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IoT Attracts Telecom, Semiconductor, and Software Companies

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Nov. 20 2020, Updated 5:31 p.m. ET

5G to boost IoT growth

So far in this series, we’ve been talking about the IoT (Internet of Things) opportunity that SoftBank is looking to tap into with its proposed acquisition of ARM Holdings (ARMH). SoftBank is currently a major shareholder of US telecom carrier Sprint (S) and operates in Japan’s (EWJ) telecom sector, which is preparing for the next generation technology of 5G.

The 5G wireless technology would go beyond 4G and provide a massive wireless sensor network supporting thousands of connections simultaneously. This would give a boost to IoT, which connects everything to the internet. Intel (INTC), Xilinx (XLNX), Qualcomm (QCOM), and Samsung (SSNLF) are at the forefront of 5G technology and are testing 5G technologies with Verizon Communication (VZ) and other telecom operators.

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IoT industry outlook

Gartner expects that there will be 20.8 billion IoT devices by 2020. IoT devices represent a direct growth opportunity for the semiconductor industry, as every device would be equipped with memory, a microcontroller, wireless connectivity, and sensors. ABI Research expects that IoT would represent 28% of semiconductor revenues by 2021.

Semiconductor companies eye IoT

The maturing of the PC and mobile revolution and the strong growth opportunity presented by IoT are attracting interests of many chipmakers. According to data from CB Insights, Intel (INTC) Capital and Qualcomm (QCOM) Ventures are the top two companies investing in startups dealing with IoT.

But the need to grow faster in the IoT market triggered many mergers and acquisitions in the semiconductor space. NXP (NXPI) acquired Freescale to increase exposure in automotive, and Cypress (CY) acquired Spansion and Broadcom’s (AVGO) IoT business to increase exposure in IoT.

As we saw in the earlier series, ARM would be at the center of IoT, powering almost 50% of IoT devices by 2020. As ARM was not available for sale, companies like Intel and Samsung did not bid for it, but with the SoftBank deal in place, ARM could decide to look for a more competitive bid, because the latter company now represents a lucrative acquisition target for many companies.

In the next part, we’ll look at ARM’s other potential bidders.

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