Sierra Wireless Transforming into an End to End Solution Provider

In 2019, Sierra wireless, transformed its strategy from an IoT hardware-focused company to delivering end to end IoT solutions.

Sierra Wireless is one of the few module vendors that recognize that selling IoT module hardware alone is not enough to survive and thrive. Sierra Wireless has benefited from bundling the modules with IoT solution integration/support services, middleware, software platform, application development toolkits, cloud platform, analytics, and end-to-end security.

Key Highlights from 4Q and FY 2019 Result:

  • Revenue from the IoT Solutions segment grew by 1% YoY to $377.8 million in 2019 due to growth in enterprise gateway sales of 12% YoY. Sierra Wireless has a stronghold in its gateways business as it builds connectivity modules on a merchant basis to customers such as Cisco as well as for internal consumption. However, the growth of enterprise gateways was partially offset by lower revenue from integrated IoT solutions modules.

Counterpoint research Sierra Wireless Revenue and Gross profit

  • Revenue from the Embedded Broadband segment declined 20% YoY to $335.7 million in 2019 due to lower in-module sales for PC OEM customers and networking modules. However, the decline in PC OEM sub-segment was partially offset by the higher revenue from the automotive sub-segment. Clients like Volkswagen will push the growth of the automotive sub-segment, but automotive will generate lower gross margins. In 2020, the PC OEM sub-segment will lose $55 million in revenue as its contract with Lenovo and Dell is completed.
  • In 2019, Sierra wireless partnered with Microsoft to launch, Octave, an all-in-one edge-to-cloud IoT platform with advanced data orchestration. Further, the IoT connections increased by more than 400,000 during the year and by the end of 2019 Sierra wireless had 3.6 million global connections.

Counterpoint research Sierra and Microsoft partnership

Source: Sierra Wireless
  • Sierra wireless also rolled out its Ready-to-Connect technology with out-of-the-box connectivity and cloud platform across all HL and WP series embedded modules. To ramp up the LPWA sales, modules bundled with subscription-based connectivity services. However, the growth was offset by a decline in 2G, 3G IoT module sales.
  • In January 2020, Sierra Wireless completed the acquisition of M2M Group in Australia with a total cash consideration of $20.7 million. The acquisition will lead to:
    • Increase in IoT services and solutions in Australia and Southeast Asia.
    • Boost the recurring subscription-based revenue model.

In early 2019, Sierra Wireless showcased 5G modules supporting both millimeter-wave and sub-6 GHz frequencies. These modules are now sampling with OEMs and system integrators in mobile computing, enterprise networking, and industrial IoT platforms. For Sierra Wireless, 5G will be crucial for its Airlink gateway business. In 2020, 5G IoT modules will be expensive and with a lower gross margin which will lower the impact of 5G in 2020.

Why China is Leading NB-IoT Development Globally

Machine to Machine (M2M) communications have existed for years. It refers to the process of connecting remote machines to a central control point. Reducing costs of sensors and enhanced communications technologies mean that more ‘things’ can be connected. And by connecting them to the Internet a stream of data can be developed that can be used for everything from simple control to advanced analytics and machine learning. This is the difference with IoT.

For connecting different elements for different applications across different verticals needed a special wireless access technology to complement existing high-speed, high-power, high-throughput 3G, 4G access technologies. Most of the M2M connections over the last decade have been using 2G or 2.5G connectivity. However, with the evolution of LTE and road to 5G, 3GPP the global cellular standards body has ratified new standards such as LTE-M and NB-IoT.

NB-1 (NB-IoT), the narrowband evolution of LTE for IoT in 3GPP RAN, included in Rel.13 with specifications completed in Q2 2016. For applications with very frequent communication and a very low latency requirement or large amounts of data, NB-1 will be the best option. PSM and eDRX will drive these features and can enable up to 10 yrs of battery life in a scenario of a daily update limit of 200 bytes. (more on NB-IoT here)

China has been embracing NB-IoT technology since its announcement. 2017 is monumental as the first year for mass commercialization of NB IoT in China, completing the transition from lab and field test to commercial implementation. China’s leading position in the development of NB-IoT can be attributed to key positive factors in the country, including favorable policies, accelerating deployment of the network ecosystem by operators, technology development & improvement and component players.

Favorable Policies for NB-IoT Development in China

In China, developing IoT industry has risen to the height of national strategy. Chinese governments and regulators have always been striving to pave the way for NB-IoT network construction and application expansion. MIIT (Ministry of Industry and Information Technology) strongly promotes NB-IoT, with a target of over 20 million NB-IoT M2M connections in 2017, and reach over 600 million connections by 2020 across the nation. There is a strong government initiative in China.

Hardware System of NB-IoT in China

There are local providers in China able to offer the key elements within the NB-IoT hardware system—chipset and module. Local chip vendors HISILICON (owned by Huawei), PDA and SANECHIPS (owned by ZTE) have developed quality products alongside the likes of Qualcomm, who has been on the forefront of the evolution of wireless standards. In terms of modules, major domestic vendors based in Shanghai and Shenzhen have developed competitive products for further application. So far Huawei and Qualcomm are big winners when it comes to chip selection.

Examples of key Chinese NB-IoT Module vendors:

QUECTEL BC95 with HISILICON Boudica 120

 ZTEWelink ME3612 with Qualcomm MDM9206

Lierda NB05-01 with HISILICON Boudica 120

Software Environment in China

A complete software environment has been established for NB-IoT, including operation system, device management and IoT connection management platform, etc. Real-time Operation System (RTOS) is potentially a better choice running on MCUs for IoT devices, compared with traditional embedded OS. In terms of IoT management, Huawei and Intel have made great contribution. Huawei OceanConnect is an open ecosystem built on IoT, cloud computing and Big Data technologies. By now, OceanConnect provides over 170 open APIs and Agent software. Intel released its IoT E2E Reference Architecture and a portfolio of products.

Network Environment in China

The big three carriers in China, China Mobile, China Unicom and China Telecom have started NB-IoT lab testing as early as a year ago, and finally got the dedicated telecom number resource for IoT in Aug 2017. China Telecom had set up the biggest commercialized NB-IoT network (310K+ base stations upgraded), and expected more than 100 million users by 2018. China Unicom plans to provide E2E IoT solutions in key cities and expects to realize the national NB-IoT coverage in 2018.

Different from its competitors, the biggest mobile operator China Mobile is likely to implement NB-IoT and simultaneously use eMTC as a supplement. Equipped with more radio resources, more base stations and more investment, China Mobile can use NB-IoT to realize wide coverage and CAT.M for connecting smart vehicles, appliances, healthcare monitors, billboards, vendor machines, etc. in urban cities. As of May 2017, China Mobile had become the largest IoT network provider with more than 120 million IoT connections.

NB-IoT Applications in China

There has been a great deal of trials ongoing in major cities and demonstrative regions in 2017. By now, IoT applications are mainly focused on utility segments, such as smart gas/water metering, street lighting and parking, etc.

Examples of NB-IoT Deployments in China:

Shenzhen Water Group started deployment of smart water meters in Mar 2017

Deployment of smart parking system in Mount Longhu in Apr 2017

NB-IoT based ofo smart bikes were put into use in Beijing in Jul 2017

In brief, IoT is a long tail market, and it’s impossible for one solution to meet all IoT requirements. However, China is very ambitious for NB-IoT, initiating dozens of pilot and commercial projects across the nation. With the industrial ecology approaching mature, we have every reason to believe that large-scale application in key areas is on the horizon, and NB-IoT will continue to grow in China next year due to the government initiative.

Our full in-depth report on NB-IoT development in China is available for subscribing clients at our research portal

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