M&As that pushed the Internet of Things

The year 2014 saw how the electronics industry moved collectively to advance the Internet of Things (IoT).

For evidence, look no further than the myriad mergers and acquisitions among chip vendors, system companies and software vendors this year—many in the IoT space. Beyond the usual reasons for consolidation (economy of scale, eliminating competition, expanding revenue), many companies scrambled to make deals specifically to get IoT technologies and products that were missing from their portfolios.

Google's acquisition of Nest Labs in January 2014 was an early warning sign to those who've resisted the hype of IoT. The deal made it clear that smart homes are no longer about clapping your hands to turn on the lights. Now it's all about big data and the Internet of Things.

Among M&A deals consummated in 2014 were Samsung's picking up SmartThings, Facebook buying Oculus, a VR technology company, and Intel acquiring Basis Science, a smartwatch start-up. At first look, these seem unrelated. But tie the common threads of IoT and wearables together, and an unstoppable market movement emerges.

Accordingly, many other chip vendors and sensor algorithm companies also jumped on the IoT bandwagon, in hopes of laying the groundwork for more useful and cost-effective IoT devices.

Sensors, MCUs and wireless connectivity are three obvious building blocks for IoT end-node devices. Tony Massimini, chief of technology at Semico Research, adds to the list "power management, algorithm (sensor fusion) and embedded security," driving the IoT market.

Among these prerequisites, "wireless connectivity and software (algorithms)" are the two most sought-after technologies, Massimini observes. Indeed, many M&As in 2014 have been built around those two. Expect more in 2015.

Daniel Cooley, vice president and general manager for Silicon Labs' IoT MCU and Wireless Division, also sees "adding more algorithms to MCUs" as a key battleground. The gating factors for IoT aren't sensors, processing power (in terms of MIPS—millions of instructions per second) or megabytes on MCU, he says. "It's the software algorithms" for sensor fusion. Customers want more sensor algorithms embedded in devices, he believes.

Cooley described sensor algorithms as an "IP minefield" where vendors need to look for the right partners.

Under threat

Massimini, while forecasting the number of connected devices to reach 36 billion units by 2020, cautions that "all of this new market opportunity is under threat."

It's because "at each point in the IoT there are vulnerabilities to malicious attacks and interception of vital information," he says. Noting the importance of security for IoT, Massimini asks: "How valuable is the data and/or the process that must be protected? What are the consequences of not having security?" While no specific M&A moves in 2014 answered those questions, they are likely to dog the IoT industry for years to come.

The following pages capture a snapshot of what happened in the electronics industry in 2014, seen through the lens of M&A in the IoT space. Some deals are big (in billions of dollars). Typically in M&A, some mergers could end up duds, but a few companies might have actually obtained the key to run with IoT in the next several years.

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