Talking Tech

Talking Tech is produced by the Progressive Tech Team of George O’Connor, Ian Robertson and Gareth Evans. Our aim is to bring you up to date with the tech news cycle each week. We comment via blog and podcast on the slings and arrows of the sector at a time of huge change.

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March 6, 2024

The IoT Revolution wash-out

GenAI washed over the tech sector like a tsunami. It drowned everything. One of the ‘everythings’ was IoT. Internet of Things promised new business models wrought by the fusion of 5G, Edge Computing, Smart devices and OpenRAN – it had its own hype cycle. But IoT didn’t deliver the grandiose dreams immediately, suffering from Covid lockdown, middling 5G roll-out, slow Wi-Fi 6 adoption, EV hype, chip shortage (Manufacturers cannibalizing fridges) and security concerns. While the repetitive disappointments in its EV sub-sector create a knock-on effect (Quartix), it shouldn’t smother the vibrancy in other IoT areas (notably home, auto services, Edge, healthcare and security). Last week the tech industry decamped to Barcelona for the annual MWC jamboree. From there we saw a semblance of better IoT drivers (admittedly from afar). As sensor technology continues to improve, investors should revisit IoT. LSE hosts many IoT companies (scroll down). They are smaller now, cheaper now, more exciting now as IoT inches better. Let’s resuscitate them now, before the tide flows, or like Spirent they are acquired.

From MWC – Floor walking in someone else’s shoe leather

The well-respected analyst guru Richard Windsor trekked to Barcelona last week. He opined that after a very slow 2021, 2022 and some recovery in 2023, “Mobile World Congress 2024 is finally back in business” with the halls busy and the “queues for loos and to buy a sandwich are fully back to historic norms”. As to the content, Mr Windsor concluded; “what is most striking is the geopolitical polarisation that is taking place across the world which is increasingly being expressed in the technology industry”. He bemoaned the “continuing balkanisation of the technology industry meaning lower long-term growth for all concerned”.

At MWC, the GSMA (mobile trade lobby) published The Mobile Economy 2024″ report. Among its findings:

  • By the end of 2023, there were 1.6bn 5G connections worldwide, representing the “fastest mobile generation rollout to date”.
  • As of January 2024, 261 telcos in 101 countries had launched commercial 5G services, of which 47 are provided by standalone networks. Another 90 operators in 64 markets have committed to 5G deployments, and by the start of the current year there were plans for 89 more SA network deployments.
  • The association’s data and analytics arm, GSMA Intelligence (GSMAi), predicts that global 5G connections will reach 5.5bn by 2030, making 5G the most dominant connectivity technology, accounting for 56% of all mobile connections worldwide.
  • On GenAI, 56% of mobile operators are currently testing applications, which translates to growth in global mobile data traffic “including the use of GenAI-enabled chatbots for customer service efforts or the continued growth of AI-generated video and music content”.

In addition:

Progress with OpenRan 

OpenRAN (Open Radio Access Network) is a non-proprietary version of the Radio Access Network (RAN) system enabling inter-operation between cellular network equipment provided by different vendors (OpenRAN definition). Of note: News from Vodafone India (a.k.a. Vodafone Idea) still in the early stages of its 5G activities but inked a new partnership with Mavenir to use OpenRAN technology to deliver better network capabilities. Vodafone Idea is behind main competitors, Reliance Jio and Bharti Airtel, both of which have national 5G coverage and signed more than 50m 5G customers each in a market that boasts more than 1.1bn mobile connections.

AWS announced a deal to deploy NTT Docomo’s nationwide 5G OpenRAN network in Japan. NTT uses Amazon Elastic Kubernetes Service Anywhere as part of its 5G OpenRAN rollout to “simplify network operation with automated cluster management tools, enabling the operator to easily run and optimise” the network, according to AWS.

Meanwhile, the UK 5G roll-out continues

  • BT switched off its final 3G mobile site (Belfast), bringing an end to the use of the technology after more than 20 years. “It was a landmark moment as we continue our work to upgrade Britain’s connectivity infrastructure. But more importantly, it is a significant milestone for communities across the UK who are now embracing the benefits provided by modern mobile technologies like 4G and 5G,” noted BT. BT adds that the 3G switch-off results in “big improvements for both our customers and the environment.”
  • Vodafone  UK shut down its legacy 3G network except for “a small number of locations of security significance, and a handful of remote rural communities” to remain in operation for a short period. Remaining 3G radio frequencies will be repurposed to support its 4G and 5G services, making those faster.

Stats on global usage by network generation are in the data section of this report.

More depressing news from the EV trailer park – curbs the enthusiasm

Media reports (27/2) indicate that Apple has shuttered its EV project, Project Titan, ending a decade long adventure. Apple will transfer some of the 2k affected employees to its GenAI (quelle surprise). Other suffering EVs carmakers include Cruise and Waymo (owned by Alphabet), and of course Tesla, which already guided for slower growth. Last week, troubled  Rivan announced a 10% FTE cut as losses mount. As consumers, we await the debut of Chinese EVs with new price points, and other drivers stick with the combustion engine for longer. Generally, the slower transition to a lower carbon economy will create a ripple effect among the swath of technology companies that are supporting the transition, leading to deals and forecasts being shunted to the right.

Recap the lower EV forecasts

In November, the UK Office for Budget Responsibility slashed its EV uptake prediction for 2027 by 44% . The new numbers suggest that EVs will account for 38% of new car sales by 2027, down from 67%. Previously the share of new EV sales had “repeatedly exceeded” the OBR’s forecasts, jumping from a 0.5% increase in new EV sales in 2017-18 to 13.6% in 2021-22.

So what happened to IoT?

IoT growth depended on the development of other key technologies, such as 5G, connectivity, cloud computing and OpenRAN. Growth was stymied by depending on the development of other technologies, which had their own growing pains:

  • Poor chipset supply. Chipset supply chains considerably improved in 2023 as demand has weakened in the face of a slowing economy but lead times remain elevated compared to pre-Covid levels. While supply increases (US Chip and Science Act 2022 and the EU Chips Act 2022) it will take years to develop (Semi plant constructions take three to four years to complete, another three to reach full capacity), coupled with some supply shifting to GPUs.
  • China. China was the leading country for new IoT device connections; recap:  active cellular IoT connections in China was 2bn in 2022. China faces issues including supply shortages on the back of renewed US–China trade tensions and companies (TSMC, AMAT, and ASML) moving parts of production out of China.

In addition, from a connectivity perspective, IoT is dominated by three technologies:

  • Wi-Fi. Wi-Fi makes up 31% of all IoT connections. The migration to Wi-Fi 6 and Wi-Fi 6E technologies (faster & more reliable connectivity) has dragged. Wi-Fi is leading IoT connectivity in smart homes, buildings, and healthcare.
  • Bluetooth. 27% of global IoT connections rely on Bluetooth. Bluetooth Low Energy (BLE), a.k.a. Bluetooth Smart, has been developed to allow IoT devices to maintain reliable connectivity while consuming limited power. As a result, BLE is now the preferred option for battery-powered IoT devices such as smart home sensors and asset tracking devices. In addition, the industrial sector is showing increasing interest in IO-Link Wireless technology based on IEEE 802.15.1 (technical standard for Bluetooth) and allows for wireless communication between sensors/actuators and an I/O master.
  • Cellular IoT. Cellular IoT (2G, 3G, 4G, 5G, LTE-M, and NB-IoT) is c20% of global IoT connections. Growth is due to the adoption of newer technologies (LTE-M, NB-IoT, LTE-Cat 1, and LTE Cat 1 bis), as older technologies such as 2G and 3G are phased out, and while 5G module shipments grew the growth rate, albeit at a slower rate than many had expected. In 2023, the top five network operators (China Mobile, China Telecom, China Unicom, Vodafone, and AT&T) managed 84% of all global cellular IoT connections. In terms of IoT revenue, the top five network operators make up 64% of the IoT network operator market, with China Mobile, AT&T, Deutsche Telekom (including T-Mobile), China Unicom, and Verizon the market leaders.

‘Hit and miss’ enterprise IoT adoption

Beecham Research, a technology analysis firm specialising in IoT, undertook a study of 25,000 IoT adopters to learn why IoT projects fail. The analysis found that 58% said that their IoT projects had been unsuccessful—12% said that they’d been fully successful. Beecham estimated that nearly 75% of IoT projects won’t be considered successful; sobering numbers impacting wide enterprise adoption.

End note

The IoT tech stack is maturing. The inhibitors are nudging to positive; shuttering older generation networks improves the latest generation performance and gets consumers and business adopting 5G. The ‘carrot and stick’ approach creates a network effect. The prior lack of success had nothing to do with IoT itself; early markets suffer from ‘immaturity’ and false dawns. For investors willing to drag themselves away from GenAI, below is a swift intro to LSE IoT companies, with a ‘cut-out-and-keep’ summary table in the data section. The trend is your friend.

A canter thru our LSE IoT cohort

1Spatial plc (Mkt Cap £68m)

Develops Location Master Data Management (LMDM) software, solutions, and business applications to a wide range of customers including government, utilities, and transport sectors. The 1Spatial Platform is a complete set of LMDM software components, including servers, portals, dashboards, software development kits (SDKs), APIs, data connectors, business-focused applications, and its 1Integrate rules engine. The 1Spatial Platform automatically validates, cleanses, synchronizes, updates, and analyses data from multiple sources and formats, allowing customers to master their data on any device/anywhere/any time.

Website & Latest results deck

Aurrigo International plc (Mkt Cap £41m)

Transport (aviation/airport) technology with autonomous vehicles and OEM products to the automotive and transport industries. A September 2022 IPO that has delivered an 85% TSR since IPO – somewhat unheard of in these markets. The three divisions are Automotive Technology, Autonomous Technology, and Aviation Technology.

  • Automotive Technology division develops systems including electronic control units, wiring harness systems, interior and exterior parts, high-level customer delight features and safety critical systems.
  • Autonomous Technology for autonomous vehicles and supporting systems (Auto-Pod, Auto-Shuttle, Auto-Deliver, and Auto-Connect).
  • Aviation Technology – automated airport vehicles and supporting services both in consulting and operations. Also sells electrical wiring harnesses and assemblies for the automotive industry.

Website & Latest results deck

Cordel Group Plc (Mkt Cap £7.5m)

AI platform for transport (rail industry) corridor analytics with a cloud-based platform for master data management and business analytics. There is also hardware and software for capturing, analyzing and reporting on datasets within the rail sector, and used for predicting and identifying maintenance needs including issues with vegetation, overhead lines, and track ballast. It provides integrated hardware and software systems that capture, process and analyze multi-channel sensor data. The use case is to deliver structured insights and builds solutions to capture imagery and light detection and ranging (LiDAR) data from in-service trains using sensors.

Website & Latest results

CyanConnode Holdings plc (Mkt Cap £36.6m)

Narrowband Radio Frequency (RF) Smart Mesh Networks, which are used for machine to machine (M2M) communication. The company’s RF Smart Mesh Networks were designed for smart metering, lighting, and IoT with low-power, end-to-end networking solutions with applications that save energy. The Omnimesh solution is an IPv6-based wireless neighbourhood area network (NAN) and is a scalable, self-healing and self-configuring deployment that enable rapid innovation for the implementation of third-party applications.

Website & Latest investor deck

IQGeo Group plc (Mkt Cap £226m)

Geospatial productivity and collaboration software for the telecoms and utility industries. The software promises to integrate data from any source, such as geographic, real-time asset, global positioning system (GPS), location, corporate and external cloud-based sources into a live geospatial common operating picture. The use case is to allow organisation to access, input and analyze operational intelligence to better manage networks, respond quickly to emergency events and manage day-to-day operations. The product portfolio includes IQGeo Platform, Network Manager Telecom, Network Manager Electric, Network Manager Gas, Workflow Manager and Inspection & Survey.

Website & Capital Markets deck (29/11)

Microlise Group plc (Mkt Cap £152m)

SaaS technology for fleet management and industrial IoT solutions with a wide product portfolio and c400 enterprise customers. This company is a bit of a favourite for this analyst (fanboy). The solutions help customers manage their entire logistics operation and products from a portfolio that includes:

  • Fleet telematics products: fleet tracking, fleet utilization, driver performance, driver communications, trailer telematics and temperature monitoring.
  • Safety, health and compliance products: fleet safety management, multi-camera vehicle systems, tachograph management, bridge strike warning and vehicle health.
  • Journey management services: schedule management, route management, planning and optimisation, customer communications, and workforce and resource management.
  • Delivery management products: electronic proof of delivery and sub-contractor management.

Website & Latest results deck

Ondo InsurTech Plc (Mkt Cap £22m)

A sustainable risk education for home insurers. ‘LeakBot’ is a patented InsurTech system that solves the problem for home insurers. An end-to-end, IoT escape of water claims mitigation solution functioning 24/7, monitoring the home for hidden leaks and bursts, and instant alerts are sent to customers smartphones if there is a problem. TAM only grows given climate change and old housing stock. There are other solutions, but from our review LeakBot is a very applicable, easy to install solution that has global mass market potential and benefits from a ‘been there/done that’ team. The patented Thermi-Q technology accurately measures both the air and water temperatures in the home. The LeakBot application alerts paranoid customers who can check their homes from anywhere, all the time.

Website & Latest results

Oxford Metrics plc (Mkt Cap £142m)

A very accomplished company making smart sensing software for the life sciences, entertainment and engineering markets. A core IoT holding. The software captures the interface between the real world and virtual/digital twin. The company has amassed a very impressive roster of over 10,000 active customers in 70+ countries including life science customers Guys & St Thomas Hospital, Imperial College London, Harvard University, Shriner’s Hospital for Children and Australian Institute of Sport, which uses Vicon systems to provide insights into movement for sports, healthcare and research. Engineering and Smart Manufacturing customers include Boeing, Airbus, Ford, BMW, UPENN and NASA, which are at the forefront of applications in ergonomics, engineering, UAVs and research. Entertainment and Virtual Reality customers include Dreamscape Immersive, Immersive Gamebox, Sandbox VR and Europa.

Website & Latest results video & covered by Progressive analyst Ian Robertson

Quartix Technologies plc (Mkt Cap £77m)

Subscription-based vehicle tracking systems, analytical software, and services. It provides an integrated tracking and telematics data analysis solution for fleets of commercial vehicles and motor insurance providers. The portfolio is designed to enhance productivity by capturing, analyzing, and reporting vehicle and driver data. The solutions include Live Vehicle Tracking, Driver Timesheets, Driving Style, Fleet Management Tools, Geofencing Alerts, IFTA Mileage Reporting, Tracking Device Options, and Fleet Tracking. The analytical software is twofold: (i) Evolve, uses fleet analytics to assess migration opportunities to all-electric vehicle fleets and (ii) Quartix Check, a walk-around vehicle condition monitoring tool. Final results (4/3) were dented due to the slower roll out of EVs coupled with costs of its software transition from 3G to 4G.

Website & Investor deck

Seeing Machines Limited (Mkt Cap £204m)

Long established, suffered from a number of false dawns, but a new management team is more sure-footed and has successfully taken the offer into adjacencies against deeper pocket competitors (Sony, Mobileye, Samsara and Waymo). The company creates solutions for operator monitoring and intervention sensing technologies and services for the automotive, mining, transport, and aviation industries. Seeing Machines’ activities include developing, selling and licensing products, services and technology to detect and manage driver fatigue and distraction; entering commercial agreements with partners for the development, manufacturing and sale of products into key target markets; and R&D of the core vision processing technologies. Seeing Machines has two segments: OEM and Aftermarket. OEM includes the automotive and aviation business units. Aftermarket is fleet and off-road business units. The eye and face tracking technology has the intelligence to measure degraded alertness and attention states and provide feedback and support in real time. Very much an LSE core IoT holding. Next news: H1 results 18/3.

Website & Latest results deck

Spirent Communications plc (Mkt Cap £609m)

Develops automated test and assurance solutions for networks, cybersecurity and positioning. Spirent’s test suite includes 5G, SD-WAN, Cloud, autonomous vehicles, and helps companies deliver on their promise to their customers of connected devices and technologies. For a variety of reasons, over the years Spirent has enjoyed a very mixed track record on each of the ‘G’ cycles; I guess that we can only look forward to 6G. News of another lacklustre set of financial results (5/3) coincided with a recommended cash offer by trade company Viava . The undisturbed premium was at 61%, in line with the historical premium that a trade buyer will pay. The deal is expected to conclude in H2/2024. Spirent has two operating segments: (i) Lifecycle Service Assurance segment offers solutions, which provide end-to-end visibility, actionable insights and automated troubleshooting to radically simplify turn-up and assurance of 5G networks and services; and (ii) Networks & Security segment develops test methodologies, tools and services for virtualized networks, cloud infrastructure and proactive security validation.

Website & Latest results deck

Tracsis plc (Mkt Cap £277m)

Software, hardware, data analytics/ geographical information system (GIS) and services for the rail, traffic data and transport industries. There are two segments:

  • Rail Technology & Services: Provides a range of products and services for the rail industry (software, hosting services, and remote condition monitoring). Customers includes train operating companies and infrastructure providers.
  • Data, Analytics, Consultancy & Events: Traffic data collection and event planning and traffic management, and data and analytics and consultancy offerings. It provides a fully integrated remote condition monitoring solution covering both hardware and software. Also supplies computer-aided dispatch and yard automation solutions and remote condition monitoring solutions.

Website & Latest results deck

Vianet Group plc (Mkt Cap £31m)

Cloud-based provider of business intelligence to the hospitality, unattended retail vending, and remote asset management sectors. Vianet supplies hardware and connectivity to capture operational and sales data for customers. There are two operating segments:

  • Smart Zones: Data insights, design, product development, sale and rental of fluid monitoring equipment. Smart Zones segment provides SmartDraught, a beverage and bar management system which enables the drinks retailing industry to reduce waste and POS shrinkage.
  • Smart Machines: Offers data insight, design product development, sale and rental of machine monitoring and contactless payment equipment and services. Its telemetry allows for monitoring asset performance and improving operational efficiency and service.

Website & Latest Investor deck 

George O’Connor

The data

IoT devices sales (more, more, more)

Numbers of IoT connections (more, more, more)

UK EV take-up forecast (fewer, fewer, fewer)

Mobile adoption by technology (5G traction – still a low start point)

Valuation heatmap – IoT is cheap & attractive PEG (tah dah)

Source Company data, Yahoo Finance, Analyst

LSE IoT who’s who & (fortune favours the bold) your fellow investors

Source Company data, Yahoo Finance, Analyst (Priced LSE close 1/3)

This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.

Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position,  and/or may perform services or solicit business from, any of the companies or related securities mentioned.

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