numer - DBS Bank and Singapore to be among the global leaders in adopting IoT. In this report, we look at Singapore and China’s smart cities initiatives and the opportunities they

DBS Group Research • January 2016DBS Asian Insights20n

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ber

SECTOR BRIEFING

From Products to Services: The Next Internet of Things

And How Asia Is Driving Its Adoption

DBS Asian Insights SECTOR BRIEFING 2002

From Products to Services: The Next Internet of ThingsAnd How Asia Is Driving Its Adoption

Production and additional research by:Asian Insights Office • DBS Group Research

go.dbs.com/research @dbsinsights [email protected]

Chien Yen Goh Editor in ChiefGeraldine Tan EditorMartin Tacchi Art Director

Sachin MITTAL

Telecom, Media and Technology Analyst, DBS Group Research

[email protected]

Tsz Wang TAM

Analyst, DBS Vickers Hong Kong

[email protected]

Suvro SARKAR

Equity Analyst, DBS Group Research

[email protected]

Patricia YEUNG


[email protected]

Ling Lee KENG

Equity Analyst, DBS Group Research

[email protected]

Chris KO


[email protected]


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Introduction

What Is IoT

Why IoT Now?

Monetisation Model for IoT

IoT Market Opportunity

IoT Value Chain

IoT Platform at the Centre of the Value Chain

IoT Adoption in Asia

IoT Spending in Asia Pacific

Asia Pacific Ahead in IoT Adoption

IT Spending Breakdown

Smart Cities

Singapore’s Smart Nation Project

China – Smart Cities

Potential Impact on Various Sectors

Utility Sector

Transportation Sector

Manufacturing Sector

Healthcare Sector

Conclusion

Introduction The first wave of Information Technology (IT) in the 1960s and 70s automated the value chain of enterprises such as order processing and billing. The second wave was the Internet in the 1990s, and this led to the formation of global and efficient supply chains. The third wave of Internet of Things (IoT) is creating smart, connected products. For the very first time, vendors are able to track their products sold and maintain relationships with customers even after the sale.

IoT enables product companies to transform into service companies by launching new services in conjunction with their products and generate recurring revenue streams. For example, Volkswagen’s “Car-Net” service offers security features, maintenance assistance, and navigation tools to its customers for a subscription fee of US$17.99/month. With this, automatic crash notifications can be sent to chosen contacts when airbags come into use in the vehicle.

The establishment of smart cities will accelerate IoT adoption in Asia, with South Korea and Singapore to be among the global leaders in adopting IoT. In this report, we look at Singapore and China’s smart cities initiatives and the opportunities they present. We also explore how IoT will disrupt not just business operations, but the structure of industries as well.


IoT will disrupt not just business operations but the structure of industries


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What Is IoT?IoT is a network of things that are connected to each other and refers to an ecosystem comprising of things, connectivity, and services including data analysis.

1) The thing (a sensor embedded in the product) has some intelligence to sense changes around it.

2) Connectivity is also referred to as Machine-to-Machine (M2M) connectivity via cellular, Wi-Fi or Bluetooth etc.

3) The service is usually hosted in a remote location away from the thing. This can be a cloud infrastructure, along with specific applications and data analytics. The service portion is likely to be the largest portion of the IoT pie in our estimate.

Why IoT Now?

The growth in IoT-enabled devices has been fuelled by the declining cost of sensors, connectivity, and data processing power. The smartphone revolution has resulted in big scale production of these components, bringing down the cost of components required for IoT. The software needed to analyse this data has improved gradually and companies are using it to boost operations and seek out new business models.

Diagram 1. Three parts: Things, connectivity, and service

Source: Gartner (December 2014), DBS Bank

Service or App 2020 (f) % of Revenue

Thing

20

70

10

Embedded Intelligence


According to an article published in the Harvard Business Review (HBR) in January 2015, there have been three waves of IT so far.

Wave 1 in 1960s and 70s – IT-automated value chains, such as order processing and billing.

Wave 2 in 1990s – Internet-enabled connectivity made supply chains global and efficient.

Wave 3 Now – Embedded sensors resulting in smart, connected products for the very first time.

Unlike the previous waves of IT transformation that boosted productivity, this wave will change the structure of industries. Smart, connected products will blur the boundaries within an industry and change the basic principles of product design.

IoT will also force vendors to standardise their products. For example, a patient’s home health monitor needs to talk to the hospital’s health informatics system, which will require coordination on technological and product levels. Similarly in the farming sector, when a tractor manufacturing company rolls out smart, connected tractors, its product should be able to talk to irrigation systems, weather data systems, and seed optimisation databases. This can be achieved through deep co-operation during product development. This is precisely the reason why governments and big enterprise customers have an important role to play in standardising IoT protocols across the entire range of products in a sector.

Diagram 2. High smartphone volumes have driven down costs, paving the way for cheap IoT sensors

Source: DBS Bank

Internet of Things

Smartphone Internet

Desktop Internet

2000 2015 2030

50bn+ Units

5bn+ Units

1bn+ Units


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Monetisation Model for IoT

Premium Product

In this model, a vendor charges a premium price for the connected features of the product. An example is LIFX, which produces remotely programmable LED light bulbs that can be controlled through a smartphone app. These bulbs are sold at a premium due to this differentiation.

Service Provider

In this much desired model, a vendor converts what has been a traditional product into a service, builds a relationship with the customer even after the sale of the product and generates recurring revenue stream. A classic example of new service revenue for enterprises is Rolls-Royce, who instead of selling aero engines, now contracts with many of its customers for “power-by-the-hour”. Rolls-Royce is able to deliver this service due to remote monitoring and use of big data analytics on parameters such as pressure and temperate, etc.

Another example of service revenue is smart thermostat manufacturer, Nest (acquired by Google in 2014 for US$3.2 billion). The company uses its Learning Thermostat — a home automation and energy management product — as a platform to offer energy management services to utility companies. Nest charges utility companies US$30 to US$50 per thermostat annually for its service. Nest automatically reschedules usage of equipment with high electricity consumption such as air conditioners to avoid outages during the peak hours. By doing so, it has been able to reduce overall electricity requirement by as much as 50% in peak times.

Diagram 3. Business models to shift under IoT

Source: DBS Bank; DBS Vickers

Basic

Tran

sact

iona

lRe

latio

nal

AdvancedIoT Capability

Premium Product

Service

Platform

ProductC

usto

mer

Rel

atio

nshi

p


Platform Provider

In an ecosystem, the focus is not on selling a product or a service, but on providing a shared platform to other players in the ecosystem – hardware manufacturers, software developers, service providers. The platform provider ideally makes money from both end-customers as well as other platform users. Platform users pay for listing and the platform provider also gets a share whenever a product is sold to the end-customer on the platform.

SmartThings sells its own products and services while creating a platform for other IoT companies to sell their services. SmartThings has a smartphone app that is used to control its hub and all of its connected devices. Various products that the company sells as part of the platform include locks, switches, environment sensors, alarms, etc. SmartThings offers design guidelines to developers who want to make products for its platforms. SmartThings works with partners such as Belkin and Phillips, and on operating systems such as Android and iOS. According to popular technology review website CNET, over 1,000 devices and 8,000 applications have been made till August 2014 when the company was acquired by Samsung Electronics for approximately US$200 million.

Diagram 4. Examples of new service launch by product companies with the help of IoT

Service Benefits to Customers and Vendors

Video analytics service by a telecom service provider

Singtel offers the cloud based Video-Analytics solution for the retail industry on a monthly subscription basis. The service leverages analytics to extract information such as age, gender, and emotions from video images.

Instant ink service by a printer manufacturer

HP Instant Ink programme allows customers to subscribe to a monthly service that enables the customer to print a fixed number of pages through their printer. A sensor is installed in the printer to detect when the printer will run out of ink and HP will mail the customer an ink cartridge before the printer runs out of ink. The monthly charge is inclusive of the ink cartridge, shipping, and recycling of ink cartridges.

Pay by flight hours service by a jet engine supplier

Rolls Royce introduced “TotalCare”, a suite of predictive maintenance and repair services for its jet engines. Customer pays Rolls Royce based on the number of flight hours the engine is used and Rolls Royce takes the responsibility to maintain and improve the durability of its engines.

Remote monitoring service by a turbine manufacturer

General Electric has opened facilities around the world to provide real-time monitoring and diagnostic services for its global base of gas turbines and compressors. A combination of sensors and control devices capture data about the performance of the equipment, which is then transmitted to these facilities where maintenance and repair needs are monitored and scheduled.

Mobility as a service by an automaker

Daimler AG launched Car2Go, a car sharing programme which allows customers to locate and use vehicles provided by Daimler for their journeys. The customer is charged per minute for the use of the vehicle while all fuel and maintenance charges are borne by the vendor.

Source: Companies, DBS Bank


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IoT Market OpportunityGartner forecasts an installed base of 25 billion connected things in 2020 compared to 4.9 billion in 2015, representing a compound annual growth rate (CAGR) of 33%. This excludes smartphones and PCs, but includes dedicated objects, such as vending machines, jet engines, connected soap dispensers, etc. In terms of annual shipments, Gartner forecasts 1.6 billion connected things in 2015, rising to 8.3 billion in just five years in 2020. The highest volume shipments are expected to come from connected LED interior light bulbs, followed by smart TVs and automotive infotainment systems.

It is estimated that by 2020, over 80% of IoT supplier revenue will be from services. The incremental cost of hardware and software is relatively small while the services opportunity (including data analytics) is much larger. Gartner forecasts IoT will support total services spending of US$69.5 billion in 2015 rising to US$263 billion by 2020 at 23% CAGR.

But IoT connectivity opportunity (part of service revenue) will be relatively small. At US$32 billion in 2020, the opportunity for IoT connectivity services is just 12.3% of total IoT service opportunity. As the revenue base of telecom service providers’ fixed and mobile revenue is large, it will translate to less than 3% of their total revenue according to Gartner. Very few IoT connections may go through the SIM-based cellular networks and most of the devices will be connected over free networks such as Wi-Fi and Bluetooth or ZigBee, etc. provided by IT companies and engineering teams of customer organisations. Telcos are expected to charge only US$1-3 for each cellular connection, which is much lower than smartphone connections. Connected cars, smart electric metres, remote patient monitoring, and outdoor security cameras will be top applications for telcos.

Diagram 5. Gartner IoT-related service revenue forecast

Source: Gartner (Dec 2014)

At a size of US$231 billion in 2020, the IoT solutions opportunity will be much bigger than connectivity. However, this will require IoT players to provide (i) industry specific solutions to enterprises helping them either launch a new service or reduce cost; (ii) services such as security, health monitoring services, etc. to consumers and charge a monthly fee.

Gartner forecasts consumer services to account for 24.7% of IoT service revenue in 2020 with enterprises accounting for the bulk – over 75%. Enterprises will be big adopters of IoT so that they (i) sell new services to their customers (both enterprises and consumers); (ii) lower their costs by reducing downtime of their equipment and supply chain costs.

Gartner forecasts that IoT will produce close to US$1.9 trillion of economic value-add in 2020. Economic value-add for a sector is essentially the sales in that sector minus inputs and supplies from other industries. For example, manufacturing sales minus the cost of raw materials and energy will be the economic value-add for the manufacturing sector.

IoT will also facilitate new business models, such as usage-based insurance calculated based on real-time driving data. The banking and securities industry will continue to innovate around mobile and micro-payment technology. IoT will also support a large range of health and fitness devices and services, combined with medical advances, leading to significant benefit to the healthcare sector.

Emerging connected sensor technology will lead to value creation in diverse areas such as utilities, transportation, and agriculture. Most industries will also benefit from the generic technologies, in that their facilities will operate more efficiently through the use of smart building technology such as connected LEDs and heating, ventilation and air-conditioning (HVAC) systems.


IoT solutions opportunity will be significant

IoT adopters to reap 6-7 times more benefits than

IoT suppliers

Diagram 5. Economic value-add by industry sectors in 2020



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McKinsey Global Institute has even higher projections. It predicted in 2013 that IoT would improve global productivity by between US$2.7 trillion and US$6.2 trillion annually between 2013 and 2025. McKinsey believes 80% to 100% of all manufacturers will be using IoT applications in ten years.

IoT Value Chain

Smart module – Smart modules combine the radio, sensor, and microcontroller, integrate it with storage, and make it “insertable” into a device. Radio/communications chips provide the underlying connectivity, sensors provide much of the data gathering, micro-controllers provide the processing of that data.

Smart object – The smart object is the product – a refrigerator, a vending machine, a car, etc. – that its manufacturer has designed to be able to connect to others via its smart module and a network.

Network operator - The network operator enables and manages fixed or wireless communication with a smart object using cellular or non-cellular technologies such as Wi-Fi, or smart objects can be connected with each other via Bluetooth, ZigBee, etc. without the operator.

Service enabler or platform provider – The platform provides the underlying management and billing capabilities to IoT (such as Android OS to mobile). It also manages the multitude of partners that offer third party applications that run on the platform (e.g. for vehicle tracking), in a way that is similar to how an app store is managed. Many tech giants such as Apple and Google are vying to be platform providers as this part captures the maximum value in the value chain.

Diagram 6. How the IoT value chain works

Source: Arthur D Little

1Smart

moduleSmart object

Network operator

SIM card Network InterfacesPlatformVending machineSensor Connectivity Solution

build-upEnabling capabilitiesApplianceActor Availablility

CarAggregator Quality HardwareCRMBilling

Service provisioning

Back-endApplications

CameraTransponderComputer

Service enabler

Share of total value

5-10% 15-20% 30-40% 15-20% 10-20%

System integrator

Service provider

Reseller (Business Customer)

Customer2 3 4 5 6 7

Packaging/ bundling

Uses service

Resells services

Buys service

Uses service


IoT Platform at the Centre of the Value Chain

There are multiple players trying to promote their platforms to attract more developers to come out with new innovative solutions.

1) Smart Home - Apple’s HomeKit, Google’s Brillo, GE Wink, Smarthings, etc.

2) Smart Healthcare - Apple’s HomeKit, Google Fit, Samsung SAMI, Human API, etc.

3) Smart Car - Apple’s Carplay, Google’s Android Auto, Microsoft’s Windows in the Car, Ford’s Applink, etc.

Sectors like utilities (smart metering), industrial applications, and smart cities present attractive business opportunities despite the lack of standardised IoT platforms. These applications focus mostly on solving well-understood needs for known customers. As such, a universal platform supporting innovative services is not essential to provide smart city services as long as various government agencies in a city/country use a single platform.

System Integrator –The smart object has to be integrated with the platform and its relevant applications. In most cases today, this integration is cloud-based, meaning that a chosen application platform will support the integration through standardised application programming interfaces (APIs) as a consequence. All large system integrators, such as Ericsson and IBM, are entering this territory, which used to be dominated by smaller regional players.

Service Providers – They brings together the hardware, the connectivity and the platform to provide end-to-end solutions to different verticals. Most importantly, they take care of bundling the solutions, setting the tariffs, billing, and customer care.

Diagram 7. Some of the popular categories by shipments in 2020


Gartner forecasts that the highest volume will come from connected LED interior light bulbs for business applications in 2020 followed by smart TVs and automotive infotainment with increased availability of online on-demand content.

Smaller-volume consumer items such as networked thermostats, which enable analytics-based advice for energy-saving programmes, as well as remote controls, would also be in high demand.


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IoT Adoption in Asia

IoT Spending in Asia Pacific

Frost & Sullivan estimates that total spending on IoT in the Asia Pacific was US$10 billion in 2014, which will grow at a CAGR of 34.1% to reach US$59 billion by 2020. Asia Pacific is characterised by a large presence of manufacturing economies which is expected to drive spending on IoT applications in telematics and supply chain visibility. IoT spending in the manufacturing industry is expected to be one of the fastest growing markets in Asia Pacific, growing at a rapid CAGR of 52.7% between 2014 and 2020.

Adoption of IoT is not without its challenges, as there are several hurdles that could prevent it from achieving rapid growth. Security and information privacy are some of the largest hurdles to the adoption of IoT. With smart and connected devices embedded in business processes and tied to critical functions, the ability to negatively affect enterprises and individuals is increased significantly.

Asia Pacific Ahead in IoT Adoption

Gartner’s survey found Asia Pacific (APAC) companies were more aggressive in IoT adoption. APAC survey respondents generally expect IoT to have a greater long-term impact on their organisations than respondents in other regions. We believe this attitude is partly because some Asian organisations tend to conduct very long-term strategic planning and partly because some of the respondents may come from smaller and more agile organisations. North America lags in terms of IoT impact. This may partly be a consequence of some respondents coming from larger and less agile organisations.

Diagram 8. South Korea and Singapore are expected to be among Top 5 global markets to adopt IoT

*Bubble size represents 2020 GDP sizeSource: AT Kearney

Lower

Brazil

India

China

Germany

Japan

UK

Australia

United States

Low

er

Higher

Hig

her

Pace of IoT Adoption

IoT

Influ

ence

on

Econ

omy

SingaporeNorway

Sweden

South Korea

Diagram 9. Expected long-term impact of IoT by region

A recent global study done by Forrester Consulting on IoT implementation in various enterprises also puts Asia Pacific ahead in IoT adoption. It found that 58% of APAC enterprises are either implementing or planning to implement IoT over the next 24 months versus only 45% globally.

An IDC survey also puts Asia Pacific as a leader in IoT adoption. Market research firm IDC shared the results of its survey of 2,350 IT and business decision makers in (mostly) large and medium-size enterprises worldwide in 2015. According to the survey results, enterprises in Asia Pacific are leaders in IoT adoption.

B2B is considered by survey participants as the area where IoT will grow, a reversal from last year where a majority of survey participants thought that consumer IoT is where the action will be.

Shift in the location of processing the data: More survey participants this year will process the data generated by IoT sensors at the ”edge” rather than in the data centre, a reversal from last year’s survey.

Top drivers for creating an IoT strategy: Increased productivity (14.2%), time to market (11.8%), and process automation (10.1%). Top challenges for the IoT: Security, upfront costs, ongoing costs.

IoT is anyone’s game in 2016: Hardware and networking vendors have lost ground in their perception as “leaders,” while software vendors, analytics vendors, and device/component vendors have gained in terms of market awareness/ perception.


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Source: Gartner (Feb 2015)


According to Gartner’s survey, respondents expect the utility sector, followed by transportation, services, manufacturing and retail to be impacted the most by IoT in the short term (less than three years). In the long term (more than five years), they expect the highest impact to remain on utilities, followed by retail and manufacturing.

Surprisingly, respondents do not see much potential in transport and services in the long term despite good short term potential. This could be explained by the fact that these industries have already invested in tracing and telemetry services.

Diagram 10. IDC survey on IoT

Diagram 11. Short- and long-term impact by industry – Impact will be higher on Utilities, Transportation, Retail and Manufacturing sectors over the next three years

Source: IDC

Source: Gartner (February 2015)


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IT Spending Breakdown Enterprise software is the fastest growing segment. Gartner expects key applications such as digital commence, marketing and sales software to be the key drivers. We believe that cloud services and data analytics are two key reasons for enterprises to spend more. Traditional on-premise application providers are being disrupted by cloud service providers. Meanwhile, increasing unstructured data and rising adoption of big data analytics is another key driver.

IT services is the second fastest growing segment. Many of the developed markets are shifting toward next-gen social, mobility, analytics and cloud (SMAC) solutions. IT outsourcing demand especially in Europe is expected to increase over the next several years in order to cut costs.

Moderate growth in data centre systems. The stagnating servers and storage market due to disruptive technologies, such as cloud computing and software defined storage, will lead to moderate growth in data centre systems. Network refreshes will fuel demand for network equipment. We believe that network equipment companies are better prepared to handle transition to cloud.

Devices sales are likely to decline. PC and tablet market continues to weaken with spending declining by 9.6% in 2015. On the mobile phones, Apple’s high end phones continue to do well while Android growth is slowing due to lower replacement activity from higher life of smartphones.

Communication services sales may decline as well. The abolition of roaming charges in the EU (due to regulation) and the elimination of roaming charges in parts of North America (due to competition) are key concerns. This could be partially offset by communication providers seeking additional revenue from IoT connectivity and value based pricing.

Diagram 12. IT spending by Sector, worldwide, 2013-2019

Source: Gartner (Oct 2015)

Spending (Billions of Dollars) 2013 2014 2015 2016 2017 2018 2019 CAGR (%) 2014-2019

Data Center Systems 164 168 169 172 174 176 177 1.1

Software 297 314 312 332 353 375 400 4.9

Devices 677 694 658 659 665 673 681 -0.4

IT Services 937 955 919 955 996 1,039 1,087 2.6

Communications Services 1,605 1,606 1,495 1,499 1,527 1,551 1,572 -0.4

Overall IT 3,680 3,736 3,555 3,616 3,714 3,815 3,917 1.0

Growth (%)

Data Center Systems - 2.6 0.9 1.5 1.2 1.2 0.8 -

Software - 5.7 -0.7 6.2 6.4 6.4 6.5 -

Devices - 2.5 -5.1 0.1 1.0 1.1 1.2 -

IT Services - 1.9 -3.7 3.9 4.2 4.4 4.6 -

Communications Services - 0.1 -6.9 0.2 1.9 1.6 1.3 -

Overall IT Growth - 1.5 -4.9 1.7 2.7 2.7 2.7 -


Smart Cities Singapore’s Smart Nation Project

Singapore’s Smart Nation Programme will harness IT, networks and data to raise standards of living, productivity and responsiveness to people’s needs and aspirations. Smart Nation will rely on IoT and big data.

Singapore’s small size will help in standardisation. Many would consider Singapore’s small size a disadvantage in some areas but it gives Singapore an edge in the implementation of the Smart Nation. Most smart city projects around the world are led by their pro-active mayors or governors who may have little control over national policies. These projects may be constrained by certain laws that affect the whole nation. For example, Federal and State legislation may not allow for the smooth transition of some American cities into becoming smart cities. As such, many smart city projects are going for piecemeal solutions only such as street lighting or waste management. In Singapore, the fact that this programme is led by the national government means that legislations can be amended and various public agencies are strongly motivated to make it a success. This enables Singapore to lead the standardisation efforts for Smart City.

An Internet of Things (IoT) Standards Outline in support of Singapore’s Smart Nation initiative has been laid out and announced in Aug 2015 The IoT Standards Outline focuses on three types of standards, namely sensor network standards, IoT foundational standards and domain-specific standards. Standards will play a critical role to create an environment where government agencies, planners, developers, manufacturers come together to develop new technologies and smart solutions efficiently.

Smart Nation Infrastructure

The government is keen to promote Heterogeneous Network (HetNet) technology for Smart Nation. HetNet network services will be maintained by switching between different types of networks such as Wi-Fi and 4G and 3G. It is meant to mitigate capacity crunch, optimise overall network capacity to improve quality of service, facilitate intra-operator roaming that would improve network resiliency.

HetNet is a key component of Smart

Nation

Singapore’s small size will help in standardisation


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We see at least two key reasons for this. Firstly, Singapore often sees extremely high data usage in certain pockets of the city such as in MRT stations and popular shopping malls. HetNet deploying Wi-Fi for small cells and 4G for macro cells is a relatively more economical solution than only deploying 4G due to cheaper cost of Wi-Fi equipment. Also, Wi-Fi uses an unlicensed spectrum of around 2.4 GHz band, thus making it more spectrum efficient. HetNet will be able to provide better user experience. Secondly, HetNet could also be a better solution than public Wi-Fi networks alone in the monitoring of various services especially when people are mobile. For example, when one leaves home to catch public transport, everything can be monitored by operators using HetNet.

Diagram 13. Smart Nation Infrastructure

Diagram 14. Smart Nation Services

Source: DBS Bank

Source: DBS Bank

Physical Base Infrastructure

Smart Nation

HetNet

Smart Logistics

Next Gen NBN

Smart Tech Challenges

Active Infrastructure

Passive Infrastructure

Smart Nation Platform

Smart Health Assist

Smart Transport

Smart HDB Town Framework

IP Core

Aggregation Gateway Boxes

Data Centres


There are currently five main areas of focus: Smart Health-Assist, Smart Logistics/Mobility, Smart HDB Town Framework and Smart Tech Challenges. The government’s annual projected healthcare spending is expected to reach S$12 billion by 2020, up from an estimated S$8bn in 2015.

Smart Health-Assist’s Challenge – Limited Healthcare Infrastructure

Hospitals are already operating at close to full capacity in Singapore. Along with medical tourists coming for better treatment, Singapore is also facing a rapidly ageing population which will squeeze Singapore’s healthcare capacity.

It is estimated that by 2030, there will be 900,000 elderly citizens in Singapore which represents a one in five ratio, increasing the emphasis of the importance of Singapore’s healthcare system. The Pioneer Generation Package is for 450,000 Singaporeans. In contrast, there are around one million Singaporeans between the ages of 45 and 64, who will reach retirement age in ten to 20 years.

Singapore would use telehealth to tackle its own healthcare challenges. National University Hospital is undertaking a trial to see if remote healthcare is viable. In this trial, patients are monitored at home with smart devices so that earlier intervention can be provided if need be in order to reduce the number of visits to hospital.

From the perspective of the consumer/patient, they will be able to manage their medical conditions especially chronic diseases such as cardiovascular, diabetes, respiratory diseases

Diagram 15. The challenge of ageing population in Singapore

Source: Smart Nation-Forbes

+30%Ageing PopulationThe world population is rapidly ageing

Food for thought: How will this shapre costs and infrastructure when it comes to our future healthcare system?

OccupancyPast Now

300,000 erlderly citizens in Singapore (1:9):

By 2020, 11,000 more hospital beds will be added

900,000 erlderly citizens in Singapore (1:5):

In Singapore, seniors avearge hospital stays length

Daily occupancy rates at public hospitals in Singapore

2030

2015

90%

?


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whilst in the comfort of their own homes. Any deterioration of a patient’s health can be detected faster than if the patient was left to their own devices to visit a medical professional.

Another use for the sensors would be the development of Smart Elderly Alert Systems for the monitoring of elderly relatives to keep them safe. Sensors placed in the flat can help to monitor the movements of the elderly, and caregivers will be alerted should irregular movements be detected.

This in turn would reduce traffic in hospitals’ emergency departments or inpatient admissions by early intervention by the healthcare provider. This would also mean that healthcare staff can be more efficiently allocated.

There are three key areas (not including infrastructure) that still require development, namely next generation sensors, decision support systems and big data analytics.

Development of Next Generation Sensors. Currently, most commercially available healthcare sensors are often intrusive and cumbersome when a patient needs constant monitoring. Sensors are also not refined and may set off false alarms. This opens an opportunity to develop solutions to these problems, for example, heart rate and blood pressure monitors that come in stick-on patches, digital wrist watches or sensors embedded in items such as pillows.

Decision Support Systems. Decision Support Systems (DSS) are meant to help healthcare professionals diagnose and recommend the right treatments and care plans for patients. This increases the consistency of treatments of evidence-cased care and the monitoring of key clinical and service outcomes. For example, if a medical professional comes across a rare case that he or she has not seen before, they are able to access a database of all the past medical cases to ensure that their diagnosis is correct.

Big Data Analytics. The data collected by the sensors will be stored in national health data bases which would allow medical professionals to gather new insights into disease patterns and contribute to further medical research. In Chicago, there is a group called the Health Data Liberation Meetup Group that is devoted to helping providers, insurers, and institutions to adopt open data practices in the field of healthcare.

Smart Transport’s Challenge – Limited Space for Roads

With a population of 5.4 million and approximately one million cars on the roads, the number of vehicles that Singapore can have is severely limited. At the same time, roads take up 12% of land space suggesting that we cannot increase its operating capacity. In response to this, the LTA has come up with ideas that make use of ICT solutions.


Smart Traffic Congestion Management. The government plans to replace the current ERP system with one that uses satellite position technology by 2020. This would get rid of those structures that are a negative externality to many people’s eyes and clear up space for other things. Using Global Positioning System (GPS), motorists may have to pay based on the distance travelled in a congested zone rather than paying a flat fee. It could also replace a whole range of things from replacing parking coupons to paying for tolls at checkpoints. It would also allow motorists to obtain real-time traffic information on an interactive computer installed in vehicles, in place of the existing in-vehicle unit. The system should ideally be able to learn a motorist’s regular route and calculate how much he could expect to pay that day. It should also be able to suggest alternative routes with different prices and journey times. There is a possibility that motorists could pay ERP charges at the end of a month, after the distance clocked has been compiled.

A range of payment options will be available, from upfront payment through Contactless e-Purse Application (CEPAS)-compliant stored value cards to backend payment using credit and debit cards, a virtual payment account and GIRO.

Monthly subscription fees for all transportation needs? Whether you travel by bus, train or cab, the Mobility-as-a-Service (MaaS) mobile app may allow you to pay a one-off, monthly subscription fee to get around Singapore. Adding the fact that you will be able to get the app to plan a trip for you — all you need to do is enter your starting point and destination — and MaaS could just be the next efficient, one-stop platform for our transportation needs. Details are scant, but according to IDA, this integrated model will allow commuters to get around at a lower cost. Another huge advantage is its efficiency;

Diagram 16. Singapore transport sector’s challenge

Source: Smart Nation-Forbes

1 million cars on the road in SIngapore (approx)

12% land space in Singapore use for roads

Mobility with limited land space, the number of vehicles or roads cannot be increased


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there is no risk that one’s ez-link card is running out of money, or having to rush to top up the card when one is running late for work.

Autonomous Vehicles in Sentosa. In April 2015, IDA revealed that it will be working with the Sentosa Development Corporation. Driverless cars will ferry visitors around the island, drones will roam to check for litter, and self-driving lawnmowers will maintain the landscape.

Ministry of Transport, Sentosa Development Corporation and ST Engineering have signed MOUs to conduct tests for a fleet of “on-demand self-driving shuttles”, which will complement the island’s existing bus, tram and monorail network. These driverless shuttles will allow guests to travel around the island by calling for them via smartphones or information kiosks. The public trials for this will take place after 2018, once an engineering study determining the technical requirements for seamless navigation is completed

Smart Logistics’ Two Key Challenges

Present day track and trace technologies are often used by large organisations for premium cargo but many of them lack near time information. Also verifications are also very disjointed with the change of custody across different service providers with as many as 25 parties required to process one export shipment, with each using different standards.

Smart logistics will be a centralised platform. This platform will allow different players - cargo owners, freight forwarders and ground handlers - to leverage upon sensory networks in airports and seaports to track and manage their cargo in near real time. The government will fund the building of the infrastructure and allow small players to access it at an affordable price. According to IDA, smaller players in particular, will benefit from this more affordable system that will enable timely response to unforeseen events, automate labor intensive processes and reduce inventory.

TradeNet, the e-government platform for the local trade and logistics industry launched 25 years ago, will be undergoing a facelift. There is a plan to combine the backend systems of TradeNet, TradeXchange and Customs into one system, tentatively to be named National Trade Infrastructure, once the current contract expires in 2017. The government hopes that this keystone project will boost Singapore’s productivity and competitiveness through a digitalised, integrated supply chain. A tender for this project had been called and bids are now being evaluated.

Ningbo City in China, for example, has developed a Smart Logistics Center to streamline the port’s entire supply chain and allows 5,000 logistics companies in Ningbo to share data. Using this cloud platform, logistics companies and their clients can work together to respond to changing demands to better decide what to produce and when and where


to ship it. Every shipping vehicle has a GPS tracker now and the idling of trucks has decreased significantly by up to 80% in some cases.

Smart HDB Town Framework

The Smart HDB Town Framework maps out the introduction of smart technologies in HDB towns and estates by focusing on four key areas: Smart Planning, Smart Environment, Smart Estate and Smart Living.

Smart Planning. It refers to the use of computer simulations and data analytics to enable HDB to effectively plan and design its estates. For example, when assessing the effectiveness of various initiatives (e.g. LED lighting, solar energy, vertical greenery, rainwater harvesting, recycling, pneumatic waste collection), and making a decision on the best combination to achieve sustainability goals in a cost effective way. Each car park will also have an intelligent parking demand monitoring system that will automatically increase the number of available lots during non-peak hours for visitors, as residents with season parking tickets are out, and reduce the number of available lots for short-term parking visitors in the evening, to ensure sufficient lots are reserved for residents with season parking tickets returning home.

Smart Environment. Estates will be linked with a network of sensors to create a Smart Environment. These sensors will capture real-time information on environmental factors such as temperature and humidity. Innovative solutions can then be found to create a more pleasant environment for residents. For example, fans in common areas can be triggered when certain thresholds of temperature and humidity are reached. The fan speed can be regulated to improve the thermal comfort level for residents, while reducing energy consumption.

Smart Estate. Data will be analysed by Smart technologies to optimise maintenance cycles and pre-empt problems. This will allow us to better understand the usage patterns of common amenities so as to easily check and identify problems to resolve them. For example, lighting fitted with sensors can help HDB to understand human traffic patterns and optimise the provision of lighting. The lighting in common areas with little or no human traffic detected could be reduced to 30%, hence reducing energy usage.

Another example would be the installation of a Smart Pneumatic Waste Conveyance System. Waste disposal patterns and volumes can be monitored which will allow effective waste collection frequencies. This can help to optimise the deployment of resources needed for waste collection.

Smart Living. The Smart Nation plans include using smart technology in housing estates. HDB estates are the first to try using these smart technologies to see if individuals can


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adapt these for day to day living. Residents will be able to tap on Smart home applications developed by commercial companies that can enhance energy savings, and enable them to access services like healthcare, in the comfort of their homes. Seventeen companies are participating in the trials, including the likes of Samsung, LG Electronics and StarHub. For example, HDB, together with the Energy Market Authority (EMA) and Panasonic, are exploring a suite of different energy choices and solutions for households. Residents can also monitor their energy consumption patterns, and manage their home appliances anywhere, in real time.

Smart Tech Challenges

The Smart Nation Tech Challenge is meant to encourage individuals and businesses to join the government and use new technologies to solve problems that we face in an urban environment. The Smart Nation Tech Challenges are very much a government-led initiative. Other smart cities such as Amsterdam and New York have citizen-led initiatives that allow anyone to convert an idea into a feasible project. Although there is no clear direction, there is a lot of citizen engagement

Video Analytics Smart Nation Tech challenge. Video analytics is the analysing of video streams and footages taken by surveillance systems and translating these into data that the government or another type of organisation could use. It could potentially boost public safety and improve resource utilisation when video analytics software senses that something is amiss, or improve services in areas such as transportation, healthcare, retail and security through relevant data gained.

The challenge is thus to build up industry technical capabilities in video analytics (i.e. accuracy and availability of algorithms) and to create solutions to video analytic problems so as to generate greater value from cameras. The evaluation, validation and announcement of winners for the challenge is expected to be announced in January 2016.

There are three main benefits to the advancement of video analytics technology, namely public safety, manpower utilisation and situational awareness.

China – Smart Cities

IoT is one of priority projects of China’s 12th Five-Year Development Plan (2011- 2015). In February 2012, China’s Ministry of Industry and Information Technology (MIIT) released the national 12th five-year plan which put forward the objectives, investments and roadmap for China’s IoT market. According to China’s R&D Centre for Internet of Things (CIT-China), the Chinese government is expected to invest around 3.8 trillion Chinese


yuan (US$610 billion) in developing a M2M ecosystem within the decade ending 2020.

China’s central government has selected over 200 cities to pilot smart city projects. These cities include Beijing, Shanghai, Guangzhou, and Hangzhou beside others. Over 90% of China’s provinces and municipalities have listed IoT as a pillar industry in their development plans, For example In Zhenjiang, Jiangsu province, high-speed 4G networks have become standard in buses, trains and the city’s app broadcasts bus arrival times. Zhenjiang states that over 500,000 commuters now utilise these features daily saving 6,700 tons of carbon dioxide and US$2.7 million in fuel costs annually by more closely tracking real-time bus routes.

Tai Lake in Wuxi City is using IoT technologies to monitor and predict the Cyanobacteria outbreak and protect the water supply to the city. China Smart City Industry Alliance, an association sponsored by MIIT predicts that smart city related industries will grow at a compound annual growth rate of 18% over the next 15 years from 2014 and IDC predicts that urban construction investments associated with smart cities in China will reach 2 trillion yuan (over US$300 billion) over the decade ending 2025.

In smart city initiatives rolling out smart grids, establishing smart traffic management systems, video analytics and surveillance and smart governments are key areas of focus.

Big spending on smart metres and grids. China’s biggest power distributer, China State Grid Corp., has spent about 400 billion yuan (US$6 billion) last two years on its electricity networks and plans to invest over 420 billion yuan (US$6.8 billion) in 2015. Growing electricity demand due to urbanisation, the nation’s pledge to generate 20% of its

Diagram 17. China Smart City Technology market to boom

Source: Navigant Research


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energy requirements by 2020 from renewable sources and increasing demand for electric vehicles is expected to drive demand for smart grids. McKinsey estimates that China’s urban population will grow to 840 million by 2020 and over five million electric vehicles to be on the roads by 2020. By 2013 China had deployed over 250 million smart metres. A recent report by the WorldWatch Institute states that the Chinese government is planning to have smart metres installed in 95% of China’s households by 2017. As such, over 435 million smart metres are expected to be deployed by 2017.


Potential Impact on Various Sectors Utility Sector

Likely to see a 15% uplift in operating profit by 2020. According to Research and Markets: Global Utilities Industry Report 2014-2017, the global utilities industry was worth US$3.4 trillion in 2014. Gartner predicts US$95 billion IoT-related economic value additions in 2020. An operating margin of 19% in the industry according to CSIMarket, suggests that there could be a positive impact of 15% on the sector due to IoT. The biggest impact will come from lower input costs for the utility companies and creation of more eco-friendly businesses. According to Gartner, utilities have about 299 million units of IoT in 2015, slightly behind 307 million units in manufacturing.

Power companies to benefit from smart metering and smart grids. Smart metering is already seeing deployments in regions such as the United States, Western Europe and Asia. Singapore and China have taken the lead in Asia by putting in place state mandated smart metering programmes that have paved the way forward for future standards in the sector. According to various market intelligence reports, the smart metre installed base (as a percentage of all metres) in Singapore is expected to reach 75% by 2020. The EU for example has set a target of 80% for smart metres by 2020.

According to Navigant research, 94 million smart metres were shipped worldwide in 2014, and the total installed base is predicted to reach 1.1 billion by 2022. Whereas traditional metres just offer total consumption, smart metres break it up by date and time, helping to raise awareness about the value of energy conservation. For example, a customer’s bill may go down if he shifts his lifestyle to do more on a Saturday (much lower tariff on Saturday), while the electric company benefits by spreading out that load more into the weekend instead of a weekday.

Diagram 18. Smart Meter’s feedback loop

Source: Switchon

Smart meter measures and records household electricity usage every 30 minutes

Data is transmitted to electricity distributors who own and manage the grid, poles and wires

Energy producers make consumption data available to user, via web portal or in-home display

Monitoring household energy useage helps user compare offers and better manage costs


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Most importantly, the data generated will used by utility companies for automated billing and optimisation of electricity generation and distribution. In addition, governments are promoting the use of renewable energy, whose generation capacity varies according to weather patterns. Utility companies can develop better predictive models using the newly available sensory data to manage loads as well as implement dynamic grid operations to support the changes in generation and usage. IoT technology is also useful in testing and implementing new technologies. For example, techniques such as distributed energy generation where households generate energy which is then distributed to their neighbours through a smart grid can be adopted.

Water is another area of interest. This includes areas such as smart metering (for water) to tele-managed irrigation networks and use of optimised routes for efficient garbage collections. Smart metres for water, similar to electricity, can be used to control and reduce water usage and wastage. Smart water metres are also an integral part of smart water systems which uses real time data to better monitor water usage and detect any problems such as leakage.

The use of sensory data can optimise the use of water in irrigation activities. For example, Barcelona is already testing a tele-managed irrigation system to reduce water usage, where plants are watered depending on the moisture level of the soil. This is important for areas with limited water supply and can reduce costs relating to transporting and distributing water. The Barcelona city council estimates a savings of US$555,000, representing a 25% cut in water usage.

Waste management companies to benefit from lower manpower needs. Singapore, for example, is implementing Pneumatic Waste Collection System (PWCS). When residents throw rubbish down their chutes, it goes to a refuse chamber on the ground floor. A sensor will be triggered when the container in the refuse chamber is full. The waste is then transported by exhaust air, through underground pipes. It travels at speeds of between 50 and 80 kilometres per hour to a centralised bin, where the rubbish is stored in sealed containers. When full, trucks will transport them to incineration plants. As for the exhaust air, it is passed through dust and odour filters. The clean air is then discharged into the atmosphere. With the process being automated, overall manpower needs are expected to be 70% lower.

Diagram 19. Waste management with IoT

Source: FarSite Communications

Sensor monitors bins fill level

Cloud based application monitors bins level and sends message to collection lorry that it needs emptying

NetBin

Collection can be planned around bins that need emptying. Route can be planned on smart phone or smart device, or desktop


Transportation Sector

Likely to see 21% upside in operating profit from IoT. Gartner projects IoT to have about US$114 billion impact on the transportation segment. According to Research and Markets’ Global Transportation Services Industry 2012-2017 forecast, the size of the global transportation industry will be US$2.7 trillion by 2017. Based on operating margins of 20% in the 2015 June quarter according to CSIMarket, the overall impact of IoT will be around 21% at operating profit level.

Cargo owners and freight forwarders to see lower inventory and insurance costs. These players will be able to intervene pro-actively to manage deliveries in the case of a delay or any exceptional event, using real time tracking. They will also be able to prevent loss of inventory from environmental damage by monitoring and managing temperature, humidity, exposure to light etc especially for the commodities. Routes can also be optimised. Through active monitoring, excess inventory along the supply chain can be minimised, which will add to profits. In addition, the data can be used to improve and optimise the logistics processes which can be lead to cost savings and reduce delays. As such, the cost of insurance for such shipments should reduce with a lower risk of shipment failure.

Ground handlers to benefit from optimisation of equipment use. By creating a tag association between cargo and ground handling equipment, ground handlers will be able to provide a full suite of real time track-and-trace capability to customers with such demands. Also, the tagging of equipment such as pallet dollies and tractors will reduce reliance on ground handlers to track equipments, translating to their optimal use. Usage of automation can have much bigger impact on e-commerce logistics than standard logistics services as e-commerce operations tend to be dominated by high volumes of small and irregular orders.

Diagram 20. Beeline app suggests routes based on crowd sourcing

Source: Beeline


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Increased flexibility of public transport. Another facet would be through understanding crowd behavior and patterns. The data collected by sensors in trains, busses, airplanes and transportation hubs can be used to predict the demand for transport services, which can be used to dynamically adjust availability of services. For example, Singapore launched Beeline app in April 2015, whereby bus routes are crowd sourced. People can input suggested routes at various times in the app which can be aggregated to start shuttle services.

Improved uptime and on-time schedule for public transport. As regular maintenance can be costly, early failure of neglected equipment is typically far more expensive. With predictive maintenance using sensors, the unexpected downtime in public transport will be reduced significantly. For example, In Oslo, the operator focussed on faulty train doors causing delays across the whole line. Research into the problem determined that speed of the door slowed down gradually prior to the point at which it remains open. This discovery led to the creation of an application to monitor this parameter. Now, each train car has Wi-Fi and a unique ID. The data snapshot gets downloaded into an internal database. For example, more than three “slow closing” errors for a particular door in a day set a flag for predictive maintenance to take place.

Manufacturing Sector

Likely to see a 22% upside to operating profit by 2020 due to IoT. This sector will see the highest gains from cost efficiencies and new business opportunities. According to World Bank data, the global manufacturing industry was worth US$11.9 trillion in 2013. Given operating margins of 11% in the industry according to CSIMarket, it would suggest that there will be 22% upside from the US$285 billion IoT-related economic value addition as predicted by Gartner.

IoT manufacturers will increasingly sell services, not just products. Manufacturers of larger goods — elevators, air-conditioning units, jet engines, and medical equipment —sell maintenance contracts along with equipment. This requires regular inspection and maintenance visits, and customers still experience downtime and emergency call-outs.

With IoT, manufacturers can remotely monitor the condition of equipment and look for indicators of imminent failure such as vibration, temperature, or pressure. This means that the manufacturer can make fewer visits, reducing costs, and freeing up employees. For the customer, it means less disruption, increased utilisation, and higher satisfaction. Manufacturers may take this to the next level by offering a price-per-use, inclusive of all hardware, installation, and servicing.

Production lines have the most to gain from connected equipment. Most production-line systems already contain the necessary sensors for anomaly detection— it’s just a case of adding connectivity. The data in manufacturing automation systems on factory floors is used only for real-time control or anomaly detection. By connecting production-line systems, manufacturers can move to predictive maintenance, which will make better use of resources and reducing unplanned


downtime. Currently a big part of data generated is not analysed except for anomaly detection. But with IoT, data will be analysed for predictive maintenance and work flow optimisation.

Healthcare Sector

Likely to see a 9% upside to operating profit by 2020 due to IoT. According to Gartner, the biggest impact on healthcare industry from IoT comes from new market opportunities and lower input costs. The overall benefit for the healthcare segment, in terms of economic value, by adopting IoT is expected to be about US$285 billion, according to Gartner. The global healthcare industry is expected to see revenues of about US$13.7 billion by 2020 according to estimates by Bain & Company. Given industry operating margins of about 23% in the 2015 June quarter according to CSIMarket, the overall benefit to the operational profit of the industry is likely to be around 9%.

Remote patient monitoring will reduce staff costs and help to divert resources towards serious ailments. More than 70% of healthcare spending goes towards treating chronic ailments, such as diabetes, hypertension, chronic pulmonary diseases and cardiac conditions. Costs can be optimised if we can keep patients out of hospitals, in their homes and still provide a comparable level of care by using mobile applications like telehealth (for example, sensor-led continuous monitoring, rather than a nurse checking on patients frequently).

A Singapore based company, Silverline is already using IoT tech to provide remote monitoring to the elderly. It claims to have established the world’s first mobile and smart home assisted living ecosystem, which helps the elderly to lead a more wholesome and healthy life by empowering them through technology. They have a range of devices and customised smartphone apps for elderly and caregivers to monitor and track activity.

Growing popularity of wearables to provide relevant data to healthcare providers. The availability of data from various wearables means that this information can now be sent to hospitals and ambulatory health records, and combined to create “complete” patient data that includes data for both within and out of a hospital setting. The old-style, hospital- or physician-focused data, without the accompanying data from wearables provides only a snapshot of the patient’s condition at that particular time

Hospitals and healthcare providers to benefit from less downtime and more efficient allocation of resources. For example, IoT technology can monitor and predict when important equipment of the hospital will need maintenance, allowing the hospital to avoid rescheduling patient and doctor appointments and increase utilisation of the asset. Similarly, hospitals can manage their pharmaceutical and equipment inventories more efficiently, which are generally overstocked. Hospitals will be able to incorporate a higher level of automation to their electronic health records systems through the use of lower cost sensors, which will cut labour requirements as well.


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ConclusionThe IoT will revolutionise the way we do business, like the Internet did in the 1990s. South Korea and Singapore have been identified to be among the global leaders in adopting IoT. Compound that with China’s push to build 202 smart cities to cope with the rapid urbanisation that is taking place, it is no wonder that Frost & Sullivan estimates total spending on IoT in the Asia Pacific will reach US$59 billion by 2020, from US$10 billion in 2014.

With IoT set to permeate nearly every facet of everyday life, from health to transport to utilities, it is vital that the different products made by different manufacturers could operate seamlessly in their respective ecosystem. But this can only be achieved through deep co-operation during product development – making it vital for governments and big enterprise customers to standardise IoT protocols across the entire range of products in a sector.

The IoT will disrupt how businesses operate and the structure of industries. But the enormous growth opportunities and revenue generation from IoT solutions and services cannot be ignored. And companies that choose to adopt IoT early, are bound to reap handsome profits.


Disclaimers and Important Notices

The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee.

The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof.

The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies.

The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.


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Living, Breathing Asia

numer - DBS Bank and Singapore to be among the global leaders in adopting IoT. In this report, we look at Singapore and China’s smart cities initiatives and the opportunities they

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