A recent report from ABI Research (News - Alert) reveals that the cellular machine-to-machine (M2M) embedded module market declined 16 percent from 2009 to 2010. The decline was primarily attributed to price erosion.
However, total unit volumes continued to rise, reaching nearly 34 million units shipped in 2010. Despite this, total industry revenue fell from roughly $996 million in 2009 to about $841 million in 2010. This represented a reverse in the upward momentum in revenue seen in 2009, the research said.
“Although total unit volume continued to grow in 2010, average selling pricings (ASPs) fell at a faster rate, leading to an overall decline in revenue,” said Sam Lucero, practice director, M2M connectivity, ABI Research, in a statement.
According to Lucero, the sharp decline in ASPs is continuing in 2011 and is indicative of the fierce competition in the market, competition that has led to industry consolidation, such as Gemalto’s (News - Alert) acquisition of Cinterion and Novatel Wireless’ acquisition of Enfora, both in 2010.
ABI Research’s report, “Cellular Machine-to-Machine (M2M) Markets,” finds that though module makers are challenged by both competition and an overall trend toward commoditization, the resulting declines in ASPs are broadening the addressable market for cellular M2M connectivity.
When the price of modules declines, it becomes more feasible to embed cellular modules into a growing array of applications ranging from smart utility meters, to automobiles, to remote healthcare related devices like cardiac monitors, the report said.
According to ABI Research, lower prices, combined with other factors that facilitate M2M application development, will lead to overall unit shipment volumes growing faster than prices are declining. This will result in significant revenue growth by 2016.
“Consequently, falling ASPs are, in essence, benefiting module vendors as a whole, although individual vendors may not be able to survive the fiercely challenging market environment,” Lucero added. Recently market analytics firm Compass (News - Alert) Intelligence announced that the next-generation M2M and connected device market will reach 87 million endpoints by 2015, with a compound annual growth rate (CAGR) of over 25 percent, TMCnet reported.
Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.
Edited by Carrie Schmelkin