All told, 2024 was something of an annus horribilis for the cellular IoT sector, with consolidation and divestitures on the back of zero sales growth. But it could prove to be a whole lot worse than expected, it seems. “It’s possible that a pessimistic outlook could worsen further,” said ABI Research this week, reviewing its forecasts (see here and here), and considering all the grim news from IoT module makers, and partners, over the last 12 months.
Jamie Moss, research director in IoT hardware at ABI Research, commented: “A critical time-sensitive issue has emerged. The market is struggling in the wake of the overbuying that occurred by device OEMs in 2021 and 2022, after Covid-19 and in the face of the chipset shortage, as manufacturers sought to secure supply chains. Any lack of a vital component would have meant an inability to produce, and an inevitable loss of sales to competitors.
“At the time of fulfilling pipelines and ensuring predictable turnover, if not profit margin, was more critical than ever. Throughout 2024 it was anticipated that OEM module inventory would soon be used up, but the delay in return to normal sales for vendors persisted quarter to quarter; and seems likely to carry on into 2025. Some vendors were down by as much as 50 percent on their cellular module line of business in 2024 versus 2023.”
Which is an alarming turn-up, if it is borne out: a 50 percent drop in sales for some vendors, in the year, must surely come out in the wash when cellular IoT module vendors formalise and report their 2024 in April. ABI Research expects the market, as a whole, will report that 426 million cellular IoT module units were shipped in 2024, for a total sales revenue of around $5.6 billion. If true, this represents “in effect an identical market value to 2023”, it said.
The biggest casualty, of course, is Swiss IoT module maker u-blox, which confirmed last month it will phase out its loss-making cellular IoT business through the first half of 2025. It made revenue of CHF 27 million ($29.6 million) in the first half of 2024, against (adjusted EBIT) losses of more than CHF 15 million ($16.45 million) in the period. Its exit from the cellular IoT market sees the end of one of the few western brands in a market that is dominated by Chinese makers.
Meanwhile, French chipmaker Sequans has sold its LTE-based cellular IoT business to Qualcomm to focus on incoming 5G-based RedCap units – which are higher-powered than most of the low-power (LPWA) IoT markets the likes of u-blox had pursued, alongside its Chinese peers and others. The market was rocked, as well, by news last November that US operator AT&T had pulled the plug on its NB-IoT network – even if it remains a champion of other cellular IoT technologies.
Moss at ABI Research suggested the Covid-19 hangover will pass in the cellular IoT game, and that the module makers have been hit hardest. It remains a question whether all of the western brands will last it out. He said: “The practical result of the current climate is that stalwart u-blox has decided to halt its cellular operations… But… the IoT market is not failing, it’s the cellular module business specifically that is rebalancing, in an eventual return to normal, organic growth.”
He added: “However, with increasingly tight margins, not all vendors may be able to wait.” Meanwhile, Chinese vendors are thriving, it seems. Quectel, the market leader for five years, had matched its full-year 2023 turnover by the end of the third quarter 2024. “It has other lines of business, and although the bulk of its income does come from cellular modules, unlike most of its direct competitors, it also supplies the automotive and mobile broadband markets,” said Moss.
He added: “Quectel’s market strategy is based on growing shipment and market share, it is not focused on profit margin, which has historically stood at an average of three percent.” Besides, new vendors have emerged in recent years – “proving there are still new business opportunities”, said Moss. He highlighted Chinese vendor Unionman, which ships “tens of millions” of Cat-1/bis and NB-IoT, units annually, “but for at a very low unit price [and] a consummately low turnover”.
