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Telit’s Acquisitions to Reshape Global IoT Module Market

In recent times, Telit has acquired cellular IoT businesses from Thales and Mobilogix. The IoT module market has started consolidating and we expect to see a few more deals in the coming months. In August, we also saw Semtech acquiring Sierra Wireless to offer complete chip-to-cloud solutions to cover the entire IoT value chain. The back-to-back acquisitions by Telit show how it is trying to become an integrated player. With the Mobilogix acquisition, Telit can offer modules, connectivity, security and management platform to design and manufacturing services. It means Telit will act as a one-stop solution provider for its customers. Here, we will try to analyze what these acquisitions mean to Telit and how they will impact the IoT industry.

Telit-Thales deal

Thales is merging its cellular IoT module business into Telit to form a new entity called Telit Cinterion. Thales will own a 25% stake in the newly formed entity and offer SIM technology and security services for IoT modules.

China dominates the global cellular IoT module market by taking more than 55% share. International players are struggling to compete in the operator- and government-driven China IoT module market.

After its deal with Telit, Thales will enjoy less distraction from its module business and will be able to focus on its core business which includes software, security and services. Thales will still continue to provide eSIM services where it is a market leader.

Global Cellular IoT Module Shipments Share by Vendor, Q1 2022

Telit and Thales Acquisition Opportunity

The newly formed company will have a common R&D platform which will help save resources. In the coming times, we may see Telit Cinterion focusing on the IoT platform business to earn revenue on a recurring basis.

Thales has a strong position in Europe and Japan, whereas Telit has a good presence in North America and Latin America. This complementary relationship supports their dream of becoming the #1 cellular IoT player in the international market. Telit-Thales is already leading in the international IoT module market in terms of revenue. With this merger, Telit Cinterion may overtake Quectel in the international market in terms of shipments in the coming years.

Telit has already divested its automotive business in 2018, but Thales has a good customer base for some European automakers. How the joint venture treats this automotive business will be keenly watched. There is ample opportunity in the automotive business with growing connected and autonomous mobility. With the introduction of 5G, Telit may focus on the automotive segment as the automotive module business contributes higher revenue due to a higher average selling price (ASP).

IoT Module Launch

In recent times, Telit has done a great job launching many new modules. This helps Telit to target new regions depending on available technologies and provides an option for customers to select a product as per their requirements.

Telit-Mobilogix deal

Telit moved to acquire Mobilogix, a decade-old end-to-end IoT hardware, software and cloud solution provider to fulfill its ambition of becoming a more integrated player and one of the largest end-to-end white-label solution providers outside China.

Mobilogix’s comprehensive device engineering expertise and resources, which focus on optimizing the specifications for EMS and ODMs, and attainment of regulatory approvals and carrier certification, will help Telit provide solutions to customers with reduced cost and complexity, and faster time to market.

Furthermore, Mobilogix is known for its expertise in customized IoT projects, which provide businesses with solutions in various application verticals that are ready to certify and mass produce. This will help Telit expand its focus in growing segments such as telematics, micro-mobility, healthcare, construction and agriculture.

Chinese module vendors are trying to become integrated players to capture maximum share across the IoT value chain. Telit is also trying to adopt such a model with these recent acquisitions. For example, Quectel is trying to increase its footprint in the North American market with the establishment of a new ODM company, named Ikotek. Similarly, Fibocom established a new ODM company in 2019 for global customers through applications such as gateway, payment terminal, telematics and industrial applications. Telit is slowly becoming vertically integrated and trying to revive back its glory days in the IoT module market.

Solutions from the combined entity will provide a great choice for customers who want to diversify and do not want to depend on the Chinese ecosystem, and need tightly integrated solution expertise from one provider.

If Telit wants to compete head-to-head with Chinese module giants like Quectel and Fibocom, it has to develop an effective business strategy for each international market.

Mobilogix has a wide range of portfolios comprising custom IoT projects and solution design services based on three basic architectures, namely beacon, power and battery-operated architecture. Apart from this, it also offers cloud platform integration and custom firmware, which will add value to Telit’s portfolio not only from cellular but also from BLE beacon hardware designs.

Mobilogix has a global presence across key regions such as the US, China, India and Latin America. Its presence in China and emerging markets like India will help Telit grow its presence in these key regions.

Telit’s Acquisitions to Reshape Global IoT Module Market

Conclusion

  • Telit is becoming a more integrated player with these acquisitions and moving up the stack to become an end-to-end solution provider. The convenient and comprehensive solutions will add more value to its customers’ IoT project deployments and will be concurrent with its long-term vision of becoming the #1 international module player in terms of both shipments and revenue.
  • The acquisitions will help Telit provide solutions to customers from the design/manufacturing of hardware to cloud and security with regional diversification. This will help Telit cater to more application segments, thus improving both revenue and profitability.
  • However, industry experts will be keenly watching the entire positioning, offering, strategy and business model, which are changing in the IoT space as you need to be a large-scale and end-to-end player to succeed even though it is a blue ocean out there.

Related post

Global Server Revenues to Grow 17% YoY in 2022

  • Global server revenues will grow 17% YoY in 2022 to reach $111.7 billion.
  • Global server shipments will rise 6% YoY in 2022 to reach 13.8 million units.

New Delhi, Boston, Toronto, London, Hong Kong, Beijing, Taipei, Seoul – June 7, 2022

The global server market’s revenue will grow 17% YoY in 2022 to reach $111.7 billion, according to Counterpoint’s Global Server Sales Tracker. From an enterprise perspective, transformation to hybrid cloud and upgrades of existing infrastructure to handle increased workloads will provide growth impetus after a pause during the COVID-19 pandemic. 5G, automotive, cloud gaming and high-performance computing will remain the key drivers for cloud service providers in data center expansion.

The market is evolving with the introduction of “As-a-Service” and “pay per use” models by server companies, like Pointnext from HPE, APEX from Dell and TruScale from Lenovo. The business model pivot has been enjoying great success due to more flexibility given to the customer at minimum capital expenses due to the emergence of workload-based infrastructure.

Looking at the overall market, Research Analyst Akshara Bassi said, “In an inflationary but extremely dynamic environment, companies are looking to strengthen their infrastructure as they prepare for Web 3.0 demands from the infrastructure end. Companies are diversifying their IT infrastructure to meet the needs of data evolution and making customers cloud-ready.”

Counterpoint Research Global Server market Revenue

Global Server Market Observations, 2018-2021

  • Revenues were flat in 2020 and early 2021 owing to the pandemic and less spending by enterprises on IT infrastructure upgrades and expansion.
  • In H2 2021, there was a backlog due to supply chain disruptions across the whole value chain from accelerator chips to power ICs, which has trickled into H1 2022.
  • The demand in 2021 picked up due to investments by hyperscalers in the fields of supercomputing, edge computing and 5G deployment. From an enterprise perspective, the upgrades and expansions happened to enable digital transformation along with cloudification of processes.
  • The shipments rose at a single digit owing to better attach rates and higher configurations within the servers.
  • Higher compute and storage requirements by customers along with supply chain disruptions raised the average unit price considerably for the server units.

Counterpoint Research Global Server market Revenue by Company

Commenting on the server market, Bassi said, “Dell and HPE are the server market icons but are seeing companies like Lenovo, Inspur and Supermicro giving strong competition as demand for flexible customised configurations in bare metal option continues to rise.”

ODM Direct grew at a higher pace by 3 percentage points than the overall market for 2021 indicating shift towards ODM direct as choice of hardware for large scale Data Center deployments. Foxconn and Quanta have been gaining significant market share over the years as hyperscalers continue to expand and favor ODM Direct for their data center orders.

Key Market Drivers, 2022

  • Edge servers: Edge server configurations will be a key driver of growth in server shipments as companies start enabling chip-to-cloud features within the devices and 5G deployments make IoT use cases penetrate across all verticals – consumer, industrial, healthcare and banking.
  • Metaverse: The infrastructure spends to enable the Metaverse will give an impetus to servers as they are the building blocks of the Metaverse. Major internet corporations and hyperscalers have already detailed their plans for spends on Metaverse infrastructure.
  • Supercomputing: Many enterprises are building their own supercomputers to develop software that can unleash Web 3.0 on consumers. From a government perspective, supercomputers are becoming ubiquitous in every research department within it – from being used only in defense initially to climate and healthcare now.
  • Cloudification of services: Many services are increasingly becoming cloud-based offerings as opposed to device-based earlier, with device storage and compute needs being taken care of by cloud-based services. Data centers, and thereby servers, are an integral part of the infrastructure needed to enable these services.

Note: ODM Direct constitutes sale to hyperscalers and whitelabel device sales to Enterprises directly.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts:

 Akshara Bassi

 

 Dale Gai

 

 Neil Shah

 

Follow Counterpoint Research
  

 

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Cloud Server CAPEX Soars as Datacenter Companies Look to Increase Share in Cloud Services Market

The cloud services market has been experiencing high double-digit growth in the past few years. Yet, there is more room to grow. Demand will continue to increase as more geographies, and companies adopt cloud services. Conventional corporate organizations are shifting towards public and hybrid cloud due to better offerings and low-cost maintenance. This demand has compelled datacenter and IaaS (Infrastructure-as-a-Service) providers to invest heavily and continually increase their infrastructure to support clients.

Among the Cloud Services providers who spend for servers and related hardware, Google dominated followed closely by AWS in 2018 (Exhibit 1). According to Counterpoint’s Cloud Services Tracker, Google spent 10% of the overall global spend, followed by Amazon Web Services (AWS) and Alibaba, with 9% and 7% share, respectively, in 2018. Facebook and Microsoft are also spending heavily to increase their datacenter capacities and capabilities. Other notable players are Apple, Intel, IBM, China Telecom, and Equinix.

Cloud Infrastructure CapEx Spend – 2018

Exhibit 1: Cloud Infrastructure CapEx Spend – 2018

Further, Counterpoint’s Cloud Services Tracker shows that the combined capital expenditure (CAPEX) of FAMGA (Facebook, Apple, Microsoft, Google, Amazon) increased by 45% year-on-year (YoY) in 2018. Intel’s CAPEX rose by 29% YoY in 2018. Chinese counterparts, BAT (Baidu, Alibaba, Tencent) and China Telecom saw a 24% YoY increase in CAPEX. Combined, FAMGA, Intel, BAT, and China Telecom contributed to 56% of global CAPEX by datacenter and IaaS providers. Among the REITs (Real Estate Investment Trusts), Equinix and Digital Realty are the biggest contributors. However, going forward, we expect the CAPEX of cloud services providers to increase as companies like Google and Microsoft venture into cloud gaming by launching their platforms, Stadia and Project xCloud, respectively.

AWS has the most number (66) of cloud infrastructure locations worldwide with 12 more locations in the pipeline, followed by Google Cloud with 61 such locations. Alibaba has 58 locations worldwide while Microsoft Azure has 20. These cloud giants are expanding globally as they look to increase their market share in the cloud services market. Further, these companies are working to ramp up their product portfolio with innovations and acquisitions and increase their market share by engaging in strategic partnerships.

Google has been quite aggressive in expanding its cloud services through acquisitions. Recently, it has acquired Looker, a big data and analytics platform, for a massive US$2.6 billion. Google’s list of acquisitions includes Qwiklabs, Kaggle, Bitium, Apigee, and Orbitera, among others. AWS is also active in this regard and has acquired companies like 2lemetry, Elemental, ClusterK, Cloud9 IDE, Graphiq and Sqrrl, among others. AWS even acquired Annapurna Labs to boost its internal production of custom chips for cloud infrastructure.

Further, cloud services providers are partnering with Taiwanese/Chinese ODMs to source servers and other components for increasing their capacities. The biggest ODM contributors are Foxconn, Wistron, Wiwynn, Inventec, Quanta providing servers to Google, Facebook, Microsoft, Amazon, and OEMs such as Hewlett Packard Enterprise (HPE) and Dell. Inventec and Quanta have the highest number of partnerships with leading cloud providers. Exhibit 2 shows the customer-ODM relationships.

Cloud Provider/OEM – ODM Partnerships

Exhibit 2: Cloud Provider/OEM – ODM Partnerships

The future looks bright for the ODMs, server OEMs, as well as component makers as cloud providers, continue to expand their consumer base as well as services. Multiple new services such as cloud gaming, service mesh, IoT expansion as well as entry into new geographies will drive the cloud adoption and hence, will increase the infrastructure spend by cloud service providers.

Dell, HPE, Lenovo Lead as Cloud Server Market Surges to a US$86 Billion in 2018

Chinese OEMs and Taiwanese ODMs are beginning to gain market share and are challenging their US counterparts soon.

New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires – May 05, 2019

Ever since the rise of Big Data, there has been a lot of debate about the optimum way to store and process data. Today, both enterprises and individuals want to put their data on the cloud. Given this trend, Counterpoint Research expects the cloud services market to grow at a double-digit rate over the next five years. We estimate that in 2018, the cloud server market grew at 28% to US$86 billion.

The growth momentum in the cloud services space will also benefit cloud server manufacturers. So where is the demand coming from?

Prachir Singh, Senior Analyst at Counterpoint Research said, “Our analysis suggests that several factors are responsible for the rising demand for cloud servers. One of the main consumers for cloud servers are big data center companies and cloud service providers. Examples of big data center companies include the likes of Equinix and Digital Realty Trust, both of whom are real estate investment trusts or REITs. Among cloud service providers, the likes of Microsoft, Amazon Web Services (AWS), Google and other such companies are the major users of cloud servers. These companies also provide Infrastructure-as-a-Service (IaaS) whereby they offer instant computing infrastructure which is managed over the internet.”

Brady Wang, Associate Director at Counterpoint Research added, “According to our research, Google, Amazon, and Microsoft are spending heavily to increase their share in cloud services as well as the data center business. New players are also emerging in this sector. In the US, Facebook, Apple, and Intel are some of the big names making a mark in the data center segment. In China, Alibaba, Tencent, Baidu, and China Telecom are spending heavily to boost their data center businesses.”

Data centers and cloud services is already a multi-billion dollar industry. Today, both big and small enterprises depend on data centers and cloud services providers for their operations, For example, Instagram takes services from Facebook data centers while Netflix is a big consumer for AWS. Recently, Google announced its new cloud gaming service, Stadia, which opens up a new market for these cloud services providers. Content remains the king from video to gaming to music to smartphone apps to user-generated content all need an increasing amount of cloud storage. Further, the growing adoption of Artificial Intelligence across different applications is in parallel driving need for greater server processing power and thus semiconductor capabilities within the servers.

Such developments are helping leading server manufacturers like Dell EMC and HP Enterprise grow fast. Globally, in 2018, the top five companies held about 49% of the market share by revenue in cloud server manufacturing.  Dell EMC and HP Enterprise are the biggest players, both holding 16% market share in 2018 in terms of revenue. Their offerings range from industry-grade racks to blade and tower servers. IBM is also a major player with its IBM Z mainframe servers. Other big players include Cisco, Oracle, and Lenovo.

But even as western companies have so far dominated the cloud server manufacturing business, in recent years Chinese OEMs are gaining market share. The likes of Inspur Power Systems and Huawei are the biggest contributors from China. In 2018, Inspur Power Systems’ revenue grew 72% YoY while Huawei’s server business grew 33% YoY. In the cloud server manufacturing segment, Taiwanese ODMs are faring much better. Players like Foxconn, Wistron, Inventec and other such ODMs have a 39% market share by revenue in the cloud server manufacturing space.

Exhibit 1: Cloud Server Market by Revenue Share % (US$) (2018)

Cloud Server Market by Revenue Share % (US$) (2018)
Counterpoint Research – Cloud Server Market OEMs Revenue Share % (US$) (2018)

Source: Counterpoint Research Cloud Computing Tracker

Commenting on the growth being witnessed by Chinese and Taiwanese cloud server manufacturers, Wang said, “Chinese and Taiwanese companies are gaining ground in terms of shipments due to the lower prices that they offer. The larger data center companies are now buying cloud servers directly from these ODMs to cut costs. This has made the Chinese companies’ share increase drastically in recent years. For example, Inspur Power Systems increased its shipments share to more than 7% in 2018 from 3% in 2016. ODMs too increased their share in shipments to 25% in 2018 from 19% in 2016. We expect this share to increase in the coming years as more and more Chinese companies get into the data center business.”

Another industry benefitting from the rise in data centers and cloud service providers is the server microprocessor market. The big players in this segment are Intel and AMD. Intel is by far the biggest contributor, grabbing more than 97% market share by revenue in 2018. AMD, which held less than 1% share two years ago, has now captured 2% market share due to their new offering EPYC.

Counterpoint Research believes that the future is very bright for cloud server manufacturers. This is mainly due to the meteoric rise of a data-driven ecosystem. Cloud services will now use advanced technologies such as AI (Artificial Intelligence), Machine Learning, and Deep Learning alongside low-latency connectivity technologies such as 5G, which will help business and enterprises increase efficiency and power newer applications.

However, the biggest challenge for cloud server manufacturers as well as cloud service providers will be security. HP Enterprise has a platform, HPE Oneview, to efficiently manage and secure the data servers. We expect to see more of such bundled solutions in the future. We expect that the battle to be the lead cloud services provider will intensify in the coming years.

Background:

Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of 14 years in the high-tech industry.

For press comments and enquiries please reach out to press(at)counterpointresearch.com

Analyst Contacts:

Neil Shah

Brady Wang

 

Prachir Singh

Follow Counterpoint Research
press(at)counterpointresearch.com

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