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Will Sony's Altair Semiconductor Purchase Make It a Major Internet of Things Player?

By Chris Neiger – Feb 2, 2016 at 9:00AM

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Sony just gave its IoT credentials a big boost, but it has a long way to go in the space.

Source: Altair Semiconductor. 

Sony (SONY -2.53%) just took a big step into the Internet of Things business. The company inked a $212 million deal last week to buy Altair Semiconductor, an Israel-based company that makes LTE modems for IoT devices. 

The acquisition will allow Sony to add LTE connectivity to its line of wearable devices, and give the company the ability to sell LTE modems to other IoT tech makers.

Many IoT devices currently don't have LTE connectivity, but the market is going to explode in the coming years. Around 7 billion IoT devices are expected to be connected to cellular networks by 2025, according to Nokia. 

Sony could definitely benefit from this explosion of IoT devices, but it's also going to face stiff competition from Qualcomm (QCOM -1.20%) in the LTE modem market.

Riding the IoT's LTE wave
Not all future IoT device will utilize LTE connections. Some will rely on older cellular technology like 2G and 3G.  But LTE will become an increasingly important way to connect IoT devices, specifically for high-capacity data transfers

A wireless industry publication, FierceWireless, said last year that LTE "will likely drive more connections to the network -- and help the industry achieve the predicted 50 billion connections by 2020 that Ericsson and others have been touting for the past several years." (bold added) 

We've already seen key areas where LTE is making inroads into the Internet of Things. AT&T's  LTE network now connects 6 million cars to the Internet, and the number of LTE-connected vehicles is expected to hit 250 million by 2020, according to Gartner

Altair's LTE chips are already in millions of IoT devices, from vehicle telematics systems to action cameras to car infotainment systems. But Sony is going to face increased competition as it sells Altair's LTE chips to other companies.

Increasing competition
Qualcomm debuted new LTE modem chips for smart meters, wearables, and industrial equipment back in October, and those chips will be ready for device makers in the first half of this year.

The new chips are LTE (CAT 1) devices, so while they offer connectivity over LTE networks, with speeds that max out at 10 Mbps for downloads and 5 Mbps for uploads, they are far slower, and use much less power, than traditional LTE chips that would be used in smartphones. This means their features overlap with some of Altair's CAT 1 chips that are being used in devices like wearables and wireless security cameras.

Source: Qualcomm.

Qualcomm doesn't offer up quarterly numbers on its IoT revenue, but the company said last year that its annual 2014 IoT revenue hit $1 billion. Much of that came from selling cellular modems used in cars, wearable tech, and smart city devices.

Where Sony goes from here
Sony doesn't break out any Internet of Things revenue numbers, probably because they're hasn't been much of it to report in the past. But if the company can use Altair's business effectively, and possibly make additional IoT acquisitions, then the Japanese tech company could eventually become a significant Internet of Things player. But Sony will have to be satisfied with a slow move into that space for now. Purchasing one IoT company won't be enough to propel Sony to the top of the Internet of Things space, so I wouldn't be surprised if the company made additional IoT acquisitions this year. 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Qualcomm. The Motley Fool recommends Gartner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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QUALCOMM Incorporated Stock Quote
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AT&T Inc. Stock Quote
AT&T Inc.
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Sony Corporation Stock Quote
Sony Corporation
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Telefonaktiebolaget LM Ericsson (publ) Stock Quote
Telefonaktiebolaget LM Ericsson (publ)
$5.85 (-1.68%) $0.10
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