Smart Cities Market Size, Share & Industry Analysis, By Component (Infrastructure & Environment, People & Society, Transportation & Mobility, and Governance and Management), and Regional Forecast, 2024-2032

The global smart cities market size was valued at USD 623.90 billion in 2023. The market is projected to grow from USD 767.75 billion in 2024 to USD 4,647.63 billion by 2032, exhibiting a CAGR of 25.2% during the forecast period.

Smart cities are urban areas that integrate technology and data-driven solutions and software to enhance infrastructure, services, and overall quality of life for residents. The smart city mainly integrates different digital technologies, such as artificial intelligence, IoT sensors, and data analytics to optimize efficiency, sustainability, and connectivity across various industrial sectors, including energy, healthcare, transportation, utility, and governance. In addition, smart cities contribute to the local and global economy, providing economic benefits to all sectors involved, with government, communities, tech professionals, and city planners to make this vision a reality in the near future.

• According to industry experts, by 2050, around 60% of the global population will be under the initiative of smart cities, along with promoting and improving security services.

The increasing usage of smart technologies such as the Internet of Things (IoT), Information and Communication Technologies (ICT), and big data technology, integrated with different urban systems, enhances smart city operations, which significantly helps to enhance operational efficiency.

The COVID-19 pandemic had a significant impact on smart cities due to rapid digitalization and increased digital transformation in the healthcare, manufacturing, and IT & telecom industries. The pandemic strengthened the security & surveillance regulations due to the social distancing rule implemented by the government. This factor boosted the demand for technologically advanced safety and security software, encouraging the government to increase investments in the development of smart cities. Similarly, enhancing remote working styles, online education, telemedicine, and digital governance promoted smart city government to boost investments in developing digital infrastructure. Thus, the COVID-19 pandemic had a positive impact on the growth of the market.

IMPACT of AI

Implementation of AI Across Various Industrial Sectors to Enhance Business Performance Will Drive Market Growth

Artificial Intelligence (AI) enables intelligent machines driven by Machine Learning (ML) to construct a cyber-physical environment that includes industrial control systems, environment sensors, traffic sensors, video cameras, smart meters, and others. The data collected and analyzed by these intelligent machines helps in making data-driven decisions and predictive analysis for intelligent city planning. With its capacity to analyze large-volume real-time data, AI can assist city officials in identifying trends and patterns that allow them to make better decisions on how to allocate the city's resources. The use of Artificial Intelligence (AI) in smart cities can be used to monitor environmental conditions, and to predict and control natural disasters. This information can be used to protect people's health and safety, as well as to preserve the natural environment of the city.

Similarly, increasing urbanization across the globe generates the demand for automated waste and transport management systems. The integration of Artificial Intelligence (AI) with these systems helps to manage road safety in collaboration with different smart devices, which significantly helps to monitor the modernization of the transport infrastructure.

• For instance, in May 2024, TVS Supply Chain Solutions Limited declared that its fully owned subsidiary, TVS SCS Europe and UK, formed a partnership with Manchester Metropolitan University (MMU) to enhance the use of AI to improve business operation performance. Through this partnership, the company focuses on advancing AI governance and delivering AI-based sustainable supply chain solutions to customers worldwide.

Thus, the implementation of AI brings development among different industrial sectors to drive market growth.

Smart Cities Market Trends

Integration of 5G Technology with Interconnected Smart Devices to Fuel Market Growth

Integrating 5G technology into smart cities provides a large number of opportunities to revolutionize the urban infrastructure, thereby enabling faster communication among different smart devices, enhancing the data collection for city planning, and helping improve traffic management, along with public safety and security. 5G standalone architecture can also connect transportation, from tug boats to trains. The increased performance and efficiency of 5G can transform the user experience and connections across the cities. Whereas governments are already leveraging 5G-enabled innovations to drive productivity and efficiency at lower costs. Cities are using 5G together with edge computing for functions such as crowd control and infrastructure monitoring, among others.

• For instance, According to GSMA, 5G networks will reach a third of the world's population by 2025. In the U.S., the NTIA recently announced plans to repurpose at least 1500 MHz in the country's spectrum for 5G satellites, mobile, and broadband connections.

5G also enables a more comprehensive security solution, which is essential for protecting city infrastructure and operations from cyberattacks and safeguarding citizens' personal information and privacy. In conclusion, 5G takes smart city design from a concept to a reality and prepares the ground for the creation and implementation of new applications, such as air quality monitoring, energy consumption and traffic patterns, street lighting, intelligent parking, crowd control, and even emergency response.

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Smart Cities Market Growth Factors

Surge in Demand for IoT-based Energy Management and Transportation Systems to Fuel Market Growth

Smart energy management in smart city infrastructure involves the integration of different smart technologies to optimize energy usage, reduce waste, and enhance the sustainability of city operations. The integration of IoT with an energy management system boosts energy efficiency and reduces carbon emissions by incorporating cleaner energy resources. The IoT-based energy management system helps to drive sustainability by optimizing the overall energy consumption.  

Increased usage of Smart Energy Management (SEM) solutions optimizes the use and distribution of energy resources in cities. It also combines renewable energy sources, storage systems, and advanced demand response mechanisms for efficient energy use, load balancing, and grid resilience. It significantly results in lower carbon footprints and improved resilience to power outages.

• According to industry experts, there will be about 27 billion linked IoT devices by 2025, which significantly aims to bring technological development across different industrial sectors during the forecast period.

Similarly, the integration of Internet of Things (IoT) devices with transportation helps to build advanced transit infrastructure with high reliability and safety. The integrated sensors built into roads, bridges, and tunnels collect information on structural integrity, wear and tear, and driving conditions. It significantly helps in delivering real-time monitoring information and predictive maintenance to identify issues before they cause disruption. It also improves public safety by tracking road conditions and alerting authorities when needed. These IoT solutions help ensure transportation assets last longer and operate more efficiently, reducing the impact on commuters and maintenance costs. These are the key factors that aim to boost the growth of the market during the forecast period.

RESTRAINING FACTORS

High Implementation Cost of Devices Restricts Market Growth

The development of smart city solutions relies heavily on collecting and analyzing data from various sources, such as sensors and devices. This data collection raises privacy and security concerns, as well as the possibility of data breaches or cyberattacks. Hence, it is essential to ensure that data privacy regulations and cybersecurity protocols are in place. Thus, to protect this data, the need for the adoption of a security solution arises. It can cost high investments from the government and other public and private sectors for market growth. However, many countries are not capable of making such huge investments.

Integration of advanced technologies, such as AI, machine learning, and big data analytics with various interconnected devices involves coding, testing, and designing, significantly requiring a high amount of investment. These are the key factors that increase the implementation cost of smart and connected devices. Thus, this factor is considered a significant restraining factor that hinders market growth.

Smart Cities Market Segmentation Analysis

By Component Analysis

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Infrastructure & Environment to Witness Fastest Growth with Increasing Deployment of Automated Solutions

Based on component, the market is divided into infrastructure & environment, people & society, transportation & mobility, and governance and management.

The infrastructure & environment segment is projected to record the highest CAGR during the forecast period. It mainly includes smart energy management, smart waste management, and smart water management. Increasing usage of applications, such as building-automation systems, dynamic electricity pricing, and pay-as-you-throw digital tracking for solid waste management brings advancements in smart city infrastructure. These factors are projected to enhance the market growth during the forecast period.

• For instance, in January 2024, VERSES AI Inc. formed a partnership with Analog to develop smart city projects in Abu Dhabi. This partnership aims to develop the smart city infrastructure of UAE by adopting smart city initiatives. This initiative mainly focuses on bringing development among the healthcare, energy, and smart mobility sectors by forming collaboration with UAE industrial stakeholders.

The people & society segment held the largest smart cities market share in 2023. This segment includes healthcare, education, and public safety & security. Growing demand for smart healthcare solutions for remote health monitoring and smart safety and public security solutions for providing ultimate city surveillance drive the growth of the market during the forecast period.

REGIONAL INSIGHTS

The market is studied across North America, Europe, Asia Pacific, the Middle East & Africa, and South America and each region is further studied across countries.

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North America is projected to be a prominent contributor to the smart cities market growth and held the highest market share in 2023. The region’s growth is credited to the growing demand for developing energy-efficient buildings across the region and rising government initiatives in infrastructure development in the U.S., Canada, and Mexico by using new innovative technologies such as Artificial Intelligence (AI), IoT, and big data to fulfill the user’s requirement of better transportation along with public safety.

• For instance, in August 2023, Vix Technology entered into a partnership with myBus, a cloud-based ticket solution provider, to generate a new cloud-native Intelligent Transportation System (ITS). This ITS solution helps deliver real-time vehicle monitoring and aims to enhance communication between drivers and passengers to ensure a safe ride.

According to a survey conducted by researchers in March 2022, almost 51% of Americans feel comfortable living in smart cities, where the infrastructure is connected with various devices and sensors that significantly help to enhance mobility. The presence of a large number of smart city solutions providers in the U.S. and Canada drives the demand for the market during the forecast period.

Asia Pacific is estimated to grow with the highest CAGR during the forecast period. The growing urbanization and increased population in India, China, and Japan are the key factors driving the market demand during the forecast period. Similarly, increased investment from both the public and private sectors to bring advancements in smart city projects fuels the market growth in Asia Pacific.  

• For instance, the Indian Government’s Smart Cities Mission seeks to create 100 smart cities across the country, with substantial investments in areas, such as smart transportation, smart energy, and digital infrastructure.

Europe is projected to showcase moderate growth during the forecast period. This is due to increasing investment by the European Government in developing smart water management systems, which integrate various digital solutions, such as advanced pressure management solutions, network monitoring, advanced meter data analytics, and leakage detection solutions. This will propel the growth of the market in the region during the forecast period.

The Middle East & Africa and South America are estimated to experience significant market growth during the forecast period. It is due to increasing internet connectivity, the high urbanization rate, and growing R&D activities to bring automation in urban planning and infrastructure development activities among different countries present across both regions.

KEY INDUSTRY PLAYERS

Companies Focuses on Forming Partnerships to Bring Advancement by Leveraging Advance Technologies  

Companies operating in the market mainly include Intel Corporation, ABB Ltd, Amazon Web Services, Inc., Hitachi Vantara LLC, Schneider Electric, Sierra Wireless S.A., Siemens AG, and Actility, SA. These companies are focusing on partnerships and new product launches to bring bringing innovations across development of smart cities. To enhance their operations throughout the world, the market players are using various strategic methods, such as partnerships, product launch, investments, acquisitions, and mergers.

List of Top Smart Cities Companies: 

• Intel Corporation (U.S.)


• ABB Ltd (Switzerland)


• Amazon Web Services, Inc. (U.S.)


• Hitachi Vantara LLC (U.S.)


• Schneider Electric (France)


• Sierra Wireless S.A. (Canada)


• Siemens AG (Germany)


• Actility, SA (France)


• Microsoft Corporation (U.S.)


• AT&T Intellectual Property (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• March 2024: L&T, a global R&D engineering and services company, formed a partnership with Intel Corporation to bring development across smart city infrastructure and intelligent transportation systems. This partnership aims to focus on Cellular Vehicle-to-Everything (CV2X) applications by leveraging LTTS's expertise among smart transportation systems and connected vehicles by deploying Intel’s scalable edge-AI solutions.


• February 2024: Siemens, along with Enlighted, a property technology provider owned by Siemens, entered a partnership with Zumtobel Group, a lighting solution provider, to advance smart building technologies and IoT intelligent lighting and set new standards by bringing sustainability to building operations across the world.


• February 2024: NEC Corporation India launched smart city technology-based solutions for advancing digital transformation and forming connected nations with the help of technology. These solutions mainly include NEC Mi-WareSync (Warehouse Management System), NEC Mi-City (Citizen Engagement Portal), NEC Mi-Command (Integrated Command and Control Centre), and NEC Mi-Eye (Intelligent Video Analytics) to deliver a seamless experience for businesses, citizens, and other communities.


• February 2024: Siemens collaborated with Moro Hub, a subdivision of the digital arm of Dubai Electricity and Water Authority (PJSC), to bring advancement in the development of a smart city project situated in Dubai. Through this partnership, the Moro Hub aims to enhance the usage of Siemens cybersecurity solutions, Ruggedcom, to identify the cyber threats and to protect the critical infrastructure of different industries such as utilities, transportation, manufacturing, and energy.


• December 2023: Schneider Electric entered a partnership with LMD to manage project systems and facilities for LMD's smart city projects in Egypt and the UAE. Through this partnership, Schneider Electric delivers advanced and sustainable smart city building management solutions for LMD projects to reduce carbon emissions and boost resource operational performance.

REPORT COVERAGE

The study on the market includes prominent areas globally to gain enhanced knowledge of the industry verticals. Moreover, it offers insights into the most recent trends and industry developments and an analysis of high-tech solutions being adopted promptly worldwide. It also highlights some of the growth-stimulating factors and limitations, allowing the reader to obtain a comprehensive understanding of the market.

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