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Illustration: Shoshana Gordon/Axios

From smart home devices to sensor-laden factories, the Internet of Things (IoT) is poised to generate trillions of dollars in value by the end of the decade, according to a new report from the McKinsey Global Institute (MGI).

The big picture: The IoT is where the digital and physical worlds converge.

  • But just how large the IoT eventually becomes will come down less to technological development than to ensuring different connected devices can operate together and countering cybersecurity concerns.

By the numbers: MGI estimates by 2030 the IoT could enable between $5.5 trillion and $12.6 trillion in value globally.

  • About 65% of that value is projected to be created in business applications, like smart factories or offices, rather than consumer applications like internet-connected robot vacuums.
  • The IoT economy is predicted to lean toward developing countries — which benefit from being able to build smart facilities from the ground up rather than retrofitting — and China in particular, which MGI expects will generate more than a quarter of all IoT value by 2030.

The catch: It's far from certain all of this economic value will be realized.

  • An earlier MGI report from 2015 on the IoT projected the industry would generate $3.9 to $11.1 trillion by 2025, but the new report lowers that to $2.8 to $6.3 trillion.
  • "We found that for production facilities in particular, it's really been quite difficult to adopt these technologies at scale," says Michael Chui, a partner at MGI. "And most of that challenge is not in the technology, but in changing the organization as well to make the most of it."

What to watch: Whether the many companies contributing to the sector agree on interoperability standards that would make the physical IoT more like the digital, highly interoperable internet.

  • Up to three-quarters of the high-end estimates for future IoT value depend on establishing interoperability, Chui notes, while cybersecurity concerns will remain a lingering headwind.

Editor's note: This story has been updated to clarify that IoT is projected to generate trillions of dollars in value by 2030.

Go deeper

Nov 9, 2021 - Technology

The year Big Tech leapfrogged the stock market

Expand chart
Data: YCharts; Chart: Axios Visuals

At about $11 trillion, the combined market value of the six most valuable American companies is now more than a quarter of the entire value of the S&P 500.

Why it matters: The stock price of most of these companies has roughly doubled in the past two years, pointing to the undeniable leverage they've had during the pandemic, as so many U.S. businesses shifted to digital operations.

Updated 10 mins ago - World

Myanmar's deposed leader Aung San Suu Kyi sentenced to 4 years in prison

An anti-coup protest in Yangon, Myanmar.Photo: Hkun Lat/Getty Images

A Myanmar court sentenced the country's ousted leader, Aung San Suu Kyi, on Monday to four years in prison on charges of "inciting public unrest" and breaking COVID-19 protocols, per the New York Times.

Why it matters: It's the first of several verdicts that could result in the 76-year-old Nobel laureate being imprisoned for the rest of her life. The 11 charges she faces have been widely criticised as politically motivated.

3 hours ago - World

Pope Francis denounces European governments' migrant response

Pope Francis adresses refugees at the Reception and Identification Centre (RIC) in Mytilene on the island of Lesbos on Sunday. Photo: Louisa Gouliamaki/Pool/AFP via Getty Images

Pope Francis criticized European countries' response to migrants and asylum seekers during his visit to a refugee camp on the Greek island of Lesbos Sunday.

Why it matters: The pope said "migration is a humanitarian crisis that concerns everyone," but little had changed in the global response to displaced peoples since his first visit to Lesbos five years ago, per a transcript of his remarks. "Human lives, real people, are at stake. ... let us stop this shipwreck of civilization!"