Hardware Encryption Market Size, Share & Industry Analysis, By Product (Hard Disk Drive, Solid State Drive, USB Flash Drive, and Smart Card), By End-user (Individual and Enterprise/Industrial), and Regional Forecast, 2024-2032

The global hardware encryption market size was valued at USD 306.2 million in 2023. The market is projected to grow from USD 331.1 million in 2024 to USD 698.7 million by 2032, exhibiting a CAGR of 9.8% during the forecast period.

The cyber threat landscape has expanded significantly due to increased digitization, interconnected devices, and massive data generation. Due to innovations in Artificial Intelligence (AI), cybercriminals are increasingly able to launch cyberattacks with greater ease and sophistication. Millions of cyber-attacks are registered every year, affecting around 50% of businesses, and the estimated average cost of data breaches is over USD 4 million. Therefore, an increase in cyber-criminal activities is driving the hardware encryption market growth.

Remote working policies witnessed a surge during the COVID-19 pandemic. Some enterprises adopted remote working strategies as a part of flexibility and some enterprises resisted due to the increasing risk posed to data security and compliance efforts. According to a survey by Infosecurity Magazine, 94% of respondents said that their organization has a policy that requires encryption of data held on removable media. However, during the pandemic, the market witnessed growth due to the increasing adoption of hardware encryption solutions among enterprises. 

Hardware Encryption Market Trends

Integration of Artificial Intelligence with Encryption Algorithms to Aid Market Growth

Artificial intelligence plays a significant role in encryption as AI can improve and break encryption, highlighting the evolving landscape of safeguarding sensitive information. Artificial intelligence helps to improve encryption techniques, simplify the management of keys and also strengthen threat detection. Artificial intelligence is used for developing quantum-resistant encryption algorithms by searching mathematical patterns and structures, which can be used for creating novel encryption techniques resilient to quantum attacks.

AI-powered systems are used to detect and prevent unauthorized access attempts and suspicious activities in real time by analyzing network traffic patterns and behavior. AI can identify potential threats and anomalies, providing early warnings. Integration of AI with an encryption algorithm enables secure data sharing among multiple parties, and techniques, such as homomorphic encryption, allow computations to be performed on encrypted data without the need to decrypt it first. This allows collaborative analysis and sharing of data without exposing sensitive information to unauthorized entities.

Furthermore, AI helps to generate strong cryptographic keys by analyzing data patterns and enhancing the randomness of the keys. This process improves the security of cryptographic systems, making them less susceptible to brute-force attacks.

Thus, the integration of artificial intelligence with encryption algorithms is expected to drive hardware encryption market share during the forecast period.

Hardware Encryption Market Growth Factors

Increasing Adoption of IoT Devices is Propelling Market Growth

Rapid growth in Internet of Things (IoT) devices and solutions has unlocked technological development. Also, it offers opportunities for cybercriminals in the form of mass distributed denial-of-service attacks, network hacking, privacy invasion, and data theft.  While some of these attacks can be prevented with the use of software-based security, they cannot be protected from all attacks. For instance, an IoT device is used for securing data during transmissions and storage where the hardware in the device is physically attacked, then no software can protect the device. This is where the demand for hardware security is increasing.

For securing the IoT devices crypto acceleration technique is used as this technique performs cryptographic functions in hardware instead of software. This enhances the application's speed and also provides hardware with systems that cannot be exploited by software. For instance, a software version of AES can be subject to code injection, and the attacker can easily reverse the encrypted result. Still, a hardware version of AES is irreversible and cannot be attacked.

However, IoT systems that are entirely based on software security will be an easy target for an attacker, while those that integrate hardware security will be significantly stronger. Therefore, the increasing adoption of IoT devices is propelling market growth.

RESTRAINING FACTORS

High Cost of Hardware Encryption to Hinder Market Expansion

The cost of installation and maintenance of hardware-based security encryption is high as the encryption comprises the installation of encryption under the external hard disk drive for ensuring a high level of protection. It also includes installing a dedicated network platform for protecting desktops, laptops, and storage systems. Also, the installation cost is high as it contains annual maintenance cost, pre-provisioning cost, licensing cost, staging cost, user excess operating cost, technical assistance cost, and idle time cost for encryption, among others. Hence, the high cost of hardware encryption is a significant factor hindering market expansion.

Hardware Encryption Market Segmentation Analysis

By Product Analysis

Increasing Adoption of Smart Cards for Security Purposes to Aid Segment Growth

By product, the market is segmented into hard disk drive, solid state drive, USB flash drive, and smart card.

The smart card segment is expected to register the highest CAGR during the forecast period as smart cards are tamper-proof and use encryption to ensure the security of information in memory. Smart cards offer a way to securely identify and authenticate the owner and third parties seeking access to the card, store data securely on the card, and secure communications through encryption.

The solid state drive segment generated the maximum share in terms of revenue in 2023, owing to the fact that encrypted solid state drives provide data security without compromising system performance. Encrypted SSDs provide transparent, complete encryption of all data, including hidden and temporary files that may store sensitive information. Encrypted SSDs help organizations protect sensitive information and provide secure disk access.

By End-user Analysis

Ongoing Trend of BOYD among Organizations Boosted Consumer Electronics Segment Growth

By end-user, the market is bifurcated into individual and enterprise/industrial. The enterprise/industrial segment is sub-segmented into consumer electronics, government, BFSI, healthcare, media & entertainment, aerospace & defense, and others.

The consumer electronics dominated the market in 2022. Hardware encryption is utilized in various electronic devices, including desktops, laptops, and smartphones, among others. The demand for hardware encryption is increasing among consumer electronics due to the ongoing trend of Bring Your Own Device (BYOD) policy in organizations globally.

The aerospace & defense segment is estimated to showcase the highest CAGR during the forecast period, as the defense industry plays an essential role in ensuring the safety and security of the nation. The dependency on digital technologies and the interconnectedness of military systems is generating the need to safeguard sensitive information. Thereby, the demand for hardware encryption is increasing in the industry to protect the data related to national security and border security.

REGIONAL INSIGHTS

The market is studied across the regions, including North America, South America, Europe, Middle East & Africa, and Asia Pacific. These regions are further classified into leading countries.

North America generated maximum revenue in 2023, owing to the increasing diversity, volume, and sophistication of cyber threats. Also, the market is witnessing growth in the region as the companies are leveraging and progressing advanced technologies, such as edge computing, AI, IoT, and cloud analytics, among others, to launch innovative solutions and services. The implementation of edge computing and cloud-native technologies has enabled market players to expand their core business capabilities, generate additional revenue and promote greater reliability and scalability. Key players, such as Seagate Technologies, NetApp, and IBM Corporation, are substantially integrating encryption algorithms to provide additional security and efficient hardware encryption products.

Asia Pacific is expected to grow with the highest CAGR during the forecast period owing to the presence of major consumer electronics players in China, South Korea and Japan, among others. Asia Pacific is a manufacturing hub of consumer electronics and a provider of advanced ICT technologies. The market will witness growth in the region owing to increasing smart city initiatives, an increasing number of data breaches among organizations in the region, and the increasing creation of digital content and usage of IoT devices among various industries.

Europe is witnessing substantial growth as the number of data centers is increasing in countries including Germany, France, and the U.K., among others, and this is driving the market size in the region. The digitalization and increasing adoption of AI in various sectors are generating huge amounts of data, and organizations are adopting encrypted devices to store this sensitive information.

South America and the Middle East & Africa are experiencing significant growth as the governments in Brazil, Argentina, GCC, and South Africa, are offering strong support for data center growth. Increasing internet penetration is generating massive amounts of data in both regions, and this is surging the demand for encrypted devices in these regions.

List of Key Companies in Hardware Encryption Market

Major Players Focus on New Product Launches to Strengthen Market Positions to Drive Market Growth

Key players, such as Western Digital, Seagate Technology, and Kingston Technology, among others operating in the hardware encryption market, are upgrading their existing encryption devices to keep up with the changing user requirements. With the recent trend of generative AI tools, companies are upgrading their product portfolio with AI technologies. With this, companies aim to transform their services and better serve their customers. Furthermore, these hardware encryption companies proactively pursue partnerships, collaboration, and mergers and acquisitions to boost their product offerings.

List of Key Companies Profiled:

• Western Digital Technologies (U.S.)


• Samsung Electronics (South Korea)


• Micron Technology, Inc. (U.S.)


• Kingston Technology Corporation (U.S.)


• Seagate Technology (U.S.)


• NetApp (U.S.)


• Intel Corporation (U.S.)


• Thales e-Security, Inc. (U.S.)


• McAfee, LLC (U.S.)


• Maxim Integrated Products (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• October 2023: Seagate Technology launched Exos 24TB hard drives that are designed for maximum storage capacity and the highest rack-space efficiency. Exos 24TB hard drives offer encryption technology, self-encrypting drive, and instant secure erase.


• April 2023: WinMagic entered into a partnership with Carahsoft Technology Corporation to provide encryption solutions to the public sector through Carahsoft reseller partners.


• March 2023: Micron Technology launched a 7450 solid state drive for the data center. This SSD consists of 176 layers of storage cells and verified CMOS under the array technology that provide an ultra-efficient design. This solid state drive offers a self- encrypting drive feature and an e-drive option that helps in preventing data breaches.


• January 2023: Kanguru expanded the product line of Defender hardware encrypted USB drives with an innovative and market-proven USB to Cloud portable software app. 


• July 2022: Kanguru launched the FIPS 140-2 certified external solid state drive series with enhanced security and this series provides organizations with data protection.

REPORT COVERAGE

The hardware encryption market report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service types, and leading applications of the product. Besides, the report offers insights into the market trends and highlights the competitive landscape. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

Report Scope & Segmentation