Analysis by Functional Area (Smart Transportation, Smart Citizen Services, Smart Building, Smart Utilities, and Others); and by End User (Healthcare Sector, Transportation Sector, Government Industry, Utilities Sector, and Others) – Supply & Demand Analysis & Opportunity Outlook 2022-2035
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The Indonesia smart cities market is estimated to garner a revenue of USD 236,430.6 Million by the end of 2035 by growing at a CAGR of 22.6% over the forecast period, i.e., 2023 – 2035. Further, the market generated a revenue of USD 27,211.8 Million in the year 2022. The growth of the market can be attributed to the rising population in urban areas and rapid prevalence of urbanization. The goal of smart cities is to lower the costs and inconveniences that are expected to come along with future urbanization. It offers a standard of living that can sustainably support the urban population and future generations. In 2022, around 58% of Indonesia's population lived in urban areas. Indonesia's urban population grew at an average yearly rate of around 2% from 18% in 1973 to approximately 58% in 2022.
In addition to these, factors that are believed to fuel the market growth of Indonesia smart cities include the higher adoption of advance technology by the manufacturing sector. The manufacturers in Indonesia are a diverse set, the extent of developing and adoption new innovative technologies is different. In the recent industry 4.0 innovations around 6% of businesses implemented new technologies across their operations, moreover, nearly 30% did so to an intermediate degree, and around 64% adopted basic technology. Besides this, the market growth is also expected on the account of rising government efforts to augment the smart city missions. Ministry of Home Affairs of Republic Indonesia aiming to support 6th edition of Indonesia International Smart City Expo & Forum (IISMEX) that is going to be held on 5 – 7 July 2023. It is one of the largest yearly technology, ICT, and IOT exhibitions and forums in Indonesia and serves to address the informational and commercial demands of providers of smart city solutions.
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Base Year |
2022 |
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Forecast Year |
2023-2035 |
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CAGR |
22.6% |
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Base Year Market Size (2022) |
USD 27,211.8 Million |
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Forecast Year Market Size (2035) |
USD 236,430.6 Million |
Growth Drivers
Proactive Government Initiatives for Executing Smart City Plan– In order to construct a green and smart metropolis, Indonesia is relocating its capital to East Kalimantan in Borneo. It is 2,000 kilometers to the northeast of Jakarta is where the country's new capital, Nusantara, is located. In addition, the government is setting aside 70% of the new city as green spaces to maintain the environmental sustainability. This is in keeping with the nation's goal of having 100% new and renewable energy by 2060 and net zero carbon emissions.
Growing Pervasion of Digitization in the Region– Digitalization is a key factor in the transformation of MSMEs. Digitization so far has benefited all the middles and small sized enterprises in lowering the operational cost, faster transaction, and capturing both national and international audience. Moreover, according to the World Economic Forum, in 2021, Indonesia have 202 million internet users that contributed USD 70 billion and it is further expected to jump to USD 146 billion by 2025.
Advancing Automation of Industry – The 4.0 Indonesia is a goal of the country to optimize the Fourth Industrial Revolution by boosting industries with the integration of technologies, such as robots, 3D printing, cloud, and others. Moreover, around 27% of industries are already using robotics and around 68% of industry are aware of it
Higher Adoption of Advanced Technology – The "Creating Indonesia 4.0" program was initially introduced in 2018, by President Joko Widodo. On the back of this program, Indonesia aims to become among the top 10 economies in the world by 2030, to leverage transformative technologies like the internet of things (IoT), artificial intelligence (AI), automation, and robots.
Rise in the Collaboration Among Public and private Sectors to boost the Transition – IAxiata and Huawei together had signed a memorandum of understanding (MoU) to partner up to create "5G City," with the goal of utilizing 5G technology to create a smart city, forecasting technological advancement, operating networks intelligently, and enhancing user experience.
Challenges
The Indonesia smart cities market is segmented and analyzed for demand and supply by functional area into smart transportation, smart citizen services, smart building, smart utilities, and others. Out of the five functional areas, the smart citizen services segment is estimated to gain the largest market size of USD 89,441.7 Million by the end of 2035 by growing at a CAGR of 23.1% over the projected time frame. Moreover, the segment garnered a revenue of USD 9,796.2 million in 2022. Furthermore, the smart citizen services is categorized into smart education, smart public safety, smart healthcare, smart street lighting, and others. The growth of the segment can be attributed to the rising government effort for augmenting the smart education in the region. On November 19, 2019, the Ministry of Education and Culture hosted the launch of the World Bank's overview of the Promise of Education in Indonesia. Moreover, rising technology integration in healthcare is also expected to boost the segment growth. In 2021, Mandaya Hospital Group came into strategic partnership to combine Philips latest technology in the new flagship hospital. Mandaya showcased their new smart hospital that are patient centered by the use of turnkey solution.
The Indonesia smart cities market is also segmented and analyzed for demand and supply by end-user into healthcare sector, transportation sector, government industry, utilities sector, and others. Amongst these five segments, the government bodies segment is expected to garner a revenue of USD 73,790 million at the end of 2035. Moreover, in 2022, the segment generated a revenue of USD 7,973.1 million. However, it is expected to grow at a CAGR of 23.3% over the forecasted period. The growth of the segment is credited to rise in the implementation of technology in the government sector. The president of Indonesia, declared his ambition to digitalize government by 2025 in 2019, it included a framework and implementation guidelines for online governance tools in public services. Furthermore, KOMINFO, the ministry of telecommunication announced that eight super apps would replace more than 20,000 current government applications. On the other hand, the transformation of the public service delivery by including the use of technology is also expected to boost the segment growth. For instance, the Maros, South Sulawesi, Population and Civil Registration Office now enables service customers to print citizenship documents at home following registration through a smartphone app. Moreover, telehealth consultations were added to the Mobile JKN app by Indonesia's national healthcare and social insurance organization in April 2020. Now, the app links patients and medical professionals directly.
Our in-depth analysis of the Indonesia smart cities market includes the following segments:
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By Functional Area |
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By End User |
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In 2023, market players might incur losses due to huge gap in currency translation followed by contracting revenues, shrinking profit margins & cost pressure on logistics and supply chain.
Controlling Inflation has become the first priority for global economies from last quarter of 2022 and to be followed in 2023. With skewed economic situations, rise in interest rate by governments to control spending and inflation, spiked oil and gas prices, high inflation, geo-political issues including U.S. & China trade war, Russia-Ukraine conflict to intensify the global economic issues.
The interest rates in the U.S. may be less sensitive in 2023 as compared to 2022; sigh of relief for businesses. Positive business sentiments, healthy business balance sheets, growth in construction spending (private construction value in 2022 stood at $1,429.2 billion, 11.7 percent (±1.0 percent) above the $1,279.5 billion spent in 2021, Residential construction in 2022 was $899.1 billion, up by 13.3 percent (±2.1 percent) from $793.7 billion in 2021, non-residential construction touched $530.1 billion, 9.1 percent (±1.0 percent) above the $485.8 billion in 2021.) showcases minimal impact of recession in the country.
Similarly, spiked spending in the European and major Asia economics including, India, China & Japan to showcase less impact on the global demand.
Ans: Increasing automation of industry, rising government initiatives, growing urbanization and digitization are the major factors driving the market growth.
Ans: The market is anticipated to attain a CAGR of 22.6% over the forecast period, i.e., 2023 – 2035.
Ans: Lack of adequate infrastructure, rising concerns associated with security and privacy, and shortage of enough funds are estimated to be the growth hindering factors for the market expansion.
Ans: The major players in the market are Honeywell International Inc., General Elect, IBM Corporation, Siemens AG, Schneider Electric., Oracle Corporation, Microsoft Corporation, Huawei Technologies Co. Ltd., and Cisco Systems Inc.
Ans: The company profiles are selected based on the revenues generated from the product segment, the geographical presence of the company which determines the revenue generating capacity as well as the new products being launched into the market by the company.
Ans: The market is segmented by functional area, and by end user.
Ans: The smart citizen services segment is anticipated to garner the largest market size by the end of 2035 and display significant growth opportunities.
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