming Consoles, Wireless MRAV, Portable Media Players, VOIP equipment, 360 Cameras, Digital cameras, A/V Receivers with network/Internet connectivity, Home Radios with Internet connectivity.

Digital Assistants

1,7002,970

4,501

6,686

9,582

13,258

2015 2016 2017 2018 2019 2020

2017 U.S. HH Penetration

U.S. Volume Shipment Forecast

Smart Home Technology Devices

HH Purchase IntentAvg. Units/Owner HH

14%2.7Installed Unit Base 51M

2017 HH Penetration

+4pts from 2016

Includes lighting controls, door locks, motion sensors, etc.Excludes cameras and thermostats

Home Technology Products: Ownership

Home Technology Products % of U.S. Households Number Owner HHs

Installed Unit Base*

Avg. Units Per Owner HH

2014 2015 2016 2017 (Millions) (Millions) 2017 2016

Other smarthome device, such as lighting controls, door lock controls, motion sensors, etc.

-- 9% 12% 16% 19 51 2.7 2.0

Smart home security camera -- -- -- 14% 17 32 1.9 --

Smart thermostat 3% 5% 6% 8% 10 12 1.4 1.4

2017 U.S. HH ownership

Home Technology Products: Purchase Intent

Home Technology Products Households Planning to Purchase in 2017 % of HH Buyers

% # (Millions) Repeat 2017

First-Time1

2017First-Time1

2016

Other smarthome device, such as lighting controls, door lock controls, motion sensors, etc.

14% 16.66 42% 58% 64%

Smart home security camera 13% 15.47 28% 72% --

Smart thermostat 7% 8.33 11% 89% 83%

912191921

3243

77105

140

Digital assistant

Smart thermostat

4KUHD TV

Other smart home devices

Smartwatch

Smart home security camera

Fitness tracker

Digital media streaming device

Internet enabled TV

Portable wireless speakers

Smartphone 238

2017 IoT Product Ownership / Purchasing Stats:Multiple Consumer Technology Categories

• Audio technology • Video technology• Wearable technology • Home technology

U.S. household Installed base: In millions1U.S. household intent to purchase in 20171

33%

16%

16%

16%

14%

13%10%

14%

11%

7%

9%

Change in penetration between 2016 to 20171

+6%pts

+6%pts

+4%pts

+2%pts

+4%pts

N/A+4%pts

+4%pts

+9%pts

+2%pts

N/A

1CTA Consumer Technology Ownership and Market Potential Report, 20172 CTA estimate of Installed Base for 4KUHD TV and Digital assistant = Cumulative Unit Sales to date from CTA Consumer Technology Sales and Forecast Report, January 2017Ownership and purchase intent of digital assistant and smart home security camera were asked for the first time in 2017 Ownership and Market Potential study

2

2

Wearable Technology Product Ownership

Wearable Technology Product % of U.S. Households Number

Owner HHs Installed Unit Base

Avg. Units Per Owner HH

2014 2015 2016 2017 (Millions) (Millions) 2017 2016

Wearable activity fitness tracker 5% 11% 20% 24% 29 43 1.5 1.4Smartwatch -- 5% 8% 12% 14 21 1.5 1.4

2017 U.S. HH ownership

Source: CTA, 19th Annual CT Ownership and Market Potential Study

In-Vehicle Communication and Safety System

HH Purchase IntentAvg. Units/ Owner HH

9%1.5Installed Unit Base80M

2017 HH Penetration

Source: CTA, 19th Annual CT Ownership and Market Potential Study

Smart CityInvestments

In the U.S.

Indicates the seven finalists for theU.S. Department of Transportation’s Smart City Challenge (Dec 2015)

Smaller Screens = Bigger Viewing Profile

62%

51%

16%

21%

5%

12%

14%

8%

3%

7%

1%

2%

2012

2016

Television Smartphone Laptop Desktop Tablet Other

Source: The Evolving Video Landscape (2012)Source: 2016 Video Study Q3. What percent of your video watching is done on the following devices? Base: Online U.S. Adults (n=1,000)

Average Share of Video Viewing on Each Device

213,088

193,554

171,482

2015 2016 2017 2018 2019 2020

95,210

122,866

147,249 Smart Switches & OutletsSmart ThermostatsMedia Streaming DevicesSmart Home KitsHome Gaming Console Wireless HeadphonesInternet-enabled TV Portable Wireless SpeakersDigital AssistantsFitness Trackers

Top 10 Connected Devices ForecastU.S. Shipment Volumes (000s)Excludes ‘hub’ devices

Source: CTA Consumer Technology Extended Forecasts 2015-2020 (January 2017)

Global Consumer Tech Unit Sales Leveling Off(in Millions)

6,835 6,708 6,711 6,389 6,211 6,187

-1% -2%0%

-5%-3%

0%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2013 2014 2015 2016fcst 2017fcst

Units y/y

Today’s Battle for the Living Room?

3%9%

15%

24%

43%50%

54%

8%

19%24% 24%

29%34% 36%

2011 2012 2013 2014 2015 2016 2017Connected TV Media Players

U.S. HH Penetration Trend

Source: CTA, 19th Annual CT Ownership and Market Potential Study

Connected Video Products Ownership

$

54% HH penetration(+4pts from 2016)

36% HH penetration (+2pts from 2016)

1.7 1.8

105M 77M

16% 16%

Avg. Units/ Owner HH

Installed Unit Base

HH Purchase Intent

57

Connected TV Media Streaming Device

Source: CTA, 19th Annual CT Ownership and Market Potential Study

Nvidia’sAI CoPilot

Global Consumer Tech Spending(Billions of USD)

1,005 1,045 1,040955 950 929

-1%

4%

-1%

-8%

-1%-2%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0

200

400

600

800

1,000

2012 2013 2014 2015 2016fcst 2017fcst

Values (USD) y/y

ConnectedDevice Share

89%

$827Billion USD