Smart Cities Market Size, Share & Trends Analysis Report By Application (Smart Governance, Smart Building, Smart Utilities, Smart Transportation, Smart Healthcare), By Governance Model, By Region, And Segment Forecasts, 2021 - 2028

Report Overview

The global smart cities market size was valued at USD 98.15 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 29.3% from 2021 to 2028. With the growing awareness about “smart everything”, the smart cities concept has been garnering attention, which is largely the result of all intermediary technologies. Furthermore, increasing investments by city governments, central/federal governments, and dedicated governing bodies have been primarily driving the market growth. Financing and funding models, technology ecosystems, governance structures, and investments in infrastructure play an essential role in smart city deployments and are expected to drive market growth over the forecast period.

As per the “2019 World Urbanization Prospects” report published by the UN Department of Economic and Social Affairs (UN DESA), the present urban population of 55.7% is anticipated to increase to 68.4% in 2050, globally. The need for sustainable infrastructure due to increasing population and urbanization has become a prime driver for the market growth. Governments worldwide are trying to tackle these problems pertaining to growing population and rapid urbanization through smart city initiatives across functional segments such as utility management, mobility, and safety. Moreover, factors such as an increase in traffic congestion and greenhouse gas emissions are resulting in the adoption of smart mobility and efficient energy management applications. This is also expected to drive the market growth over the forecast period.

Driven by the recent technological advancements in healthcare, transport, energy, governance, and intelligence analytics, the smart cities market is anticipated to register a considerable CAGR over the forecast period. The market growth can be attributed to the growing adoption of technologies such as Internet of Things (IoT), cloud computing, cognitive computing, big data analytics, and open data. Moreover, the growing implementation of different Public-Private Partnership (PPP) models such as OBM, BOO, BOT, and BOM is driving the successful execution of smart cities projects. Government initiatives across the world are anticipated to further drive the market growth. For instance, the U.K. government's recent announcements to raise a substantial amount for its smart city projects and the Indian government's Smart City initiative are anticipated to contribute to the market growth over the forecast period.

Though the smart city projects require the use of a diverse set of technologies and intelligent sensors, the application areas vary across projects and from community to community or city to city. The need for improving resilient cities, conserving energy, and developing a sharing economy is also making the market flourish in the global economy. Furthermore, the vendors invest significant resources toward Research and Development (R&D) activities to establish new technologies and systems for connected infrastructure to be used across smart cities projects. Siemens AG, Cisco Systems, and International Business Machines Corporation are leading technology companies that are significantly investing in R&D activities related to connected infrastructure and are instrumental in smart city development across the world.

Technologies such as cloud computing, big data analytics, and IoT have enabled innovation by integrating the internet across routine human functions, and thus simplifying and improving human life with technology. Over the coming years, advancements in the field of artificial intelligence are expected to lay the foundation for the further development of disruptive technologies, which would eventually enhance the human lifestyle to a significant extent globally. Moreover, the development of allied markets such as electric vehicles and renewable energy is expected to contribute significantly to the market growth. Thus, technology proliferation over the forecast period is likely to boost the smart city infrastructure growth prospects.

The recent COVID-19 pandemic and its unprecedented spread worldwide brought numerous countries to a standstill. Moreover, the social, economic, and psychological disruption caused by it across cities and communities remains an ongoing issue across many countries. The dependence of the global economy on urban areas and the oversight in keeping public healthcare a priority in smart city visions have been brought to light during the pandemic. As many countries and cities continue to struggle to recover from the aftermath of the COVID-19 pandemic, some short-term smart city development plans may be curtailed. However, the long-term scenario remains favorable for smart city development globally to manage any forthcoming pandemic situation in a more efficient manner. The pandemic is expected to act as the inflection point for the digitalization of services. This will hold for e-governance services as well as other services such as e-health applications. This is anticipated to drive the market growth over the forecast period.

Governance Model Insights

The public segment dominated the governance model segment in 2020 and accounted for a revenue share of nearly 50%. Smart city projects across the globe involve a considerable amount of capital investment owing to the challenging nature of technology and infrastructure development, thus, resulting in the increased involvement of public authorities. While the traditional methods of financing such as debt instruments exist, numerous new methods of financing smart city projects have been emerging owing to the multi-disciplinary nature of smart city projects. Active support from national governments for digital city initiatives is anticipated to drive the demand for the public governance model.

The Public Private Partnership (PPP) segment is expected to witness significant growth over the forecast period. A mature smart city strategy is at the forefront of adopting PPPs for smart cities globally. PPPs have witnessed considerable growth in adoption in recent years for smart city projects as these are used as a source of financing projects that specifically fall under the ICT domain and constitute projects of a comparatively smaller scale. These projects often are Proof of Concepts, aligned to a particular technology (such as Wi-Fi or 5G), or are part of testbeds and incubation centers.

Application Insights

The smart transportation segment dominated the market in 2020 and accounted for a revenue share of over 35%. Growing traffic congestion problems owing to rapid urbanization, coupled with the need to modernize public transportation infrastructure, are driving the market growth in both developing and developed countries globally. The increasing adoption of IoT technology in the field of transportation has also empowered authorities by offering efficient traffic management in cities. The growing adoption of on-demand mobility, driverless cars, ridesharing, and electric vehicles is the key factor driving smart city projects in the transportation segment. These factors combined with increasing government initiatives and growing consumer awareness are anticipated to propel the demand for smart transportation solutions in the near future.

The smart governance segment is expected to witness significant growth over the forecast period. Smart governance enables government organizations to improve transparency, accountability, collaboration, security, and citizens' participation in the overall governance process by creating a progressive government-public partnership. With the use of information and communication technology, smart governance focuses on supporting and facilitating better planning and decision-making by transforming public service delivery processes. For instance, with the help of system integrators, OEMs, and distributors, several governments are implementing video surveillance systems in various cities to detect and prevent criminal activities and improve smart governance. For instance, Dahua Technology, along with Luxriot VMS, has implemented more than 300 cameras in Lincoln with the help of Videcom Security Ltd (System Integrator).

Smart Governance Insights

The city surveillance segment dominated the smart governance segment in 2020 and accounted for a revenue share of over 30%. City surveillance is a critical parameter in developing a smart city mission for monitoring and managing public assets, transportation systems, citizens, civil bodies, and other community services. The growing concerns about public safety and security are promoting the use of video management systems and IP cameras across the world, thus driving the city surveillance segment growth. Furthermore, reduced IP camera prices and the rising technological advancements in software and analytics are increasing the demand for spy and wireless cameras to keep citizens safe; these are the main factors driving the city surveillance segment growth.

The Command and Control Center (CCC) segment is expected to witness significant growth over the forecast period. All the smart city applications and systems, including city surveillance, Intelligent Traffic Management System (ITMS), smart lighting, smart parking, energy management, and waste management solutions, are accessed and monitored from the CCC center. Thus, the CCC center acts as the core of smart city projects for the collection and analysis of a large amount of data flowing from different applications and systems. The CCC solution providers are increasingly expanding their network and association with partners, resellers, and distributors to enter high potential markets. For instance, Rolta India Limited appointed distributors in China, Russia, Germany, and Turkey, among others, for the distribution and deployment of its BI, Big Data Analytics, and Rolta OneView Enterprise Suite. These factors are expected to drive the segment growth.

Smart Utilities Insights

The energy management segment dominated the smart utilities segment in 2020 and accounted for a revenue share of over 55%. Key functionalities offered by a majority of the energy management solutions include collection and analysis of energy consumption data, identification of energy-saving opportunities, and tracking the progress and ongoing grid improvements. Market players are focusing on establishing a strong R&D infrastructure to drive the development and introduction of advanced energy management systems and design analytics solutions, and integrate emerging technologies such as Blockchain into the same. For instance, in September 2017, Spectral partnered with Alliander N.V. to jointly develop and introduce Jouliette, a Blockchain-based energy trading and sharing token. It also introduced a Smart Meter Data Platform, a new data analytics solution.

The water management segment is expected to witness significant growth over the forecast period. The growing concerns regarding global climate change and water scarcity are impelling various governments to implement water management solutions in their cities with system integrators and OEMs. Most of the OEMs and system integrators are majorly focusing on the cities where the natural water bodies are depleting due to increased construction activities. Moreover, there is an increase in strategic collaborations and acquisitions across the segment. For instance, SEUZ, in collaboration with Caisse de dépôt et placement du Québec, signed an agreement to purchase GE Water from General Electric. Such collaborations are expected to strengthen the growth of the water management segment.

Smart Transportation Insights

The Intelligent Transportation System (ITS) segment dominated the smart transportation segment in 2020 and accounted for a revenue share of over 40%. The need for presenting real-time traffic information to drivers and passengers is one of the key factors driving the demand for ITS. The improved traffic efficiency enables transportation authorities to respond to emergencies more efficiently. The use of such systems maximizes efficiency in traffic management, reduces travel duration, and encourages the increased use of public transit. The higher use of public transportation results in the reduction of airborne pollutants and carbon dioxide emissions. Moreover, the rapid decline in the cost of telecommunication technologies and the evolution of IT systems in recent years are expected to drive the ITS segment growth over the forecast period. 

The parking management segment is expected to witness significant growth over the forecast period. The growing demand for off-street parking systems, owing to urbanization, is expected to drive the growth of the segment over the forecast period. The growing number of vehicles in cities is making it difficult for traffic departments to manage traffic congestion problems. As a result, governments are now focusing on the effective utilization of available parking spaces to enhance customer experience and reduce pollution and traffic jams. The demand for efficient parking space management, cost reduction, environmental protection, improved safety and security in parking lots, and solutions to improve the convenience of end users has been growing in recent years and thus, contributing to the segment growth.

Regional Insights

North America dominated the market in 2020 and accounted for a revenue share of over 30%. The growth can be attributed to the continuous digital transformation across various industry verticals such as telecom, retail, and banking. North America has emerged as the dominant region owing to its well-developed ICT infrastructure, the collaboration of federal and local governments with ICT vendors and start-ups, and the presence of prominent technology vendors. These factors are expected to drive innovation around smart technologies in the region. Moreover, the presence of various international councils is boosting the regional market growth. For instance, The Smart Cities Council and the U.S. Department of Transportation promote the concept of smart cities in the region by organizing networking events.

Asia Pacific is expected to emerge as the fastest-growing regional market over the forecast period. This growth can be attributed to the increased focus on the development of digital infrastructure in the region. Moreover, growing urbanization and a rise in disposable income are further expected to propel the regional market growth over the forecast period. The increasing focus of governments across the region to improve parking management and reduce traffic congestion and air pollution is expected to fuel the demand for smart parking systems over the forecast period. Organizations in the region are keen on exploiting benefits such as cost-effectiveness associated with cloud-based solutions, which bodes well for the growth of applications such as smart transportation, smart governance, smart utilities, and smart building.

Key Companies & Market Share Insights

The key industry participants include ABB Limited; Cisco Systems, Inc.; Schneider Electric SE; International Business Machines Corporation; Siemens AG; and Microsoft Corporation. Companies such as Honeywell International Inc.; Oracle Corporation; Huawei Technologies Co. Ltd.; Hitachi, Ltd.; and Intel Corporation are also at the forefront of developing smart cities solutions. The industry is also expected to witness a rise in small companies that address the niche markets and provide customized solutions with limited scope. However, the marketplace will still be dominated by large technology corporations. The industry is also marked by a growing number of collaborations between governments and companies to develop and implement pilot projects. The key players are also collaborating to develop and deploy customized smart city solutions in the areas of city surveillance, energy management, smart transportation, and smart utilities, among others. Some of the companies are also playing the role of system integrators across smart city projects. Some of the prominent players operating in the global smart cities market are:

• ABB Limited

• AGT International

• AVEVA Group plc.

• Cisco Systems, Inc.

• Ericsson

• General Electric

• Honeywell International Inc.

• International Business Machines Corporation

• Itron Inc.

• KAPSCH Group

• Huawei Technologies Co., Ltd.

• Microsoft Corporation

• Oracle Corporation

• Osram Gmbh

• SAP SE

• Schneider Electric SE

• Siemens AG

• Telensa

• Verizon

• Vodafone Group plc

Smart Cities Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2016 to 2028. For this study, Grand View Research has segmented the global smart cities market report based on application, governance model, and region:

• Application Outlook (Revenue, USD Million, 2016 - 2028)

  • Smart Governance

  • Smart Building

  • Environmental Solution

  • Smart Utilities

  • Smart Transportation

  • Smart Healthcare

• Smart Governance Outlook (Revenue, USD Million, 2016 - 2028)

  • City Surveillance

  • CCS

  • E-governance

  • Smart Lighting

  • Smart Infrastructure

• Smart Utilities Outlook (Revenue, USD Million, 2016 - 2028)

  • Energy Management

  • Water Management

  • Waste Management

• Smart Transportation Outlook (Revenue, USD Million, 2016 - 2028)

  • Intelligent Transportation System

  • Parking Management

  • Smart Ticketing & Travel Assistance

• Governance Model Outlook (Revenue, USD Million, 2016 - 2028)

  • Public

  • Private

  • PPP

• Regional Outlook (Revenue, USD Million, 2016 - 2028)

  • North America

    • The U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

    • Italy

    • Spain

    • Russia

    • Nordic Region

    • Eastern Europe

  • Asia Pacific

    • China

    • Japan

    • India

    • Australia

    • ASEAN

  • Latin America

    • Brazil

    • Mexico

  • MEA

    • Africa

    • Middle East