Invest KOREA

In the wake of the mobile revolution, a new revolution called hyperconnectivity is on the rise. And what’s emerging in the middle of this transformation is ICBM—Internet of Things, cloud computing, big data and mobile technology. This web of connection among people, things and the online world increasingly enables real-time collection, storage, analysis and utilization of data.

The Internet of Things, or IoT, allows us to collect a wide variety of data that traditional ICT couldn’t offer. Other than being the groundwork for ICBM, IoT also provides analysis and utilization of the data collected as well as real-time feedback, thereby serving as a point of connection between the online and offline world

Therefore, IoT is not just a precursor to the full realization of ICBM, but an essential element to the development and improvement of any product or service.

According to statistics based on Korean Standard Industry Classification (KSIC), there are 1,991 IoT vendors based in Korea as of 2016, an increase of 779 (or 64.3 percent) from 1,212 in 2015. The aggregated number of Korean enterprises that offer IoT services stands at 1,089, up by 538 (or 97.6 percent) from 551 in 2015.

Number of Enterprises in the Korean IoT Industry

There are also 374 and 125 companies newly registered under ‘Computer Programming, System Integration and Management Services’ and ‘Application Software Development and Supply’, respectively, resulting in new players to the IoT services market.

In terms of revenue, hardware solution sales stands at about KRW 3 trillion (USD 2.7 billion), making up for around 52.1 percent of the total revenue generated in the area. Revenue from network solutions stands at KRW 1.36 trillion (or 23.6 percent), followed by KRW 771.57 billion (or 13.4 percent) from platform solutions. While the 1,089 IoT service vendors account for 54.7 percent of total IoT firms, their share in the industry’s total revenue is as low as 10.8 percent. And despite burgeoning entrepreneurship in the area, the sum of revenue generated from IoT services in 2016 went up by a mere 23.2 percent from the previous year.

Industry Composition

In terms of market structure, Korea’s IoT industry is relatively dependent on goods and equipment compared to the global market. According to the International Data Corporation (IDC)’s latest ‘Worldwide Semiannual IoT Spending Guide (Jan 2017)’, hardware represents the largest (30.6 percent) spending category, but the structure is relatively balanced as services, software and connectivity take up 27.5 percent, 25 percent and 16.9 percent, respectively. This indicates the domestic industry’s stronger dependence on goods and equipment.

As for IoT services, majority of the revenue came from facility management (entry and exit control, facility management, attendance management services, off-site facility control and monitoring, building crack monitoring, etc.), safety (location-based child tracking services, personal safety apps for women, safety management for workers, toxic chemical monitoring at industrial plants, etc.) and environment-related technology (air and water quality monitoring and management, environmental oversight, disaster control for fire and floods, etc.).

Revenue from manufacturing, or KRW 95.51 billion (USD 85.96 million) accounts for 15.4 percent. This is largely attributable to the Korean government's policy effort to promote smart factories, including the Banwol and Sihwa Industrial Complex Smart Factory Cluster established last year.

Revenue of IoT Service Product Groups

(Unit: %)

Growth of Smart Home Technology

Smart home and energy-related technology is showing the sharpest increase in revenue year-on-year. As mobile telecommunication operators entered the smart home market, the market's total revenue jumped by 54.4 percent, or KRW 20.06 billion (USD 18 million). Energy-related services also saw a 52.3 percent growth from 2015. In a report released in July 2016, the Hyundai Research Institute (HRI) suggested that smart home, smart cities and connected cars are the three most promising IoT-related products.

The global market for smart homes is forecast to expand from USD 9.8 billion in 2015 to USD 43 billion in 2020; the number of devices connected to smart homes via the IoT will shoot up to 44.15 million by 2020 from 7 million in 2015. IoT companies are also optimistic about the potential of IoT applications in smart home and energy. Many businesses thus expect smart home technology to be the fastest thriving market in the IoT sector.

Currently, business-to-business (B2B) transactions account for more than 80 percent of the IoT services market in Korea, while the share of business-to-consumer (B2C) transactions is a mere 5.7 percent. The B2C market might be in need of market stimulation as revenue generated from two major product groups—healthcare/medicine and smart home—make up for 5.4 and 4 percent, respectively, of the aggregated total.

B2B’s dominance in the Korean IoT market is also visible in the customer makeup. Domestic companies represent 85 percent of all consumers, making them the biggest customer group for IoT vendors. They are followed by domestic governments and public institutions at 7.6 percent and domestic individual customers at 4.7 percent.

Customer Composition of IoT Firms

Recognizing its potential as the next engine of economic growth, many countries are now turning to the IoT sector to solve national challenges, reform the public sector and boost private sector competitiveness. With its top-level ICT infrastructure, diverse and innovative startups and tech-friendly people, Korea has strong potential to become a leader in this field. Given the IoT’s potential to take the Korean economy to the next level, Korea should utilize the technology as a strategic tool to addressing national challenges such as economic growth, youth employment and other social issues.

[1] IDC, Jan. 2017
[2] The 2016 Survey of the Korean IoT Industry
[3] “K-ICT Strategy on the Promotion of Internet of Things”, Ministry of Science, ICT and Future Planning of Korea, Jan 18. 2016
[4] Hyundai Research Institute, Jul. 2016

Park Won-geun
General Manager, Korea IoT Association

nayafly@kiot.or.kr