Economic Impact of IoT

The contribution of IoT to

economic growth

March 2019 gsmaintelligence.com @GSMAi

© 2019 GSM Association

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Authors
Mayuran Sivakumaran Pau Castells
Senior Economist Director of Economic Analysis
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IoT significantly increases productivity: by as much
as 0.2% of GDP already, and growing
The world economy benefited by $175 billion in 2018 from the productivity
1 benefits to businesses from the use of IoT. This is equivalent to 0.2% of GDP

Over half of these benefits are enjoyed by manufacturing businesses, making

2 it the sector currently with the largest opportunity from using IoT

The potential gains for businesses in developing countries are substantive:

3 enterprises already save 4-5% of costs with relatively low deployment

Governments can encourage further economic growth: the right policies can
4 stimulate IoT adoption by businesses – this can sharpen their countries’ business
sector competitiveness and result in higher tax revenues
Contents 1 Why is IoT important for economic growth?

2 What is the productivity impact of IoT?

3 What is key for developing economies?

4 Our Methodology
 Changes in productivity, 10-year moving
Productivity growth average of 23 countries
is slowing 5%

4%
• There is a broader slowdown in
economic productivity occurring in 3%

developed economies, but also in 2%

developing economies
1%
• This presents a major challenge on
achieving prosperity and higher living 0%
1960 1970 1980 1990 2000 2010
standards -1%

-2%
• IoT can support businesses across the
-3%
industry to improve their productivity
Source Bergeaud, A., Cette, G. and Lecat, R. (2016): "Productivity Trends in
Advanced Countries between 1890 and 2012," Review of Income and Wealth, vol.
62(3), pages 420–444
IoT can change the way businesses operate
• By deploying connected devices Ordinary factory Smart factory
across their operations, businesses
• Production line • Monitoring – on the
are able to make improvements on
managed manually performance of
their current approach
• Extensive manual equipment and
• The example on the right describes monitoring of processes predictive maintenance
the advantages of manufacturing • Manual entry for stock • Tracking – volume,
firms moving from ordinary location location of stock, equip.
production processes to smart • Manual documents for • Quality assurance -
production processes inventory reducing production
• Assessing faults by waste by assessing and
• Replicated across the economy,
audit acting on product quality
these changes can lead to
improved business productivity and
therefore economic growth
IoT connections to grow Global number of IoT Connections,
billions
to 25 billion by 2025 25

22
• Industrial IoT connections will lead overall 20
growth, on average 21% per year between 17 14
2017 and 2025 15 12

•
10
13
As a result of this significant growth, IoT 8
11
connections for industry will account for over 7
9 6
half of connections by 2025 – 14 billion 5
4
world wide 10 11 11
9
• This will lead a significant change in the way 5 6 7 8

that industries work

2018 2019 2020 2021 2022 2023 2024 2025
Consumer Industrial

Source GSMA Intelligence

We valued productivity In scope

based on enterprises’ Productivity

Additional output that can be
produced by companies as a result of
cost savings
experience Out of scope
• Our study focusses on the productivity gains Ecosystem The economic value added by
for businesses who adopt IoT solutions and direct companies that produce IoT devices,
contribution connections and solutions
deployed IoT devices
• Therefore our analysis forms one part of a Indirect wider The knock-on impact of the IoT
economic ecosystem on the rest of the
wider view of IoT contribution to the global
impact economy
economy
• Our results are driven by results from the Consumer Savings enjoyed by consumers: e.g.
welfare reduced energy bills as a result of
GSMA Intelligence IoT Enterprise Survey benefits smart metering
Contents 1 Why is IoT important for economic growth?

2 What is the productivity impact of IoT?

3 What is key for developing economies?

4 Our Methodology
Global productivity impact Economic impact of IoT on business
productivity
already $175bn, 0.2% of $ billions
GDP
0.34% GDP 371
• Productivity benefits will be worth over
$370 billion per annum in 2025 – 0.34%
of global GDP
• This is just one part of the story of IoT’s
economic contribution:
• IoT companies will generate over $1 175 0.2% GDP
trillion in revenues by 2025
• Beyond these impacts on businesses,
there will be considerable benefits to
2018 2019 2020 2021 2022 2023 2024 2025
consumers as connections reach
Source GSMA Intelligence
over 10 billion worldwide Source: GSMA Intelligence
Governments are set to Global fiscal impact of IoT-driven productivity
growth
gain fiscally too $ billions
47
• Productivity gains by the wider economy 39
43

result in more government revenue as taxes 35

32
are payable on the wider economy’s 28
25
corporate income and sales in particular 22

• We estimate that, solely due to productivity

gains, $22 billion was contributed to
government revenue worldwide, which will
rise to $47 billion by 2025. This figure does 2018 2019 2020 2021 2022 2023 2024 2025
not include direct and indirect tax
Source GSMA Intelligence
contributions from the IoT ecosystem
The manufacturing sectors Economic impact of IoT on business
productivity, Global, 2018
lead the way $ billions
• 50% of the total global productivity impact is $ billions % of sector economic value

from the manufacturing sectors, which 100

0.4% 0.5%

90

themselves form a large share of total global

0.4%

0.4%
80

0.4%

economic output
0.3%
70

•
0.3%

Manufacturing (including consumer 60

0.2%
0.3%

electronics and automotive) has a higher

50

92 0.2%

40

0.1%
0.1%
adoption than other sectors 0.2%

0.1%
30

• Transport, Utilities and Healthcare can further 20

38
0.1%

7 0.1%

productivity gains if adoption increases

10

15 10 10 4
0 0.0%

significantly Manufacturing
(incl.
Other
enterprises
Retail Transportation Public Sector
& Logistics
Utilities Healthcare

Consumer
Electronics and Source GSMA Intelligence
Automotive)
US and China contributing Economic impact of IoT on business
productivity, 2018
significantly $ billions (% of national GDP)

• In both absolute and relative share of GDP United States of

America
(0.27%) 54.2
terms, the USA and China are leading the
world in IoT productivity gains accounting for China (0.26%) 36.2

over 50% of global benefits together

Germany (0.24%) 9.9
• This is due to the size of their economies as
well as the higher estimated adoption of IoT Brazil 3.6 (0.17%)
in those countries
• Germany and Brazil also benefited from India 1.3 (0.04%)

productivity gains worth almost 0.2% in 2018

South Africa 0.3 (0.09%)
– both countries have significant
manufacturing sectors Source GSMA Intelligence
North America currently Economic impact of IoT on business
productivity
to gain most in the % of regional GDP
future 0.46%

• North America remains the main

0.34%
beneficiary, with productivity gains
0.30%
worth 0.46% of GDP by 2025 North America 0.26% 0.28%

•
0.27%
Whilst growth will be strong in some Asia Pacific 0.20% 0.20%
MENA 0.18%
developing regions, it is from a low Latin America 0.17%
base Europe 0.16%
CIS 0.12% 0.11%
• These regions need a more
Sub-Saharan 0.06%
widespread adoption across different Africa

industries to benefit 2018 2019 2020 2021 2022 2023 2024 2025

Source GSMA Intelligence

Source: GSMA Intelligence
Contents 1 Why is IoT important for economic growth?

2 What is the productivity impact of IoT?

3 What is key for developing economies?

4 Our Methodology
Enterprises in developing Operating cost savings from using IoT
reported by enterprises, simple average
countries making significant across sectors
% of gross operating costs
savings
7%
• Globally, enterprises report savings of 6%
between 4% and 6% of operating costs on
average. 4% 4%

• But developing countries can in fact be 3%

3%
reporting higher operating cost savings than
enterprises in more developed economies
• This could be because, on average,
businesses are less efficient in developing South Africa India China Brazil United Germany
States of
countries and therefore have the most to gain America
from deploying IoT technology
Source GSMAi IoT Enterprise Survey 2018
Even basic adoption can Relationship between mean cost saving and
deployment levels
reap great benefits
• 6.5%

Operating cost savings

Enterprises with higher levels of deployments
make greater savings on average across the
6.0%
14 surveyed countries, supporting the idea
that mass-scale deployment has the most
5.5%
significant impact on operations
• But notably the largest gains in cost savings 5.0%
when enterprises are shifting from deploying
a minimal number of devices (less than 50) to 4.5%
deploying over 300 devices
• This means that focussing on improving 4.0%
- 5,000 10,000 15,000
adoption will yield significant productivity
Number of IoT devices deployed
improvements
Source Analysis based on GSMAi IoT Enterprise Survey 2018
Policies designed to boost Economic impact of IoT on business
productivity, Sub-Saharan Africa
adoption can have a large $ billions
effect 4.4

• For example, if policies led to a doubling in

the growth of IoT adoption in Sub-Saharan
Africa 2.4
• The productivity impact would be +$2
billion higher in 2025
1.0

• Productivity gains will generate extra tax

revenue worth $400 million to Sub-Saharan
2018 2019 2020 2021 2022 2023 2024 2025
African governments in 2025
Baseline Double growth
• But this could increase to $730 million if
IoT adoption was higher Source GSMA Intelligence
Contents 1 Why is IoT important for economic growth?

2 What is the productivity impact of IoT?

3 What is key for developing economies?

4 Our Methodology
Our modelling approach relies on three key inputs
Economic
Productivity of IoT

Operating cost Businesses cost reductions from using IoT devices using outputs from
savings the GSMA intelligence IoT Enterprise Survey Q4 2018

X
IoT Business The share of businesses in the economy that are using IoT: these are
Adoption Rate based on assumptions from existing research

X
The size of the sector’s contribution to the economy based on
Sector value add calculations from OECD Input-Output table
Modelling Principles
The model is based on the following principles:
1. Businesses in many sectors of the economy
are able to make savings and run their
operations more efficiently as a result of
employing IoT technology
2. The benefit to each of these sectors depends
on the number of businesses that adopt IoT
3. The savings allow each sector to produce
more using the same level of inputs
4. The impact of IoT on business productivity
will vary depending on the size of the sector
within the economy
Key sources of inputs
Operating cost savings
The GSMA Intelligence IoT Enterprise survey was
carried out in Q4 2018, covering over 2,000 businesses
from 14 countries. We asked these enterprises what
reductions in operating costs in the previous financial
year that they associated with the adoption of IoT
IoT Business Adoption Rate
Most of the research conducted on IoT enterprise
adoption is based on actual business adoption, but
some is more focussed on population, or urban
population. We have assumed in all cases that
businesses uniformly cover the population