The Rise of Industrial IoT in Europe: Market Trends and Opportunities

The Europe industrial IoT market is experiencing a remarkable surge, transforming the manufacturing landscape across the continent. Recent market intelligence suggests that the Industrial Internet of Things (IIoT) sector in Europe is poised for substantial growth, with Gartner forecasting a significant increase in market size over the coming years. This technological revolution is reshaping traditional industries, enhancing productivity, and driving innovation in ways previously unimaginable.

As the IIoT market continues to expand, businesses are keen to leverage its potential to gain a competitive edge. Market data indicates that Europe is at the forefront of this digital transformation, alongside other global leaders like America and Asia. To analyze this trend, companies are turning to IoT analytics and market research to guide their strategic decisions. The rise of specialized IoT analytics companies is providing valuable insights, helping organizations to navigate the complex IIoT landscape and capitalize on emerging opportunities in this rapidly evolving sector.

Current State of Industrial IoT in Europe

The European market for Internet of Things (IoT) solutions is experiencing rapid acceleration, particularly in the industrial sector. As the third-largest adopter of IoT after the Asia-Pacific region and North America, Europe has a significant presence in the global IoT landscape. The continent's IoT market is witnessing impressive growth, with annual rates reaching double digits (over 10%).

Market Size and Growth

European IoT spending was estimated to reach €184 billion in 2021, with projections indicating continued double-digit growth through 2025. This robust expansion underscores the increasing importance of IoT technologies across various industries. In 2019, Europe accounted for 23% of global IoT spending, highlighting its substantial market share.

The global IoT device landscape is equally dynamic. In 2021, there were more than 10 billion active IoT devices worldwide, with expectations of this number surpassing 25.4 billion by 2030. Europe is poised to host approximately 23% of these devices by 2030, further cementing its position as a key player in the IoT ecosystem.

Key Players and Technologies

While consumer devices comprise almost two-thirds of all connected devices, they only account for 19% of Europe's IoT expenditure. In 2019, revenues from the consumer segment were estimated at €28.5 billion. This disparity highlights the significant investment and potential in the Industrial Internet of Things (IIoT) sector.

The growth of the IoT market coincides with the development of other crucial technologies, such as 5G and cloud computing. These advancements are driving the adoption of smart solutions across various use cases, from industrial applications to security systems.

Industry Adoption Rates

Several industries are at the forefront of IoT adoption in Europe:

1. Manufacturing: This sector is expected to account for the largest share of potential economic value from IoT, growing to an estimated 26% by 2030. The focus on Industry 4.0 and smart factories is a key driver, with IIoT technologies enabling real-time data on machine performance and production output.
2. Healthcare: Projected to represent 10-14% of the estimated IoT value by 2030, healthcare is the second-largest industry in terms of IoT adoption.
3. Retail: This sector has witnessed significant growth over the past two years, primarily due to the massive expansion of e-commerce.
4. Agriculture: The agriculture IoT market is expected to reach $18.1 billion USD by 2026, with a Compound Annual Growth Rate (CAGR) of 9.8% from 2021 to 2026.

Despite the promising outlook, challenges remain. The biggest concerns for IIoT adoption include a lack of in-house skills (38%) and a shortage of suitable solutions (30%). The most in-demand skills for IIoT projects include security, data science, technical support, and connectivity technology expertise.

Driving Forces Behind IIoT Growth

The Europe industrial IoT market is experiencing significant growth, driven by several key factors that are reshaping the industrial landscape across the continent. These driving forces are propelling the adoption of IIoT technologies and transforming traditional manufacturing processes.

Industry 4.0 Initiatives

Industry 4.0, often referred to as the fourth industrial revolution, represents the integration of digital technologies, data-driven insights, and automation into manufacturing and industrial processes. This transformative force is shaping a new era of innovation, competitiveness, and sustainability across industries. The goal of Industry 4.0 is to create 'smart factories' that are more adaptable, responsive, and efficient, ultimately leading to increased productivity and competitiveness.

By leveraging the power of digital technologies, Industry 4.0 aims to transform traditional manufacturing into a more interconnected, intelligent, and data-driven ecosystem. As Europe embraces smart factories, connected supply chains, and advanced robotics, it is positioning itself at the forefront of a global industrial transformation.

The Internet of Things (IoT) is a key pillar of Industry 4.0, enabling seamless connectivity between machines, products, and systems. This interconnectedness facilitates real-time data exchange, predictive maintenance, and adaptive manufacturing, leading to improved efficiency and reduced downtime. Additionally, artificial intelligence (AI) is revolutionizing decision-making processes and augmenting human capabilities. European companies are integrating AI into manufacturing operations to optimize production, enhance quality control, and enable predictive analytics.

5G Network Deployment

The rollout of 5G networks is playing a crucial role in driving IIoT growth across Europe. Higher bandwidths associated with 5G will allow more devices to connect to the internet, paving the way for increased IoT adoption. The European Union has set ambitious targets for 5G coverage, aiming to have it cover at least 40% of the European workforce by 2025, including 70% of European industrial sites and 80% of main logistics routes.

The arrival of 5G connections has also opened up opportunities for edge computing, which builds on a multi-layer technology that enables the management and automation of connected IoT devices. Edge computing is the logical evolution of the dominant cloud computing model, avoiding the transfer of mission-critical data to the cloud, supporting resilience, real-time operations, and security, privacy, and protection. At the same time, it reduces energy consumption and carbon footprint.

Government Support and Funding

The European Union's commitment to industrial evolution is evident in its ambitious strategies and funding initiatives. Investments in research and development, coupled with initiatives to upskill the workforce, are empowering European industries to harness the full potential of digital technologies.

Horizon Europe, the EU's key funding program for research and innovation, is contributing more than €150 million into R&I under its 2021-22 Calls on 'World Leading Data and Computing Technologies: From Cloud to Edge to IoT for European Data'. This support is enabling the transition to a computing continuum with strong capacities at the far edge in an energy-efficient and trustworthy manner.

Furthermore, the DIGITAL program is strengthening existing AI testing and experimentation facilities in areas like healthcare and mobility, and subsidizing European digital innovation hubs to boost the digitization of SMEs and help European companies become more competitive in the digital age.

The EU also supports the development of industrial IoT platforms, which are essential for the integration of key digital technologies in real-world applications, processes, products, and services. This support is crucial in creating a future data economy through the sovereign sharing of data, not only within sectors but also across them.

Challenges and Opportunities in the European IIoT Market

The Europe industrial IoT market is experiencing rapid growth, but this expansion comes with its own set of challenges and opportunities. As businesses embrace digital transformation, they face several hurdles that need to be addressed to fully harness the potential of IIoT technologies.

Cybersecurity Concerns

As the adoption of IIoT solutions increases, so does the risk of cyber threats. The interconnected nature of IIoT devices and systems creates a larger attack surface for malicious actors. Recent incidents, such as the ransomware cyberattack on the American oil supply system, Colonial Pipeline, highlight the vulnerabilities in critical infrastructure. The energy sector, in particular, has become a prime target for cybercriminals and state-sponsored actors due to its criticality to society and the economy.

To mitigate these risks, businesses are focusing on minimizing vulnerabilities by combining IoT solutions with blockchain and edge processing technologies. However, the constant innovations in the sector increase the complexity of European telecommunication supply chains, making it increasingly challenging to ensure a high level of cybersecurity and resilience.

Data Privacy Regulations

The implementation of the Data Act in the European Union has significant implications for the IIoT market. This legislation aims to enhance the EU's data economy and foster a competitive data market by making industrial data more accessible and usable. While this creates opportunities for data-driven innovation, it also introduces new challenges for businesses.

The Data Act requires companies to make data generated from connected products available to users, third parties, and public sector bodies under certain circumstances. This obligation applies to businesses of all sizes and across all sectors of the economy. Companies must now assess their products and services to ensure compliance with the Data Act's extensive requirements, which will start applying from the second half of 2025.

Skill Gap and Workforce Adaptation

The rapid advancement of IIoT technologies has created a significant skills gap in the European workforce. There is an increasing need for specialized developers and experts in areas such as data visualization, security solutions, machine learning, and hardware integration. However, a study by Udacity in 2021 revealed that 59% of enterprises report that not having enough skilled employees has a major or moderate impact on their business.

This skills shortage is no longer limited to Western and Northern Europe but has spread to Eastern European countries as well. The situation is likely to worsen as the demand for skills in artificial intelligence, augmented reality, blockchain, cloud computing, and other emerging technologies continues to grow.

To address this challenge, businesses and governments are focusing on upskilling and reskilling initiatives. The need for workforce development is particularly acute in countries like South Africa, where the manufacturing industry is characterized by a significant number of unskilled and semi-skilled workers. Similarly, in Mexico, industry managers are grappling with how to implement technology on the shop floor while balancing the risk of job displacement.

As the IIoT landscape evolves, addressing these challenges will be crucial for European businesses to remain competitive in the global market. By focusing on cybersecurity, navigating data privacy regulations, and investing in workforce development, companies can turn these challenges into opportunities for growth and innovation in the industrial IoT sector.

Emerging applications and use cases

The Industrial Internet of Things (IIoT) is transforming various sectors, with manufacturing, healthcare, and agriculture at the forefront of adoption. In manufacturing, IIoT is revolutionizing traditional supply chains, turning them into dynamic, interconnected systems known as digital supply networks (DSNs). These networks facilitate better integration with ecosystem partners and enhance overall operational efficiency.

Predictive maintenance has emerged as a key application of IIoT, with 45.2% of surveyed industry professionals focusing their IoT initiatives on this area. Other popular use cases include asset tracking and monitoring (54.5%), automation of manual processes (52.1%), and improving safety and security (39.7%).

The rise of smart buildings is another significant trend, with 39.7% of participants interested in improving energy efficiency or automation in buildings. Additionally, the metaverse is gaining traction, offering a graphically rich virtual space for various activities, including work, play, and socializing.

Potential market value by 2030

By 2030, the manufacturing industry is expected to account for the largest share of potential economic value from IoT, growing to an estimated 26%. Healthcare follows as the second-largest industry, representing around 10 to 14% of the estimated IoT value. The agriculture IoT market is also showing promising growth, with projections reaching €20.4 billion by 2028, at a CAGR of 9.8% from 2021 to 2028.

The global robotics technology market, closely related to IIoT, is expected to reach €150.7 billion by 2028, growing at a CAGR of almost 13%. This growth aligns with the increasing adoption of automation and robotics systems in production lines to enhance product quality, reduce work-in-progress time, and improve equipment reliability.

Impact on European industrial competitiveness

The adoption of IIoT technologies is set to have a significant impact on European industrial competitiveness. By enabling real-time data exchange, monitoring, and analysis of linked devices, equipment, and systems, IIoT is creating a smarter and more connected industrial ecosystem. This transformation is enhancing complex processes and increasing operational agility across various sectors.

In the energy sector, IIoT is helping companies adapt to changing market conditions, increase competitiveness, and drive sustainable growth. The technology is providing new insights and opportunities, resulting in a more efficient, safe, and sustainable energy landscape.

However, to fully leverage the potential of IIoT, European industries must address challenges such as cybersecurity concerns and the need for skilled workforce. Adhering to standards like IEC 62443-4-1 and IEC 62443-4-2 will be crucial in ensuring the security and reliability of industrial automation and control systems, thereby maintaining Europe's competitive edge in the global IIoT market.

Conclusion

The Industrial Internet of Things (IIoT) is causing a revolution in Europe's industrial landscape, paving the way for smarter, more efficient, and more competitive businesses. The growth of this market, driven by Industry 4.0 initiatives, 5G network deployment, and government support, is set to have a significant impact on various sectors, including manufacturing, healthcare, and agriculture. This technological shift is not just about connecting devices; it's about creating a new ecosystem that enables real-time data analysis, predictive maintenance, and enhanced decision-making.

As the European IIoT market continues to expand, businesses face both challenges and opportunities. To make the most of this digital transformation, companies need to address cybersecurity concerns, navigate data privacy regulations, and bridge the skills gap in their workforce. By tackling these issues head-on and embracing the potential of IIoT technologies, European industries can strengthen their position on the global stage, driving innovation and sustainable growth in the years to come.

FAQs

1. What is the current demand for industrial IoT?
The global market for Industrial IoT (IIoT) is expected to grow from USD 194.4 billion in 2024 to USD 286.3 billion by 2029, achieving a compound annual growth rate (CAGR) of 8.1% during this period.

2. What does the future hold for industrial IoT?
By 2029, the IIoT market is anticipated to expand to USD 286.3 billion. The future growth is likely to be driven by the adoption of advanced technologies such as 5G, AI, and digital twins, which facilitate enhanced real-time data analysis and support faster, more informed business decisions.

3. What are the upcoming trends in industrial IoT for 2024?
A significant trend in Industrial IoT for 2024 is the advancement of edge computing. With the surge in data produced by IoT devices, more organizations are expected to implement edge computing technologies to process and analyze data closer to its source.

4. What is the projected future of IoT in Germany?
The IoT market in Germany is projected to grow at an annual rate of 8.80% from 2024 to 2029.