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Global Smart Cities to Top $2 Trillion by 2025: Frost & Sullivan

Less than seven years from now, smart cities will create business opportunities to the tune of $2 trillion, according to the analyst firm Frost & Sullivan, driven by artificial intelligence, personalized healthcare, robotics and distributed energy generation.

The Asia-Pacific region is anticipated to be the fastest-growing region in the smart energy space by 2025. In Asia, more than 50 percent of smart cities will be in China, and smart city projects will generate $320 billion for China’s economy by 2025.

North America has been quickly catching up, with many Tier II cities, such as Denver and Portland, committed to building their smart city portfolios. The total NA smart buildings market, comprising the total value of smart sensors, systems, hardware, controls, and software sold, is projected to reach $5.74 billion in 2020.

Europe will have the largest number of smart city project investments globally, given the engagement that the European Commission has shown in developing these initiatives. The European e-hailing market, central to cities developing smart mobility solutions, currently generates revenues of $50 billion and is estimated to reach $120 billion by 2025.

In Latin America, cities actively developing smart city initiatives include: Mexico City, Guadalajara, Bogotá, Santiago, Buenos Aires and Rio de Janeiro. In Brazil, smart city projects will drive almost 20 percent of the overall $3.2 billion IoT revenue by 2021.

AI plays a key role in smart cities in the areas of smart parking, smart mobility, the smart grid, adaptive signal control and waste management. Major corporations, such as Google, IBM, and Microsoft, remain key tech innovators and the primary drivers of AI adoption.

“AI has been the most funded technology innovation space in the past two years, with large investments coming from independent and corporate venture capital companies,” explained Jillian Walker, visionary innovation principal consultant at Frost & Sullivan.

Along with AI, personalized healthcare, robotics, advanced driver assistance systems (ADAS) and distributed energy generation are believed to be the technological cornerstones of smart cities of the future.

“Currently most smart city models provide solutions in silos and are not interconnected. The future is moving toward integrated solutions that connect all verticals within a single platform. IoT is already paving the way to allow for such solutions,” added Vijay Narayanan, visionary innovation senior research analyst at Frost & Sullivan.

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Data Center Activities Accelerate Ethernet Test Equipment Market

Analysis from Frost & Sullivan shows that the explosion of network traffic in China is forcing network operators and network equipment manufacturers (NEMs) to search for higher-speed technologies to break the bandwidth limit. Higher-bandwidth applications have popularized 10GbE networks, while the 40/100GbE market is expected to grow considerably. With the rapid uptake of these networks, the Ethernet test equipment market is expected to exhibit double-digit growth rates through 2018.

The Chinese Ethernet test equipment market earned revenue of $109.5 million in 2011, and revenue is estimated to grow to $264.9 million in 2018, according to Frost & Sullivan.

The extra bandwidth created by the increased use of smart terminals and the widespread application of data/video/voice services is compelling service providers and NEMs to move toward Ethernet technology, which offers significant opportunities to test vendors.

Service providers and carriers are the biggest end-user groups in the 1GbE and 10GbE test equipment market, therefore, their cost consciousness affects the market for test equipment.

“Due to the increasing price-performance ratio of instruments, test equipment vendors are competing on price while offering the highest level of product performance,” said Frost & Sullivan Research analyst Wei Wei, in a company statement. “In addition, they offer specialized customer service and technical support to ensure quality of service.”

Test equipment vendors are constantly investing in R&D to keep pace with technological advancements. They will also gain from operators moving away from traditional time-division multiplexing (TDM)-based mobile backhaul networks to Ethernet mobile backhaul to scale and simplify provisioning and management.

“Additionally, the deployment of a 10G passive optical network for mobile backhaul traffic will boost the Ethernet test equipment market,” noted Wei, in a company release. “Telecom infrastructure upgrades enhance the need for testing and thereby, push up the sales of Ethernet test equipment.”

Market Shift Creates Need for Updated Mobile Backhaul Testing

Analysis from Frost & Sullivan of the total global mobile backhaul and wireless core market shows that the market earned revenues of $357.5 million in 2011. It is forecasted that revenue is expected to increase to $954.4 million by 2018, at a compound annual growth rate of 15.1 percent.

New opportunities are being created because of the telecom industry’s shift to Long Term Eevolution (LTE) and 4G technologies. Backhaul is moving to new architectures, such as Internet protocol (IP) and Ethernet, creating growth opportunities for testing, Frost & Sullivan senior research analyst, Mariano Kimbara, told the Backhaul Bulletin. “This migration presents a number of key growth opportunities for test equipment vendors,” he said.

Kimbara also told the Bulletin that developing solutions that will help manage various applications to facilitate the interoperability of mobile backhaul testing is likely to generate high growth and success for mobile backhaul test equipment vendors. “Customers are looking for a one-stop-shop investment to get all test deployments from a single source,” Kimbara said.

Testing companies also are rolling out certification programs to ensure consistency for telecom-network standards. These certifications have homogenous network devices that work together to enable a more scalable implementation of OEM technologies across the networks. The explosion of media-rich and bandwidth-intensive applications is compelling network operators to reevaluate the mobile network infrastructure to improve user experience and reduce costs.

The continuous replacement of time-division multiplexing (TDM) technologies into Ethernet and IP technologies is one of the main factors driving demand for the mobile backhaul test equipment markets, according to Kimbara. He explained that the industry is experiencing a historically high growth in mobile traffic and data that is driving the need for a new set of dynamics and realignment for mobile backhaul. “Within this transition, it is crucial for IP and Carrier Ethernet to stay ahead of higher-bandwidth and quality-intensive service demands, such as data, voice and video services delivered over the network,” Kimbara said.

With the industry moving from 3G to 4G technologies and the increasing backhaul speed moving from TDM to 1G or 10 GB facilities, updates have driven testing growth opportunities because the infrastructure architecture that delivers LTE services has changed. There were approximately 30 commercial deployments of LTE in 2011. It is expected that the first implementations of voice over LTE (VoLTE) will be deployed in 2012, according to Kimbara.

“For at least the next two to three years, the industry is expected to experience a combination of both E1/T1 (for voice) and Ethernet/IP (for data services) technologies in the mobile backhaul market,” Kimbara said. He added that the hybrid-network approach has to support legacy networks and new architectures, representing some key industry challenges as it obliges carriers to sustain two separate networks. New architectures are trying to provide the same level of quality required in TDM networks.

Analysis of the global mobile backhaul and wireless core market is part of the Test & Measurement Growth Partnership Services program, which also includes research in the LTE test equipment market and wireless test equipment market.