Wi-Fi, not cellular networks, will emerge as the dominant wireless access technology for the Internet of Things — connecting industrial, medical, automotive and consumer devices to the Web, says Goldman Sachs.
That could be good news for certain chip and gear makers.
"We expect Wi-Fi to be the dominant wireless access technology for IoT, given that, unlike cellular, it uses unlicensed spectrum and thus does not require monthly access fees," wrote analyst Simona Jankowski in a research report.
"Just like wired access (copper and fiber) laid the foundation for the fixed Internet, and cellular access (3G and 4G) enabled the mobile Internet, we expect Wi-Fi to be the enabler of the Internet of Things," Jankowski said.
The report cites a survey by VDC Research, in which about 70% of respondents expected the IoT to use Wi-Fi.
Goldman Sachs expects chipmakers as well as Wi-Fi gear makers to get a boost as Wi-Fi becomes more pervasive in IoT applications. Goldman Sachs sees chipmakers Broadcom (NASDAQ:BRCM), Qualcomm (NASDAQ:QCOM) and Marvell Technology (NASDAQ:MRVL) benefiting, as well as gear makers Cisco Systems (NASDAQ:CSCO), Netgear (NASDAQ:NTGR) and Ruckus Wireless (NYSE:RKUS).
Machine-to-machine communications is another widely used term for the Internet of Things. Cellular providers AT&T (NYSE:T), Verizon Communications (NYSE:VZ) and Sprint (NYSE:S) have touted M2M as a new revenue source.
While Wi-Fi chips offer lower power consumption than 4G devices, cellular connections provide always-on connectivity to a wireless network, says Jankowski. As a result, cellular connections will have an edge in some IoT applications.
"The automobile vertical is likely to be the biggest driver of IoT cellular baseband demand," said the Goldman Sachs report.
Jankowski says automotive M2M growth will help offset slowing demand from smartphone makers.
"We view the IoT as an incremental growth opportunity for the cellular baseband market, which is otherwise maturing, given already high handset penetration globally," Jankowski said.
Aside from chipmakers and network gear suppliers, Goldman Sachs expects upside for Google (NASDAQ:GOOGL).
"For Google, we believe its role in IoT will be focused around developing an open software platform that can be installed on any hardware device, similar to Android's evolution on smartphones," wrote Jankowski.
General Electric (NYSE:GE), AT&T, Cisco Systems, IBM (NYSE:IBM) and Intel (NASDAQ:INTC) last year said they would create standards for the industrial Internet.
Morgan Stanley in a recent report said M2M could disrupt factory automation, agriculture, utilities, health care, retail and insurance industries. Apple (NASDAQ:AAPL), Google, Intel, Splunk (NASDAQ:SPLK) and Salesforce.com (NYSE:CRM) are among companies that could benefit, Morgan Stanley said.
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