The IoT Quarterly: 2Q16 - · PDF fileThe IoT Quarterly: 2Q16 Equity Research ... 5G, IoT World, Qualcomm, Samsung, HPE A new quarterly series tracking IoT ... multi-volume IoT report

August 8, 2016

Internet of Things

The IoT Quarterly: 2Q16

Equity Research

2Q 2016 Update: MWC Shanghai, 5G, IoT World, Qualcomm, Samsung, HPE

A new quarterly series tracking IoT

This is the second installment in our new

quarterly series on IoT. Since our last issue, IoT

has continued to drive strategy across industries

(as highlighted, for example, at the GE Digital

Investor Meeting) and M&A (e.g.

Verizon/Fleetmatics). For more detail on the

impact of IoT across industries, please refer to our

multi-volume IoT report series (links inside).

What you can find in the IoT Quarterly

Our 2nd installment includes the following topics:

1. 2Q16 updates: MWC Shanghai, FCC spectrum

allocation, IoT World, GE Digital Investor

Meeting, Verizon’s IoT study

2. Profiles in IoT: Qualcomm, Samsung, HPE

3. Start-up Spotlight: Enlighted

4. IoT endpoint growth: top-down and bottom-up

5. Key news flow

6. M&A tracker

7. IoT funding events

8. IoT start-up list

9. Upcoming events

Key events this quarter

(1) Qualcomm and China Mobile demoed 5G at

MWC Shanghai. (2) Qualcomm and Ericsson said

that the 5G adoption timeline is accelerating. (3)

The FCC allocated spectrum for 5G. (4) The GE

Digital Investor day highlighted GE’s leadership in

Industrial IoT. (5) A VC panel at IoT World and a

Verizon study highlighted the much larger

opportunity in enterprise vs. consumer IoT.

IoT Cellular connections up 33% yoy

Across major global carriers, (Vodafone, AT&T

and Orange), IoT connections were up 33% yoy.

Start-up Corner

VCs invested $399mn in 93 IoT start-ups in 2Q16

(Exhibit 11). In this issue, we highlight Enlighted,

which offers an IoT platform for commercial

building automation, such as advanced lighting

control. It has a number of Fortune 500 customers

including Agilent, AT&T, Google, HP and Uber.

Enlighted has raised $80mn from investors

including Kleiner Perkins and Intel Capital.

Simona Jankowski, CFA

(415) 249-7437 [email protected] Goldman, Sachs & Co.

Marcus Shin

+82(2)3788-1154 [email protected] Goldman Sachs (Asia) L.L.C., Seoul Branch

Brian Lee, CFA


Balaji Krishnamurthy, CFA


Connie Qian


Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research

August 8, 2016 Americas: Technology

Goldman Sachs Global Investment Research 2

Simona Jankowski, CFA Marcus [email protected] [email protected]

(415) 249-7437 +82 (2) 3788-1154

Goldman, Sachs & Co. Goldman Sachs (Asia) LLC

Brian Lee, CFA Balaji Krishnamurthy, [email protected] [email protected]

(917) 343-3110 (415) 249-7482

Goldman, Sachs & Co. Goldman, Sachs & Co.

Connie Qian Ankit [email protected] [email protected]

(415) 249-7445 (212) 934-6394

Goldman, Sachs & Co. Goldman Sachs India SPL

Authors



Contents

Profiles in IoT: Qualcomm, Samsung, HPE 8

Start-up Spotlight: Enlighted 12

IoT endpoint growth: top-down and bottom-up 14

Key news flow on IoT in 2Q16 17

M&A activity in IoT in 2Q16 18

Capital invested and funding events in IoT startups 19

IoT funding events in 2Q16 20

List of IoT Startups 22

Upcoming events 24

Disclosure Appendix 25

This is the latest installment in our series exploring the implications of the Internet of Things across sectors and the technologies and

companies enabling greater connectivity. View the full series below and visit our portal to see related research, videos and more.

The IoT Quarterly: 1Q16, May 25, 2016

Making S-E-N-S-E of the next mega-trend: Framing the IoT opportunity for CommTech and Semiconductors, June 25, 2014

Software and the IoT: Platform, data and analytics– The role of software across the enterprise and consumer IoT, July 8, 2014

Moving from B-R-I-C-K-S to B-I-T-S: Understanding the Industrial IoT, with a deep dive into home automation, July 16, 2014

Smart technology and the future of insurance: As cars and homes get smarter, so too will insurance companies, September 24, 2014

The digital revolution comes to US healthcare, June 29, 2015

https://360.gs.com/gs/portal/home/fdk/?st=1&n=/portal/announcement/research/iot

https://360.gs.com/gs/portal/?st=1&action=action.binary&d=21769225&fn=/document.pdf








The IoT Quarterly: 2Q16 update

In this section, we detail the key developments in the broader Internet of Things (IoT) ecosystem during the quarter, including

conferences, company events, and other datapoints, to help investors track the broad IoT theme.

MWC Shanghai continued the focus on 5G and infrastructure for IoT

Mobile World Congress (MWC) Shanghai, previously known as Mobile Asia Expo, was held from June 29, 2016 to July 1, 2016 in

Shanghai, with around 550 exhibitors and over 53,000 participants. Consistent with the global MWC held in Barcelona in February,

the announcements and demonstrations at Shanghai largely revolved around 5G, which we believe will be a key enabler of the

infrastructure for IoT. According to a report by GSMA, China’s machine-to-machine market will reach 1bn connections by 2020.

At the event, Qualcomm demoed a 5G New Radio (NR) prototype system in collaboration with China Mobile. The system, which

consists of a base station and user equipment, operates in spectrum bands below 6GHz and achieves data rates of multi-gigabit per

second with significantly lower latency. Qualcomm expects the system will be able to facilitate robust mobile broadband

communications. We believe this is particularly important for Chinese telecom operators, as there are discussions in the industry

about using sub-6GHz spectrum bands for 5G in China. Qualcomm also demonstrated the capabilities of its power-efficient LTE IoT

modems, first announced at CES in January. Qualcomm revealed that its MDM9x07 chipset family, consisting of the Snapdragon

X5 LTE modem and MDM9207-1 modem for IoT, has secured 100+ design wins with 60+ equipment and module manufacturers.

These chipsets are being tested and deployed in a wide range of applications in smart cities and commercial and industrial IoT.

China Mobile and Huawei jointly demonstrated several 5G developments. They showed a 5G 3.5GHz prototype, a first pre-

commercial prototype which supports throughput up to 3Gbps in this spectrum band. China Mobile expects to complete the 3.5GHz

trials by end of 2017 with large-scale field trials in 2018 and commercial deployment in 2020. The companies also showed a 5G

prototype above the 6GHz band, a 5G network slicing solution, and 5G smart car use case solution.

Huawei also launched an end-to-end narrow band IoT (NB-IoT) solution to accelerate cellular IoT. The solution is designed to meet

operators’ low power and wide-area coverage requirements, thereby helping the operators to expand their IoT services and turn IoT

into a basic service in the future. Huawei said the solution is based on 3GPP standards and will be available in September 2016 for

large commercial trials and large-scale commercial deployments from December 2016.

Ericsson, China Mobile and Intel together demoed a Smart City solution at MWC Shanghai calling it the “world’s first application

demonstration based on latest Cellular IoT technology”. The system comprised of Intel’s XMM 7115 modem, China Mobile’s

environment monitoring system, and Ericsson’s RBS6000 multi-mode base station combined with pre-commercial software

supporting the latest cellular IoT technology. The system captures environmental conditions such as temperature, humidity,

particulate matter, etc. and sends it to CM’s monitoring application. The companies expect that the technology will be used in

several applications such as smart homes, smart meters, municipal IoT, industrial IoT, wide area IoT, etc.

F5 Networks announced a standalone carrier-class firewall which supports up to 1.2bn concurrent connections (20mn+ connections

per second) for end-to-end security across service provider networks. The scalability of the firewall is designed to address rising

security concerns associated with growth of IoT, development of 5G and NFV networks.

For more detail, please see our April 18 note, 5G: How 100x faster wireless can shape the future



Virtual Reality and Augmented Reality were also a topic of discussion, with the key announcement being HTC’s formation of a

VR-focused alliance of 28 global VCs with an aim to develop the VR ecosystem. The Virtual Reality Venture Capital Alliance

(VRVCA) together has about $10bn of capital to invest in VR and AR related projects and start-ups.

FCC spectrum allocation likely to accelerate 5G development in the US

In July, the FCC unanimously approved a plan to begin working toward making 5G available in the US. Accordingly, FCC has

opened up nearly 11GHz of spectrum in the above 24GHz band (3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum)

for 5G, including mobile and fixed-use wireless broadband networks. The FCC expects the first 5G networks to go live in 2020. It

noted that its decision has made US the first nation to identify high-band spectrum for 5G. The decision was widely hailed by

carriers and industry participants. AT&T commented that the FCC’s decision to open up high-frequency spectrum for 5G was

positive, saying “FCC made a big down payment on the next generation of wireless innovation in the US”. Verizon commented,

“The FCC order puts the US on track to become the first country in the world to open up wide swaths of high-band spectrum, which

is critical to ensure that the US retains its global leadership in advanced wireless communications.”

Separately, Verizon revealed on its earnings call that the FCC has approved its request to lease licenses in the 28GHz and 39GHz

high-frequency bands from XO Communications. The FCC has granted Verizon permission to move ahead with its plans of fixed 5G

deployments. Verizon reiterated its plans for fixed commercial wireless fiber launch in 2017 and to be the first carrier in the US with

5G networks. Meanwhile, AT&T also applied to FCC to seek permission to use bands in 28GHz and 39GHz bands for 5G trials.

Qualcomm’s CEO commented on its earnings call that the company has also seen acceleration in the 5G timeline over the last year,

and especially over the last quarter in the US. The company now believes the 5G deployment timeline has fast-tracked from an

expected 2020 a year ago to a 2018/2019 timeframe now, depending on the type of deployment (i.e. fixed-use or wireless). Ericsson

said on its earnings call that the company has increased its investment in 5G, as it expects the technology to be available earlier

than previously anticipated. Ericsson’s CEO (days before stepping down) also said in an interview that the 5G developments and

pre-commercial trials by carriers are happening much quicker than the company anticipated, further adding that the US has ramped

up quickly in 5G. Overall, we view these developments in the quarter as likely to accelerate the 5G evolution in the US.

IoT World: Venture Capitalists focused on subscription models and expect ‘survival-of-the-fittest’

We attended a panel discussion with several venture capitalists (VCs) at IoT World on May 11, 2016 in Santa Clara, CA. Our key

takeaways are as follows: (1) VCs pointed out that IoT is gaining significant traction, with the focus shifting from consumer to

industrial IoT, with the industrial IoT opportunity to be 9X the size of consumer IoT (this is consistent with the views expressed by

companies such as Cisco and Verizon as well). In addition, they noted that IoT is, if anything, under-hyped and believe that it could

potentially grow 10X the size of internet, thereby providing immense growth opportunities through early investments in this market.

(2) VCs are increasingly focusing on subscription models to have more predictable, recurring source of revenue. IoT helps

merchants/vendors shift from selling products to providing services. For instance, instead of selling cars to customers, companies

can provide transportation services enabled by IoT, such as fleet management. (3) VCs expect ‘survival-of-the-fittest’ as the

market consolidates. VCs pointed out that large companies no longer have the best developers and the gap in innovation between

large companies and start-ups is at an all-time high. Large companies typically look at inorganic ways to reduce this gap. For

instance, Qualcomm, Cisco, Intel, and GE among others have set up dedicated VC arms to invest in startups from an early stage. In

addition, companies also look at M&A to acquire talent as well as products and technologies to augment their in-house capabilities.



VCs expect to see a lot of consolidation going forward, including multi-billion dollar deals as the market matures further (e.g. as we

recently saw with Verizon’s $2.4bn acquisition of GPS vehicle fleet management company Fleetmatics). We list the M&A activity and

key funding events in IoT for the quarter in Exhibits 10-13.

GE Digital Investor Meeting: expects 20% CAGR to $15bn in revenues by 2020

We attended the GE Digital Investor Meeting on June 23, 2016 in San Ramon, CA in which executives presented on GE’s Digital

strategy and opportunities going forward. GE is one of the leaders in the Industrial IoT, and we profiled the company’s IoT strategy

in our inaugural IoT Quarterly. Our analysts believe that its cloud-based, open-source Predix platform developed for Industrial IoT

could be transformational for GE’s services business. We highlight several key takeaways from the event: (1) GE Digital expects to

grow at over 20% CAGR (2016-20) with sales of $15bn by 2020. Of that, the company expects its Predix platform to contribute $4bn

by 2020 (with most of the revenue ramp expected post 2018) with industrial applications such as Asset Performance Management

(APM) and Brilliant Manufacturing adding an additional $10bn in sales and an incremental $1bn from productivity enhancements.

(2) GE is investing organically as well as inorganically to grow GE Digital. GE differentiates itself from other platform providers

(such as IBM, SAP, AWS etc.) through its domain expertise, global scale and operational knowledge. With organic investments of

~$2bn, it has focused toward Digital thread (to connect factories digitally) along with enhancing vertical and horizontal capabilities.

Apart from that, the company also highlighted strategic investments in Pivotal, NeuCo, and Servicemax to enhance platform

capabilities and accelerate its growth trajectory. (3) In addition, GE aims to develop a healthy developer and partner ecosystem

to commercialize its platform. It intends to grow its Predix developer community to over 20,000 and have over 50 partners by 2016.

Notably, on July 11, GE partnered with Microsoft to add support for GE’s Predix platform on Microsoft Azure in order to leverage its

enterprise applications. Ultimately, GE aspires to make Predix the preferred open-source platform for industrial IoT.

Verizon’s study highlights 5 macro trends that will drive IoT opportunities

In early April, Verizon published a report titled “State of the Market: Internet of Things 2016” providing several insights into the

market opportunities created by IoT. Notably, while consumer applications were the focus of IoT startups in the past (raised 15%

more VC funding compared to the enterprise focused IoT startups in 2014), the trend reversed in 2015 as enterprise-focused IoT

startups gained more traction and raised over 75% more funds compared to consumer counterparts. Further, Verizon believes that

enterprise-focused IoT startups are on a rise and will generate 2-3x more funding relative to consumer-focused IoT startups in 2016.

Notably, Verizon acquired Fleetmatics (provides fleet-tracking solutions) on August 1 for $2.4bn to bolster its telematics business. It

had earlier (in June) acquired Telogis in the same segment. Broadly, Verizon expects IoT-led revenue opportunities to be driven by 5

macro trends: growing consumer expectations, data monetization, evolving regulatory landscape, network connectivity, and

security. We summarize these below.

Growing consumer expectations – Consumers have already become accustomed to smartphones and are beginning to realize

their potential as a gateway to monitor and control physical objects by connecting them to the network. As a result, consumer

demand for IoT is increasing as they want to connect more things around them in order to monitor and control them effectively.

Data monetization – As billions of things are connected to the network, enterprises will be able to monetize them through

analytical services that can sift through the massive amounts of data generated by these connected devices and derive valuable

insights. Once the benefits of data monetization become clearer, more companies will pursue IoT strategies.




Evolving regulatory landscape – Regulators are increasingly mandating greater monitoring in order to make processes more

efficient and tackle social issues. For instance, the Energy Act (2007) accelerated the deployment of smart meters in order to

monitor energy consumption. In addition, the Drug Supply Chain Act aims to solve the issue of counterfeit drugs ($75bn annual

industry loss) by tracking prescription drugs across the supply chain by transferring details such as shipment information,

transaction history etc. to electronic medium by 2017.

Network connectivity – As the cost of sensors declines and connecting devices to the network becomes cheaper, large scale

deployment of IoT devices becomes more feasible. In addition, 5G can provide the infrastructure to support an end-to-end

connected ecosystem with wearables, connected cars, home automation devices, smart grids, and industrial applications.

Security – As more devices get connected to the network, security and privacy become high priority issues. It involves several

layers, i.e. (1) Governance, Risk and Compliance to lay the groundwork of risk management; (2) Threat Management to enforce

security policies and protect the perimeter; (3) Authentication and Privacy to ensure unauthorized access to critical data is

prevented; and (4) Professional Security Services to deal with security threats to contain the potential impact to the ecosystem.



Profiles in IoT: Qualcomm, Samsung, HPE



Qualcomm: Spearheading connectivity and processing technology development for IoT

Covered by Simona Jankowski, Hardware & Communications Technology Analyst

Qualcomm stands to benefit from the proliferation of IoT from both a chipset and licensing standpoint, as it can leverage its leadership position in wireless

connectivity (3G/4G, Wi-Fi, Bluetooth, GPS, etc.) in a wide range of new applications from wearables to smart homes to automobiles and healthcare.

Qualcomm recently disclosed that non-smartphone devices or IoT generated $1.7bn of revenues last year, and are expected to generate $2.5bn this year

(representing 16% of chipset division revenues). Over the past few years, Qualcomm has made several acquisitions to broaden its IoT portfolio, including

Atheros and CSR, and we think M&A will likely remain a driver of Qualcomm’s expansion in this area.

Strong traction with LTE IoT modems – At the end of June 2016, Qualcomm had more than 100 design wins across over 60 OEMs with its MDM9X07

LTE modem for IoT. The chipset is designed for deployment in Smart City, Commercial and Industrial applications, and offers edge processing for IoT

devices. The chipsets can support up to 10Mbps Cat-1 LTE downlink, with up to 10 years of battery, and are compatible with global cellular standards

and 802.11ac Wi-Fi. Qualcomm expects to broaden out the family over the next year to cover expanding LTE capabilities.

Chipsets for Connected Cars – Qualcomm introduced Snapdragon 602A (S602A) in 2014, and it was engaged with over 15 OEMs in over 40 models by

the end of 2014. Qualcomm leveraged its early leadership in LTE in the mobile space to the automotive space, with nearly 100% share of the early

design wins, including BMW, GM and Audi. At the Consumer Electronics Show (CES) in 2016, Qualcomm launched the Snapdragon 820A (S820A)

processor for cars with optional integration of the X12 LTE modem (in Snapdragon 820Am) supporting Cat-12 (600Mbps downlink and 150Mbps uplink)

speeds. S820Am can support up to 8 camera sensors that can be used to provide active driver assistance (ADAS) features such as lane departure,

possible collision detection etc. It has already shipped 340mn+ chips to over 20 automakers globally. Built on its portfolio of automotive offerings,

Qualcomm introduced its Connected Car Reference Platform in June 2016.

Snapdragon Wear SoCs power the next-generation of wearables – Qualcomm’s Snapdragon Wear platform includes system on chip (SoCs) for

wearables. It includes Snapdragon Wear 2100, which is designed for multi-purpose applications in the next-generation of wearables including

smartwatches, sports watches, connected eyewear etc. and Snapdragon Wear 1100, which is targeted primarily toward trackers for kids and elderly by

leveraging Qualcomm’s IZat location service. Relative to the predecessor Snapdragon 400, Wear 2100 is 30% smaller and consumes 25% less power to

provide more flexibility to ODMs. Qualcomm also disclosed that its processors are used in over 100 wearables including Samsung Gear S, LG Urbane

LTE, and Asus Zenwatch among others.

Exhibit 1: Expanding addressable market through adjacencies and additional growth opportunities Serviceable addressable opportunity (US$ bn)

Source: Company data.

23.033.0

10.0

18.01.7

3.0

2.0

6.0

2.5

5.0

6.6

15.05.0

18.0

2015 2020E

Data center

Healthcare

IoT

Networking

Mobile compute

Automotive

RFFE

Core mobile

$46 bn $103 bn



Samsung: Wearables, Virtual Reality, Smart homes, and Artik platform

Covered by Marcus Shin, Asia Pacific Hardware & Semis Analyst

In the IoT arena, Samsung provides wearables, virtual reality devices and connected home solutions for consumers, and its family of Artik modules and

cloud platform for enterprises. It announced plans to invest $1.2bn over the next four years in US-focused R&D and IoT related investments.

Samsung Gear’ing up with its portfolio of Wearables and Virtual Reality devices – Samsung has 10+ variations of fitness trackers and

smartwatches available under its Gear brand. Most recently, Samsung launched Gear Fit2 (in June 2016), which added Android support, GPS tracking,

and has an improved UI compared to its predecessor, Gear Fit. In addition to smartwatches, Samsung also introduced the Gear IconX wireless earbuds

that use Bluetooth to connect to each other as well as to the smartphone. They can also be used as a fitness tracker to measure heart rate, number of

steps, distance travelled, and calories burnt etc., and have an ambient-sound mode which keeps users aware of their surroundings, particularly useful

outdoors from a safety standpoint. Samsung has two products in the realm of virtual reality (VR), the Gear VR headset and Gear 360 VR camera.

Samsung developed the Gear VR headset in collaboration with Oculus (acquired by Facebook in 2014) which works with Samsung’s flagship Galaxy

devices. Separately, in April 2016 Samsung launched the Gear 360, which is a spherical VR camera that can capture high-resolution 360-degree images

and videos.

Samsung SmartThings make Smart Homes – Samsung addresses the smart home market through its SmartThings offering (acquired in August

2014). It consists of the SmartThings Hub, which provides an interface to wirelessly connect to and control smart devices. Along with its own sensors,

Hub is also compatible with hundreds of other smart products such as Philips Hue lights, Kwikset locks, and Honeywell thermostats. In addition to the

Hub, the SmartThings portfolio includes dedicated sensors to detect unexpected motion, arrival of known people, water leakage and a multi-purpose

sensor that can be used to monitor temperature/vibrations as well as whether doors, windows etc. are shut, which can automatically trigger alerts in

case of break-ins. Other connected products include power outlets and event-triggered cameras which can record as well as provide live video feeds.

Artik Platform to simplify development of IoT solutions – Samsung’s Artik platform includes Artik Modules and Artik Cloud, aimed at simplifying the

process of development and enabling faster time-to-market for IoT applications. Samsung launched Artik modules (in May 2015) in 3 variants (Artik 1, 5,

and 10) to cater to different requirements (size, power, capacity etc.) across IoT devices. While Artik 1 is most suited for wearables where small size and

low power consumption are critical requirements, Artik 5 is designed with keeping connected cameras and drones in mind, and Artik 10 provides

advanced capabilities which are most suited for industrial applications. In April 2016, Samsung entered the cloud services market by launching Artik

Cloud where it competes with the likes of Azure IoT and AWS IoT platforms amongst others. Artik Cloud provides an open platform to develop

connected IoT applications by supporting devices across protocols to derive valuable insights. Also, Samsung acquired Joyent (in June 2016) to further

augment its cloud platform.

Exhibit 2: Samsung’s SmartThings platform has 3 containers to secure and simplify the control of connected devices SmartThings platform segments into 3 containers, i.e. Accounts, Locations, and Groups

Source: Company data, Goldman Sachs Global Investment Research



HPE: Building an ecosystem for Industrial IoT

Covered by Simona Jankowski, Hardware & Communications Technology Analyst

HPE has announced several notable offerings as well as partnerships with key players to bolster its presence in the Industrial IoT domain. It introduced

the Universal IoT platform at IoT World in early May and further highlighted its IoT efforts at HPE Discover 2016 (on June 8). HPE launched its

converged system offering (Edgeline IoT systems), real-time data analytics platform for the edge, and announced its strategic partnership with GE to

target industrial use-cases. We discuss these in detail below.

Universal IoT Platform, HPE’s end-to-end enterprise IoT offering – HPE launched the Universal IoT Platform, intended to simplify IoT for enterprises

by providing an end-to-end solution, which is data centric and focused on improving data monetization. It can work across industries and vendors to

support heterogeneous devices irrespective of the underlying network. It supports LoRa and SIGFOX (competing low power unlicensed spectrum

wireless communication standards for IoT) in addition to WiFi, Bluetooth, and cellular connectivity. It can further leverage the HPE Vertica and Haven

OnDemand data analytics platforms to extract meaningful insights with enhanced security. HPE disclosed that Objenious (a Bouygues Telecom

subsidiary) is leveraging this platform to improve its fleet management as well as other IoT based solutions for predictive maintenance, remote meter

reading, etc.

Edgeline IoT Systems leverage Vertica platform for real-time data edge analytics; Aruba ClearPass automates IoT device onboarding – HPE

launched the EL 1000 and EL 4000 converged systems developed for industrial IoT use-cases with a focus on oil & gas, telecom, and manufacturing

companies for which data collection from remote sites is a major pain point. These systems are designed to withstand harsh temperatures and

vibrations, making them suitable for industrial deployments such as oil rigs. In addition, these can further enhance operational efficiency by analyzing

data at the edge in real-time instead of transmitting it to the cloud. HPE launched its Vertica analytics platform that works with EL 4000 systems to

process large amounts of IoT data in real-time to generate actionable insights. Separately, HPE’s WLAN solution (acquired last year), Aruba ClearPass,

allows for automated device onboarding and more efficient device management by dynamic authentication and enforcement of security policies. This

could be valuable for large gatherings, such as in sports events, music concerts etc. where a large number of devices have to be securely connected.

Focus on partnerships to drive Industrial IoT innovation – HPE intends to develop an ecosystem to facilitate innovation in Industrial IoT in

collaboration with other companies. For example, in collaboration with Intel, HPE has set up IoT Innovation Labs in Houston (Texas, USA), Grenoble

(France), Bangalore (India), and Singapore to assist customers with development of their IoT offerings. HPE also has partnerships with PTC, National

Instruments, and GE Digital to develop joint Industrial IoT solutions. In particular, HPE partnered with GE to leverage its Predix platform for edge

analytics. The partnership is targeted toward developing IoT applications for industries including aerospace, oil & gas, automotive, manufacturing, and

energy.

Exhibit 3: HPE Universal IoT Platform is based on oneM2M standard to ensure inter-operability of devices across industries and vendors HPE Universal IoT Platform Architecture




Start-up Spotlight: Enlighted



Start-up Spotlight: Enlighted Enlighted is a venture-backed start-up founded in 2009 and based in Sunnyvale, CA. The company’s last round, Series D in March 2016, raised $25mn,

bringing its total to $80mn with investors including Kleiner Perkins Caufield and Byers, Draper Fisher Jurvetson, RockPort Capital Partners, Intel Capital,

and Tao Capital. Enlightened offers an IoT platform for commercial building automation, with its initial focus on advanced lighting control. Its solution

initially targets Fortune 500 companies, with customers including Agilent, AT&T, Google, HP and Uber. In April 2016, Enlighted formed a 5-year global

partnership with commercial real estate company Jones Lang LaSalle for implementing end-to-end smart building solutions.

How it works: Enlighted’s commercial IoT solution is based on patented digital sensors that are attached to LED lighting fixtures, a resilient and secure

wireless mesh network that can manage over 10,000 sensors per building, and a cloud infrastructure that includes a software analytics platform to help

process the data and manage the overall solution. Enlighted can retrofit existing lighting infrastructure with the sensors, or provide them integrated

with the lighting in new deployments. The sensors measure temperature, light, and motion, which can enable solutions such as energy management

(lighting and HVAC), space planning, building security, or asset tracking, with additional apps or third party solutions added over time.

Value proposition: By automating the lighting in a building, an enterprise can achieve 65-70% in energy savings (up to 90% when combined with an

LED upgrade) as lighting is controlled based on occupancy and daylight harvesting. While enterprises can recoup the cost of the system through the

energy savings over time, Enlighted offers financing options that make deployment possible without an up-front cash outlay. This go-to-market

approach further stimulates adoption. Enlighted’s solutions have been installed in over 135mn square feet of building space so far. For context,

commercial real estate represents 80bn of sq.ft. in the US, with 3bn or more sq.ft. developed or remodeled every year. Enlighted’s solution costs about

$1/sq.ft. for new construction and $2-3/sq.ft. for retrofits. Please also refer to Brian Lee’s recent note on connected LED lighting competitor Digital

Lumens.

Customer case studies: AT&T retrofitted 20mn sq.ft. of space across 240 sites by replacing fluorescent light fixtures with LEDs equipped with the

Enlighted lighting solution. This resulted in $8mn/year in lighting energy savings. Eventually, AT&T plans to retrofit its entire 120mn sq.ft. of real estate.

Agilent retrofitted 400 light fixtures in 50k sq.ft. of real estate, achieving 20% energy savings on weekdays and more than 90% on weekends. Enlighted

was awarded the AT&T Supplier Sustainability award and was named a 2016 Cool Vendor by Gartner.

Exhibit 4: The Enlighted System




IoT endpoint growth: top-down and bottom-up

From a top-down perspective, IDC estimates that we exited 2015 with 12bn connected IoT devices (excluding PCs, smartphones or

tablets), up from nearly 10bn exiting 2014. IDC fine-tuned its forecasts in May 2016. Overall, it forecasts the global IoT installed base

to cross 30bn devices by 2020, growing at 2015-20E CAGR of over 20%. The types of connected devices included in this market

sizing cut across multiple sectors, based on IDC’s taxonomy:

Consumer: home security, appliances, thermostats, smart meters, surveillance cameras, door and window locks, etc.

Government: automated public transit, environmental monitoring, traffic signals, toll booths, parking, first responders, etc.

Healthcare: patient monitoring, fitness bands, telemedicine, etc.

Insurance: telematics using GPS and accelerometers in cars

Manufacturing: connected vehicles, food supply chain tracking, maintenance, factory automation, asset tracking, etc.

Exhibit 5: IDC expects global IoT installed base to grow over 20% CAGR (2015-20E) and cross 30bn devices by 2020 The installed base in IDC’s definition includes IoT end points that use IP-based communication without human interaction

Source: IDC.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016E 2017E 2018E 2019E 2020E

Inst

alle

d ba

se (m

n)

IoT Installed Base (mn units)



IoT connections across major carriers were up 24%-55% yoy – We show below the growth trajectories and key use cases for the

M2M cellular connections of several major global carriers (Exhibits 6-8). Note that cellular connections represent a much smaller

portion of the total IoT end points. The vast majority of end points use other communication standards such as WiFi, Bluetooth,

ZigBee or RF, which do not require a monthly data plan and are therefore much cheaper to operate. Thus, these data sets are

representative of only a small fraction of the IoT universe, but have the advantage of being trackable on a quarterly basis as one

snapshot of the pace of adoption.

AT&T added 1.2mn connected devices in 2Q16, down 17% yoy. AT&T now has nearly 29mn devices connected to its network. It

disclosed having over 8mn cars (i.e. roughly 30% of the total ~28mn devices) on its network as of 1Q and had partnerships with 19

top automakers globally in 2015. In 2Q, it launched unlimited data plans for connected car customers (support for ZTE Mobley WiFi

plugin as well as select cars) for $40 per month. In addition, it established several partnerships to develop IoT solutions across

industries. Notably, it partnered with GlobeComm to leverage satellite connections for physical asset tracking and Otis to develop

IoT solutions for real-time monitoring and data collection from elevators, escalators, and walkways. Separately, AT&T views 5G as

an important enabler of IoT with the potential of significantly reduced latency and much faster speeds to effectively support billions

of connections. Recall that AT&T unveiled its roadmap for 5G in February with plans to start conducting trials with Ericsson and Intel

2Q onwards. However, it views 5G as largely a 2020 story for standards to evolve over phases and standards based large-scale

deployments to commence subsequently. Importantly, on July 14, the FCC unanimously voted in favor of opening high frequency

bands (above 24GHz) for 5G, which should provide a boost to US-based carriers (including AT&T) in their journey toward 5G.

Exhibit 6: AT&T added 1.2mn connected devices in 2Q16 after adding 1.6mn in 1Q16

AT&T’s connected devices (mn units)


0

5

10

15

20

25

30

35

Q115 Q215 Q315 Q415 Q116 Q216

Con

nect

ed d

evic

es (m

n)

AT&T



Vodafone had over 41mn IoT connections in 2QCY16, up 39% yoy. Vodafone views IoT as a strategic area of growth and reported

2Q IoT revenues of $174mn in 2Q, up 20% yoy. It primarily addresses automotive and smart grid applications but also participates in

the domain healthcare, wearables, and agriculture by providing its managed IoT connectivity platform. Notably, Huawei

collaborated with Vodafone to develop a Narrow Band IoT (NB-IoT) ecosystem and opened the first lab in the UK in April. The

companies expect NB-IoT devices to be available toward the end of 2016 or early 2017. Recall that Vodafone aims to convert all 4G

sites to NB-IoT by 2020. Separately, Vodafone noted that its mobile networks in the European Union are eCall-ready.

Orange grew its M2M subscribers (France) to 4.6mn in 2Q16, implying net adds down 1% yoy. As part of its Essentials2020

program, Orange has repeatedly highlighted IoT/M2M as its strategic priority. Recall that Orange expects IoT/M2M to contribute

EUR 600mn in additional revenues by 2018. It participates primarily in the domain of healthcare, smart cities, transport, and

manufacturing through its services platform. In its last earnings conference call, management disclosed having over 10mn devices

connected to and managed by its network. In addition, Orange is expanding beyond France and secured a smart city project win in

India. Separately, Orange assists IoT startups expand their reach by providing access to Orange’s global sales and distribution

channels.

Exhibit 7: Vodafone had over 41mn IoT connections by C2Q16

Vodafone’s M2M connections (mn)

Exhibit 8: Orange grew its M2M subscribers (France) to 4.6mn in 2Q16

Orange’s M2M subscribers in France (mn)



05

1015202530354045

Q115 Q215 Q315 Q415 Q116 Q216

M2M

con

nect

ions

(mn)

Vodafone

0.0

1.0

2.0

3.0

4.0

5.0

Q115 Q215 Q315 Q415 Q116 Q216

M2M

sub

scrib

ers

(mn)

Orange



Key news flow on IoT in 2Q16

Exhibit 9: Summary of major IoT related company announcements

Source: Company data, Goldman Sachs Global Investment Research.

Company Date NewsAmazon 28-Jun-16 Disclosed having over 1,400 Alexa skills and added features to simplify discovering skillsAmazon 3-Jun-16 Developers created 1000+ skills for Alexa with Alexa Skills Kit (eg. order Domino's pizza, book Uber etc.)AT&T/Wistron NeWeb 17-Jun-16 Developed next generation LTE modules (M14A2A Cat-1 and M18Q2F Cat-4) for IoT devices

AT&T 19-May-16 Introduced unlimited data plans for connecting select cars or through ZTE Mobley pluginDisclosed having 8mn+ connected cars (as of 1Q16) and relationships with 19 top car brands worldwide

AT&T/Otis 25-Apr-16 Collaborated on developing IoT based solutions for elevators, escalators and moving walkwaysAT&T/GlobeComm 25-Apr-16 Partnered to enhance IoT connectivity to track physical assets using satellite connectivity with cellularChina Mobile/Nokia 13-Jun-16 Signed EUR 1.36bn frame agreement to meet the growing demands from IoT and 5GCisco/IBM 2-Jun-16 Collaborating to provide IoT analytics at the edge of the network Cisco/Rockwell Automation 26-Apr-16 Collaborating on Industrial IoT Security through deep-packet-inspection (DPI) technologyFossil 11-May-16 Founder smartwatch the number one selling SKU in 1Q 2016Google/Levi's 20-May-16 Collaborating toward smart jackets that can take calls, use navigation, control music etc.HPE 8-Jun-16 Introduced Edgeline EL1000 and EL4000 converged systems for IoTHPE 10-May-16 Launched Universal IoT Platform, aligned with oneM2M standard to support cross platform devicesHuawei 30-Jun-16 Launched end to end NB-IoT solution and plans to commercialize for large-scale use by the end of 2016Huawei/Telefonica 22-Jun-16 Signed a joint innovation agreement on 5G and NG-RAN to efficiently support IoTHuawei 12-Apr-16 Announced Indoor Connected Solution to provide a fully-connected indoor user experience

Huawei 12-Apr-16 Announced IoT as one of its strategic priorities and unveiled 5 IoT based solutions: smart home & industrial IoT gateway, NB-IoT solution, cloud-based management platform, & LiteOS

IBM/ISS 30-Jun-16 Collaborating to use IBM Watson to improve the management of 25,000+ buildings globally

IBM 8-Apr-16 IBM Watson Health completed the $2.6bn acquisition of Truven Health Analytics providing it access to extensive health data to derive insights and aide healthcare organizations

IBM/Pfizer 7-Apr-16 Collaborating toward research and development of IoT based healthcare solutions such as remote monitoring for patients suffering from Parkinson's disease

Intel 26-May-16 Acquired Itseez to enable customers develop applications in autonomous driving, surveillance etc. Intel 5-Apr-16 Acquired Yogitech to improve IoT functional safety and better compete in automotive and industrial marketsMicrosoft 1-Apr-16 Schneider Electric is integrating Azure with its smart energy saving offerings (over 30 customer deployments)NXP 16-May-16 Showcased autonomous vehicle platform using its BlueBox engine and its silicon at ADAS nodesNXP 5-Apr-16 Collaborated with DAF Trucks to demonstrate IoT based self-driving technologies for trucks

Qualcomm 8-Jun-16 Announced Connected Car Reference Platform to accelerate connectivity in cars (340mn+ chips shipped to 20+ automakers)

Qualcomm 31-May-16 Introduced QCA4012 WiFi solution with support for Apple HomeKit and Google Weave & Snapdragon Wear 1100Qualcomm/Google 19-May-16 Collaborating to enable android infotainment systems based on Snapdragon 820A and 602A processorsSalesforce 10-May-16 Using Amazon's cloud to develop new services instead of using its own infrastructure (as is typical)Samsung/Intel 22-Jun-16 Formed National IoT Strategy Dialogue to provide IoT related recommendations to policy makersSamsung 21-Jun-16 Announced intentions to invest $1.2bn in IoT over 4 years toward US focused R&D and investmentsSamsung 16-Jun-16 Announced intentions to acquire Joyent to add its cloud platform for IoT solutionsSamsung 3-Jun-16 Launched Gear Fit2 smartwatch and Gear IconX smart earplugsSamsung 27-Apr-16 Introduced Artik Cloud platform targeting IoT applications and servicesTelefonica/PTC 6-Jun-16 Partnered to leverage PTC's ThingWorx IoT platform in Telefonica's Smart Device ServiceTelefonica/Automatic Labs 25-May-16 Signed a multi-year agreement to leverage Telefonica's Global SIM provisioning & management serviceTelefonica 28-Apr-16 Selected for a smart metering project for Charleroi in Belgium by Ores and SWDEVerizon 21-Jun-16 Acquired Telogis to provide SaaS based solutions in its connected vehicle offerings



M&A activity in IoT in 2Q16

Exhibit 10: IoT related M&A continuing at a healthy pace

IoT M&A tracker

Source: Company data, compiled by Goldman Sachs Global Investment Research.

Date Acquirer Target Deal size ($mn) Domain Status

21-Jun-16 Verizon Telogis Undisclosed Telematics Announced

31-May-16 Nokia Withings $191 Connected Health Completed

25-May-16 Intel Itseez Undisclosed Autonomous cars Announced

9-May-16 Salesforce Implisit Undisclosed Analytics, automation Announced

3-May-16 Microsoft Solair Undisclosed Connected devices Announced

28-Apr-16 Cypress Broadcom (wireless IoT business) $550 WiFi, Bluetooth, Zigbee Announced

18-Apr-16 Qorvo GreenPeak Undisclosed RF solutions, SOCs for IoT devices Announced

5-Apr-16 Intel Yogitech Undisclosed Autonomous cars Announced



Capital invested and funding events in IoT startups

Exhibit 11: VCs invested $399mn in 93 IoT start-ups in 2Q16

Note: In December 2014, Xiaomi raised $1.1bn, causing a spike in funding in 4Q14. There may be variance in historicals as PitchBook revises its data retroactively.

Source: PitchBook, Goldman Sachs Global Investment Research.

314 273 315 453

681

311 371 445 399

1,100

107

122114

150155

111

127 128

93

0

20

40

60

80

100

120

140

160

180

-

200

400

600

800

1,000

1,200

1,400

1,600

2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

# of

dea

ls

Cap

ital I

nves

ted

($m

ns)

Capital Invested Xiaomi # of deals



IoT funding events in 2Q16

Exhibit 12: IoT funding events in 2Q16 (not exhaustive)

Source: PitchBook, compiled by Goldman Sachs Global Investment Research.

Date Company Name Industry Last Financing Size ($mns)

Total Raised ($mns) Investors

4/6/2016 Karamba Security Network Management Software $2.5 $2.5 8200 EISP, GlenRock Israel, YL Ventures

4/7/2016 Electric Imp Wireless Communications Equipment $21.0 $44.0 Foxconn Technology Group, Lowercase Capital, PTI Ventures, Rampart Capital, Redpoint Ventures

4/8/2016 Meural Social/Platform Software $2.5 $2.7 Barbara Corcoran Venture Partners, Bolt Innovation Group, Corigin Ventures, Elio Sceti, Jerry Colonna

4/11/2016 KORE Wireless Group Wireless Service Providers $67.1 ABRY Partners

4/13/2016 Jolata Network Management Software $7.0 $11.7 ATA Ventures, Ericsson, Spirent Communications

4/14/2016 KONUX Other Commercial Products $7.5 $9.3 Andy Bechtolsheim, EIT Digital, Founder.org, HMW Innovations, Michael Baum, New Enterprise Associates, UnternehmerTUM, Warren Weiss

4/18/2016 Realtime Immersion Other Media $9.3 $11.3 Alison Murdock, Chris Lalli, Clive Downie, Doug Barry, Ian Del Balso, John Coelho, Marker, Paul Wattis, Ricardo A. Sagrera, Viceroy Ventures

4/21/2016 Sirqul Media and Information Services (B2B) $3.0 $10.7 415 Investments, Owen Van Natta, Rick Dalzell, Rudy Gadre

4/21/2016 Xaptum Social/Platform Software $2.2 $2.9 1871 Chicago, Hyde Park Angels, Jai Shekhawat

4/22/2016 Cirrent Other Commercial Services $5.0 $5.0 DCM Ventures

4/25/2016 Helium Systems Connectivity Products $20.0 $38.8 Digital Garage, FirstMark Capital, GV, Jeffrey Schox, Khosla Ventures, Marc Benioff, Munich Re/HSB Ventures, Shawn Fanning, Slow Ventures, SV Angel, The Marc R. Benioff Revocable Trust

4/26/2016 Disruptive Technologies Production (Semiconductors) $6.1 $11.2 Ubon Partners

4/26/2016 SparkCognition Social/Platform Software $6.0 $9.0 Alameda Ventures, Alfonso Barragan, CME Ventures, Entrepreneurs Fund, MSD Capital, Verizon Ventures

4/27/2016 SintecMedia Business/Productivity Software $400.0 $20.0 Francisco Partners, SEB Private Equity

4/27/2016 Vivint Electronics (B2C) $100.0 Peter Thiel, Solamere Capital, Summit Partners, The Blackstone Group

4/27/2016 Nuki Other Consumer Durables $2.3 Up to Eleven, Venta Group

4/28/2016 Glue Application Software $3.7 $3.7 Alfven & Didrikson, Kristian Hansson, MOOR Capital, Peter Carlsson

4/30/2016 CarVi Application Software $5.0 $5.0 JayHyo Park, Korea Telecom, Plug and Play, Posco, Samsung Venture Investment

5/2/2016 SAM (electronics kits) Electronics (B2C) $4.7 $4.8 Imperial Innovations Group, Microsoft Accelerator

5/3/2016 Sixgill Connectivity Products $6.0 $7.5 Mobile Financial Partners

5/4/2016 LitBit Social/Platform Software $7.0 $10.5 AME Cloud Ventures, Correlation Ventures, FundersClub, Illuminate Ventures, Storm Ventures

5/8/2016 Signal Laboratories Other IT Services $3.3 $3.3

5/10/2016 Bayshore Networks Network Management Software $6.6 $7.0 Houston Angel Network, Trident Capital Cybersecurity

5/12/2016 Device Authority Social/Platform Software $9.2 Tern

5/18/2016 Afero Software Development Applications $20.3 $22.5 Assembly Partners, Fenox Venture Capital, Presidio Ventures, Robert Dobkin, Samsung Strategy and Innovation Center, Sanshin Electronics

5/18/2016 Resin.io Automation/Workflow Software $8.0 $11.8 Aspect Venture Partners, Draper Fisher Jurvetson, Ericsson, GE Ventures, Gil Dibner, OpenFund, Panayiotis Papadopoulos



IoT funding events in 2Q16 (continued)

Exhibit 13: IoT funding events in 2Q16 (not exhaustive)

Source: PitchBook, compiled by Goldman Sachs Global Investment Research.

Date Company Name Industry Last Financing Size ($mns)

Total Raised ($mns) Investors

5/19/2016 Hologram Internet Software $4.8 $6.1 Bong Koh, Brendan Weitz, Brian Ficho, Christopher Muhr, Drive Capital, Idris Mokhtarzada, KohFounders, Maiden Lane, Mucker Capital, NextView Ventures, Raj Ruparell, Tyler Willis

5/24/2016 Glide Communication Software $8.0 $36.5 DG Incubation, Eniac Ventures, Marker, Menlo Ventures, MSQ Ventures, New Ground Ventures, Nihal Mehta, Orey Gilliam, Prolific Venture Capital, Square Peg Capital, Two Sigma Investments, Venkatesh Harinarayan

5/24/2016 Optofidelity Electronic Equipment and Instruments $4.1 $4.1 Finnish Industry Investment, VisionPlus

5/25/2016 Zubie Automotive $6.0 $25.9 Best Buy Capital, Castrol InnoVentures, Comporium, Magna, Melody Capital Partners, Nokia Growth Partners, OPENAIR Equity Partners

5/30/2016 Thermondo Social/Platform Software $26.6 $33.1 Climate-KIC, E.ON Strategic Co-Investments, Global Founders Capital, GreyCorp, Holtzbrinck Ventures, IBB Beteiligungsgesellschaft, Leverate Media, Picus Capital, Rocket Internet

6/1/2016 Sentera (Sensor) Other Commercial Products $2.0 $8.5

6/1/2016 Linkbee Electronics (B2C) $6.0 $6.0 Loeb Enterprises, Loeb.nyc, Pegasus Capital Advisors

6/3/2016 Qadium Media and Information Services (B2B) $23.3 Defense Advanced Research Projects Agency, Founders Fund, Knoll Ventures, New Enterprise Associates, Palantir Technologies, Scott Sandell, Susa Ventures

6/6/2016 KnuEdge Vertical Market Software $100.0 $100.0

6/7/2016 Ranzure Networks Wireless Service Providers $7.6 $7.6 LiveOak Venture Partners, Mitel Networks

6/10/2016 Omnispace Media and Information Services (B2B) $8.3 $18.4 Columbia Capital

6/14/2016 DeepSense (Machine Crowd Sourcing) Business/Productivity Software $2.0 $2.0 AfterDox, BizTEC, JANVEST Capital Partners, Microsoft Accelerator, SeedIL

6/15/2016 Addsecure Security Services (B2B) $84.9 ABRY Partners

6/16/2016 Soracom Communication Software $28.4 $34.1 Infinity Venture Partners, Mitsui Private Equity, Pavilion Capital Partners, World Innovation Lab

6/17/2016 All Traffic Solutions Business/Productivity Software $8.0 $8.0 Edison Partners

6/22/2016 Sevenhugs Electronic Equipment and Instruments $14.6 $16.2 Business Angels des Grandes Ecoles, Cap Decisif Management, Femmes Business Angels, Investessor, Kima Ventures, NovX Capital, Women Business Angels Club, Xerys

6/23/2016 iControl Networks (Connect & Piper) Other Software $140.0

6/24/2016 ZTE Intelligent IOT Technology Company Other Commercial Products $22.5 ZTE

6/27/2016 Mojo Networks Media and Information Services (B2B) $16.3 $65.1 Blueprint Ventures, Cipio Partners, Granite Ventures, Presidio Partners, Trident Capital, Walden International

6/27/2016 Ayla Networks Business/Productivity Software $39.0 $59.1 3NOD Digital Group, Acorn Pacific Ventures, Alliance Capital Ventures, Ants Capital, Cisco Investments, Crosslink Capital, International Finance Corporation, Linear Venture, Mitsui & Company, Oriza Ventures, Peter Hsing, Phil Boyer, SAIF Partners, SJF Ventures, Voyager Capital

6/28/2016 Deako Electronics (B2C) $6.8 $8.3 ZTE



List of IoT Startups

Exhibit 14: List of IoT startups (not exhaustive)

Source: Crunchbase, PitchBook, compiled by Goldman Sachs Global Investment Research.

Startup Key product category Investors Startup Key product category Investors

3D Robotics Drones Qualcomm Ventures Glue Home Application Software Alfven & Didrikson, Kristian Hansson, MOOR, Peter Carlsson

7Invensun Virtual Reality; eye tracking Qualcomm Ventures Gotye Wearables; Communication Services Intel Capital

Actility Low Power WAN Ginko Ventures Helium Systems Secure connectivity for things Khosla Ventures, FirstMark Capital

Addsecure Security Services (B2B) ABRY Partners Hologram Internet Software Drive Capital

Advanced Micro-Fabrication Equipment In Semiconductors Qualcomm Ventures IDENTEC GROUP Asset Tracking Intel Capital

Afero Software Development Applications Samsung Strategy and Innovation Center Ineda Systems SoCs Qualcomm Ventures; Cisco Investments

Airspan Wireless 4G Broadband for Smart Grids Oak Investment Partners INRIX Traffic Monitoring Kleiner Perkins Caufield & Byers, Intel Capital

All Traffic Solutions Business/Productivity Software Edison Partners Intersec Group Data consolidation; Realtime analtyics Cisco Investments

Altiostar Networks Next-gen 4G LTE architecture Cisco Investments ip.access Capacity for mobile operators Cisco Investments

Ambiq Micro High efficiency controller for computing devices Kleiner Perkins Caufield & Byers, Cisco Investments Jaunt Virtual Reality Google Ventures

APPScomm Wearables; Health Management Intel Capital Jawbone Wearables Kleiner Perkins Caufield & Byers

Athos (MAD Apparel, Inc.) Smart Clothing True Ventures Karamba Security Network Management Software 8200 EISP, GlenRock Israel, YL Ventures

August Home Connected Home; Smart Locks Qualcomm Ventures; Bessemer Keen Home Connected Home RMR Capital; Galvanize Ventures; Bullet Time Ventures

Autofind Industrial Equipamentos Asset Tracking Intel Capital Kii Cloud Integration for IoT data sources Cisco Investments

Avegant Corp. Wearables; Virtual Retinal Display Intel Capital KONUX Commercial Products TechFounders, New Enterprise Associates

Ayla Networks End-to-end platform for cloud connectivity Cisco Investments KORE Wireless Group Wireless Service Providers ABRY Partners

Bayshore Networks Network Management Software Houston Angel Network, Trident Capital Cybersecurity LIFX Smart bulbs Qualcomm Ventures; Sequoia Capital

Bit Stew Systems Real-time network operations solutions Cisco Investments Linkbee Electronics (B2C) Loeb Enterprises, Loeb.nyc, Pegasus Capital Advisors

Bloom (Orbit HCI) Remote Monitoring; Social Health Management Google Ventures LISNR Wearables Intel Capital

Bocom Intelligent Security, Transportation Solutions Intel Capital LitBit Social/Platform Software Storm Ventures

Body Labs 3D body-scanning sensors Intel Capital littleBits Smart Home True Ventures; Foundry Group

Braigo Labs Wearables; Braille Printer Intel Capital Loggly Cloud-based logging Cisco Investments

Brain Corp. Autonomous navigation Qualcomm Ventures Lookout, Inc. Security Qualcomm Ventures

Brewbot Smart Home FG Angels Mark One Smart Cup Intel Capital

CarVi, Inc. Application Software Korea Telecom, Plug and Play, Posco, Samsung Ventures Meural Social/Platform Software Corigin Ventures

Cavendish Kinetics Wearables; Radio components Qualcomm Ventures Microprogram Information IoT management solution Intel Capital

Celeno Semiconductors; Wi-Fi systems Cisco Investments MobiKwik Mobile wallet Cisco Investments

Cirrent Commercial Services DCM Ventures Mojo Networks Media and Information Services (B2B) Blueprint, CMEA, Granite Ventures, Trident Capital, Walden Int'l

Cohda Wireless Connected Cars Cisco Investments Motiv Inc. Wearables Kleiner Perkins Caufield & Byers

Convacsis Industrial IoT Cisco Investments Mozaiq Interoperability of smart home systems Cisco Investments

CrossChx Healthcare Management Khosla Ventures, Drive Capital MuleSoft Device to cloud connectivity Lightspeed Ventures, New Enterprise Associates, Salesforce

Deako Electronics (B2C) ZTE N3N IoE visualization solutions provider Cisco Investments

DeepSense (Machine Crowd Sourcing) Business/Productivity Software AfterDox, BizTEC, JANVEST, Microsoft Accelerator, SeedIL Navdy Connected Car; Heads-up Display Qualcomm Ventures

Device Authority Social/Platform Software Tern NextInput Wearables; ForceTouch Intel Capital

Disruptive Technologies Production (Semiconductors) Ubon Partners Ninebot Smart Transportation Intel Capital

Electric Imp Wireless Communications Equipment Foxconn Tech Group, Lowercase Capital, PTI Ventures, Rampart Noom Wearables; Healthcare Solutions Qualcomm Ventures

Enlighted Building Automation Kleiner Perkins Caufield & Byers Novasentis Wearables Samsung Ventures, Chengwei Capital

Enovix Wearables; Rechargeable battery solutions Intel Capital Nuki Consumer Durables Up to Eleven, Venta Group

Enverv SoC for Advanced Metering Infrastructure (AMI) Benchmark, Cisco Investments Omnispace Media and Information Services (B2B) Columbia Capital

Eques Technology Co. Connected Home Security Qualcomm Ventures Optofidelity Electronic Equipment and Instruments Finnish Industry Investment, VisionPlus

EVRYTHNG Connecting consumer products to web Cisco Investments OrCam Wearables; Visual Recognition Intel Capital

Eyefluence Wearables; Eye tracking Intel Capital Ossia Inc. Wearables; Wireless charging Intel Capital

Fibocom Wireless M2M communication provider Intel Capital Passport Inc. Connected Parking, Smart City MK Capital

Fon Wireless Ltd. Wi-Fi connectivity Qualcomm Ventures Peloton Technology V2V solutions Intel Capital

Glide Talk Communication Software Marker, Menlo Ventures Percolata Smart Retail; Store Traffic Analytics Andreessen Horowitz, Google Ventures, Menlo Ventures



List of IoT Startups (continued)

Exhibit 15: List of IoT startups (not exhaustive)

Source: Crunchbase, PitchBook, compiled by Goldman Sachs Global Investment Research.

Startup Key product category Investors Startup Key product category Investors

Performance Lab Wearables; Fitness Intel Capital Sirqul Media and Information Services (B2B) 415 Investments, Owen Van Natta, Rick Dalzell, Rudy Gadre

Phunware Multiscreen Platform Cisco Investments Sixgill Connectivity Products Mobile Financial Partners

Placemeter Smart City New Enterprise Associates Soracom Communication Software Infinity Venture Partners, Pavilion Capital, World Innovation Lab

Poynt Co. Smart Payments Google Ventures, Matrix Partners Sotera Wireless Wearables; Health Management Intel Capital; Qualcomm Ventures

Primo1D E-Commerce Rhône Alpes Création, Sofimac Partners SparkCognition Social/Platform Software CME Ventures, Verizon Ventures

Qadium Media and Information Services (B2B) New Enterprise Associates; Founders Fund Streetline Vehicle Management; Smart Parking Qualcomm Ventures, True Ventures

Qnovo Wearables; Battery Management Intel Capital StretchSense Wearables, Sensors Start Today Co. Ltd

Quantcast Audience Measurement Cisco Investments Taifatech SoC Intel Capital

Ranzure Networks Wireless Service Providers LiveOak Venture Partners, Mitel Networks Telcare Social Health Management Qualcomm Ventures

Realtime Immersion Media Viceroy Ventures Telink Connected Home Intel Capital

Relayr IoT developer kits Kleiner Perkins Caufield & Byers Thermondo Social/Platform Software E.ON, Global Founders, Grey Corp, Holtzbrinck, Rocket Internet

Resin.io Automation/Workflow Software Draper Fisher Jurvetson uBeam Wireless Charging Upfront Ventures

RetailNext Smart Retail; Store Traffic Analytics Qualcomm Ventures UNISOUND Voice recognition for smart appliances; Wearables Qualcomm Ventures

Ring (Bot Home Automation, Inc.) Home Security; Smart Home True Ventures Veniam V2V and V2X solutions Cisco Investments

Ringly Wearable Jewelry Andreessen Horowitz Wearable Intelligence Enterprise Solutions for Wearables Google Ventures

Rithmio Wearables; Gesture Control Intel Capital WebRadar Big Data Analytics Qualcomm Ventures

SAM Labs Connected kits for coders Imperial Innovations Group, Microsoft Accelerator Welltok Social Health Management Qualcomm Ventures

Samsara Wireless Sensors Andreessen Horowitz WHILL Personal mobility 500 Startups

SanJet Technology Remote Video Monitoring Intel Capital Worldsensing Industrial IoT and Smart City solutions Cisco Investments

Sano Intelligence Inc. Biometric sensors Intel Capital Xaptum Social/Platform Software 1871 Chicago, Hyde Park Angels, Jai Shekhawat

SAY Wearables Wearable Jewelry NFX Guild Zephyr Health Social Health Management Google Ventures

Sensity Smart Lighting Cisco Investments ZMP Car robotics and sensor systems Intel Capital

Sevenhugs Electronic Equipment and Instruments Xerys Funds ZTE Intelligent IOT Technology Company Commercial Products ZTE

SintecMedia Business/Productivity Software Francisco Partners, SEB Private Equity Zubie Automotive Magna International, Nokia Growth Partners



Upcoming events

Exhibit 16: List of upcoming events

Source: Company data, compiled by Goldman Sachs Global Investment Research.

Event Name Location Start Date End Date

2016 China International IoT and Smart China Exhibition Shenzhen, China 18-Aug-16 20-Aug-16Wearables Tech in Sport Summit San Francisco, US 24-Aug-16 25-Aug-16IoT in Oil and Gas Houston, US 14-Sep-16 15-Sep-16The Internet of Healthcare London, UK 21-Sep-16 22-Sep-16Industrial Internet Summit London, UK 21-Sep-16 22-Sep-16Internet of Insurance New York, US 27-Sep-16 28-Sep-16M2M and IoT Strategies Summit Berlin, Germany 11-Oct-16 12-Oct-16Monetizing IoT Copenhagen, Denmark 12-Oct-16 13-Oct-16Connected Automobiles Milan, Italy 17-Oct-16 18-Oct-16IoT Security Summit Boston, US 17-Oct-16 19-Oct-16Internet of Retail New York, US 18-Oct-16 19-Oct-16IoT Tech Expo North America Santa Clara, US 20-Oct-16 21-Oct-16IoT Planet Grenoble, France 25-Oct-16 27-Oct-16Internet of Manufacturing Chicago, US 1-Nov-16 2-Nov-16Connections Europe Amsterdam, Netherlands 2-Nov-16 3-Nov-16IoT Emerge Chicago, US 2-Nov-16 4-Nov-16IoT World Dublin, Ireland 20-Nov-16 22-Nov-16IoT World Forum 2016 London, UK 29-Nov-16 30-Nov-16



Disclosure Appendix

Reg AC

We, Simona Jankowski, CFA, Marcus Shin, Brian Lee, CFA, Balaji Krishnamurthy, CFA, Connie Qian and Ankit Prasad, hereby certify that all of the views expressed in this report accurately reflect our

personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific

recommendations or views expressed in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.

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returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage

universe.

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Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,

ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month

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Disclosures

Coverage group(s) of stocks by primary analyst(s)

Simona Jankowski, CFA: America-Consumer Hardware & Mobility, America-IT Hardware, America-Telecom Equipment. Marcus Shin: Korea Technology. Brian Lee, CFA: America-Clean Energy,

America-Solar Energy.

America-Clean Energy: Acuity Brands Inc., Cree Inc., Silver Spring Networks Inc., TerraVia Holdings, Universal Display Corp., Veeco Instruments Inc..

America-Consumer Hardware & Mobility: Apple Inc., BlackBerry Ltd., BlackBerry Ltd., Corning Inc., Garmin Ltd., GoPro Inc., Qualcomm Inc..

America-IT Hardware: Aerohive Networks Inc., Arista Networks Inc., Brocade Communications Systems, CDW Corp., Cisco Systems Inc., EMC Corp., F5 Networks Inc., Hewlett Packard Enterprise Co.,

HP Inc., Motorola Solutions Inc., NetApp Inc., Nimble Storage Inc., Pure Storage Inc., Xerox Corp., Zebra Technologies Corp.

America-Solar Energy: 8point3 Energy Partners, First Solar Inc., SolarCity Corp., SolarEdge Technologies Inc., SunPower Corp., Sunrun Inc., TerraForm Global Inc., TerraForm Power Inc., Vivint Solar

Inc..

America-Telecom Equipment: Acacia Communications Inc., ADTRAN Inc., ARRIS International Plc, Ciena Corp., Finisar Corp., Infinera Corp., Juniper Networks Inc., Lumentum Holdings.

Korea Technology: Samsung Electro-Mechanics, Samsung Electronics, Samsung SDI Co., Samsung SDS Co., Seoul Semiconductor, SK Hynix Inc..

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of

Goldman Sachs and referred to in this research.

Goldman Sachs has received compensation for investment banking services in the past 12 months: Hewlett Packard Enterprise Co. ($21.91) and Qualcomm Inc. ($62.00)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Hewlett Packard Enterprise Co. ($21.91), Qualcomm Inc. ($62.00) and

Samsung Electronics (W1,561,000)

Goldman Sachs had an investment banking services client relationship during the past 12 months with: Hewlett Packard Enterprise Co. ($21.91), Qualcomm Inc. ($62.00) and Samsung Electronics

(W1,561,000)



Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Hewlett Packard Enterprise Co. ($21.91), Qualcomm Inc. ($62.00) and

Samsung Electronics (W1,561,000)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Hewlett Packard Enterprise Co. ($21.91), Qualcomm Inc. ($62.00) and Samsung Electronics

(W1,561,000)

Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Hewlett Packard Enterprise Co. ($21.91)

Goldman Sachs makes a market in the securities or derivatives thereof: Hewlett Packard Enterprise Co. ($21.91) and Qualcomm Inc. ($62.00)

Goldman Sachs is a specialist in the relevant securities and will at any given time have an inventory position, "long" or "short," and may be on the opposite side of orders executed on the relevant

exchange: Hewlett Packard Enterprise Co. ($21.91)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 31% 54% 15% 66% 60% 50%

As of July 1, 2016, Goldman Sachs Global Investment Research had investment ratings on 2,963 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment

Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups

and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided

investment banking services within the previous twelve months.

Price target and rating history chart(s)

82

9095

88

79

7873

65

5856

64

1,600

1,700

1,800

1,900

2,000

2,100

2,200

40

50

60

70

80

90

100

Qualcomm Inc. (QCOM)

Goldman Sachs rating and stock price target history

Stock Price Currency : U.S. Dollar

Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016.

The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.

Rating

Price target

Price target at removal

Covered by Simona Jankow ski, CFA

Not covered by current analyst

S&P 500

Inde

xPr

ice

Stoc

kPric

e Oct 15 Aug 24B NR

AB

S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016

17500001800000

17500001700000

1650000

16000001550000

1500000

1400000

13500001600000

15500001450000

14000001300000

1350000

1400000

1300000

1250000

1300000

13500001400000

1,8001,8501,9001,9502,0002,0502,1002,1502,200

1,000,0001,100,0001,200,0001,300,0001,400,0001,500,0001,600,0001,700,0001,800,000

Samsung Electronics (005930.KS)


Stock Price Currency : South Korean Won



Rating

Price target


Covered by Marcus Shin,as of Oct 6, 2014


Korea SE Composite (KOSPI)

Inde

xPr

ice

Stoc

kPr

ice

May 5B

AN

S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016

19

1819

1,600

1,700

1,800

1,900

2,000

2,100

2,200

12.0013.0014.0015.0016.0017.0018.0019.0020.00

Hewlett Packard Enterprise Co. (HPE)


Stock Price Currency : U.S. Dollar



Rating

Price target


Covered by Simona Jankow ski, CFA,as of Oct 26, 2015


S&P 500

Index

Price

Stoc

kPric

e

May 24, 2016 to NR from N

Oct 26N

A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J2013 2014 2015 2016



Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or

other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or

specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their

households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes

investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,

director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and

therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if

with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia

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Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a

stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review

Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular

coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the

potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price target. Price targets are required for all

covered stocks. The return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. The analyst assigns one

of the following coverage views which represents the analyst's investment outlook on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The



investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12

months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage

group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic

transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because

there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and

price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The

information is not meaningful and is therefore excluded.

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The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global basis. Analysts based in Goldman Sachs offices

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