IoT in Smart Cities Market – Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented By Offering (Solutions, Services), By Application (Smart Transportation, Smart Building, Smart Utilities, Smart Citizen Services), By Region, Competition 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 11.59 Billion
CAGR (2026-2031)	19.01%
Fastest Growing Segment	Solutions
Largest Market	Asia Pacific
Market Size (2031)	USD 32.93 Billion

Market Overview

The Global IoT in Smart Cities Market will grow from USD 11.59 Billion in 2025 to USD 32.93 Billion by 2031 at a 19.01% CAGR. The Global IoT in Smart Cities Market involves the strategic integration of interconnected sensors, devices, and analytical platforms within urban infrastructure to enhance operational efficiency and public services. Primary drivers fueling this market include the urgent need for sustainable resource management amidst rapid urbanization and government mandates aiming to optimize traffic flow and energy consumption. These factors necessitate robust solutions that reduce operational costs and improve the quality of life for citizens while addressing the physical demands of expanding metropolitan areas.

However, widespread deployment faces significant hurdles regarding security and interoperability across diverse device ecosystems, as a lack of standardized protocols can fragment infrastructure and impede seamless data exchange. This fragmentation often complicates the scalability of projects essential for holistic city management. According to the Wi-SUN Alliance, in 2024, the ecosystem achieved a milestone of 100 million capable endpoints globally, demonstrating the critical mass of interoperable wireless mesh networks currently supporting smart utility and city applications.

Key Market Drivers

The surge in government initiatives and funding acts as a primary catalyst for the Global IoT in Smart Cities Market as administrations worldwide seek to modernize aging infrastructure and stimulate economic growth through digital transformation. Public sector investments are increasingly directed toward creating industrial corridors and intelligent urban hubs that leverage technology for efficient resource management. For instance, according to the Press Information Bureau, August 2024, the Government of India approved 12 new industrial smart city projects with a total project cost of Rs. 28,602 crore to develop robust trunk infrastructure. Such substantial financial commitments de-risk private investment and accelerate the deployment of foundational IoT layers, including smart utilities and traffic management systems, thereby fostering a conducive environment for large-scale technology adoption.

Simultaneously, the deployment of 5G and advanced connectivity technologies is removing historical bandwidth and latency barriers, enabling the reliable operation of mission-critical urban applications. The high-speed, low-latency nature of 5G networks supports massive machine-type communications which are essential for connecting millions of sensors simultaneously without network congestion. According to Ericsson, November 2024, in the 'Mobility Report', global 5G subscriptions were projected to reach almost 2.3 billion by the end of 2024, reflecting the rapid expansion of the infrastructure necessary to support dense smart city grids. This connectivity backbone allows for real-time data analytics and automated responses across city services, from emergency response to waste management. Highlighting the scale of this interconnected ecosystem, according to the GSMA, in 2024, the number of licensed cellular IoT connections globally was reported at 3.5 billion, demonstrating the vast potential for integrating diverse urban endpoints into a cohesive smart network.

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Key Market Challenges

The most significant challenge hampering the growth of the Global IoT in Smart Cities Market is the persistent issue of security vulnerabilities combined with a lack of interoperability across diverse device ecosystems. As cities digitize critical infrastructure, such as power grids and traffic management systems, the potential surface area for cyberattacks expands exponentially. Municipalities are often hesitant to scale pilot projects into full city-wide deployments due to the catastrophic risks associated with data breaches or service disruptions. This hesitation is compounded by a fragmented landscape where proprietary protocols prevent devices from different vendors from communicating effectively, creating data silos that negate the benefits of a connected urban environment.

Consequently, city planners face the risk of vendor lock-in, where they are forced to rely on a single supplier for incompatible systems, driving up long-term operational costs and complexity. This fragmentation prevents the seamless data exchange necessary for holistic urban management and increases the difficulty of securing the network. The severity of this operational hurdle is underscored by recent industry findings. According to the Cloud Security Alliance, in 2024, 77% of IT and security professionals reported feeling unprepared to effectively deal with security threats within their environments. This widespread lack of confidence and readiness directly slows investment and adoption rates, preventing the market from reaching its full potential.

Key Market Trends

The Convergence of Artificial Intelligence and IoT (AIoT) for Intelligent Decision-Making is reshaping urban management by transforming raw sensor data into actionable insights that enhance citizen well-being. Cities are increasingly deploying advanced algorithms to automate complex operations, such as dynamic traffic routing and real-time public safety monitoring, thereby moving beyond simple data collection to predictive governance. This operational shift is strongly supported by public sentiment, as citizens recognize the tangible benefits of algorithmic efficiency in their daily lives. According to Sand Technologies, March 2025, in the 'AI in Smart Cities 2025: What Do Residents Think?' report, more than two-thirds of residents believe AI will drive future improvements in their quality of life, validating the municipal push for integrated intelligent systems.

Simultaneously, the Emergence of Virtual Power Plants and Decentralized Smart Grids is revolutionizing urban energy management by turning passive structures into active grid elements. As cities face pressure to decarbonize, strategies are prioritizing the integration of smart buildings that can dynamically adjust energy consumption and generation in response to real-time grid demands. This transition empowers urban centers to balance loads locally, reducing reliance on centralized power stations and enhancing resilience against outages. The commitment to this infrastructural evolution is evident in corporate strategies; according to Siemens, November 2024, in the 'Infrastructure Transition Monitor 2025', 55% of organizations plan to increase investment in smart building technologies over the next three years, highlighting the critical role of decentralized assets in the modern urban landscape.

Segmental Insights

The Solutions segment is positioned as the fastest growing category in the Global IoT in Smart Cities Market. This expansion is primarily driven by the increasing necessity for integrated software platforms that aggregate and analyze data from diverse urban sensors. Municipal authorities are actively adopting these central management systems to optimize traffic flow, waste management, and energy distribution. The shift towards data-centric governance requires reliable applications to interpret real-time information for better decision-making. Consequently, the demand for analytics and network management software is accelerating, ensuring the Solutions segment expands more rapidly than hardware components.

Regional Insights

Asia Pacific leads the Global IoT in Smart Cities Market primarily due to extensive government funding and rapid urbanization requiring efficient resource management. Major economies including China and India are driving this trend through large-scale infrastructure projects such as the Smart Cities Mission in India. This regional strength is further supported by the widespread implementation of modern telecommunication networks that facilitate connectivity across urban environments. Consequently, the public sector focus on sustainable development and digital integration ensures the continuous adoption of internet-connected technologies throughout the region.

Recent Developments

• In December 2025, ASUS IoT formed a strategic partnership with an industrial software innovator to accelerate the deployment of scalable edge AI and IoT solutions for urban environments. The collaboration focused on integrating industrial-grade gateways with a unified management platform to streamline the connectivity and security of smart city infrastructure. Initial projects targeted the optimization of transportation systems and the enhancement of public security through smart streetlights equipped with environmental and traffic sensors. This joint effort aimed to provide municipalities with real-time analytics and predictive insights, reinforcing the infrastructure capabilities within the "Global IoT in Smart Cities Market".
• In July 2025, Siemens Smart Infrastructure entered into a collaboration with a major technology corporation to enhance interoperability for Internet of Things data in the built environment. The agreement involved integrating a digital building platform with cloud-based IoT operations to facilitate seamless data exchange and device connectivity across commercial buildings and infrastructure. This solution allowed for the automatic onboarding of assets such as HVAC systems and sensors, enabling real-time monitoring and energy optimization. By utilizing open industry standards, the partnership aimed to break down data silos and support sustainability targets, marking a significant advancement in the "Global IoT in Smart Cities Market".
• In October 2024, Nokia expanded its global partnership with a digital business services leader to deploy private 5G solutions tailored for airports and smart cities. A significant development involved the deployment of a carrier-grade private wireless network for the City of Brownsville, Texas, designed to support mission-critical applications and enhance public safety. This infrastructure was engineered to manage high-bandwidth, low-latency data for diverse connected use cases, effectively transforming the municipality into a modernized urban hub. The collaboration highlighted the growing reliance on robust, scalable wireless networks to drive digital transformation and operational efficiency within the "Global IoT in Smart Cities Market".
• In January 2024, Honeywell announced a strategic alliance with a prominent semiconductor company to advance the digitization of commercial buildings, a key component of urban infrastructure. This collaboration focused on integrating digital connectivity technologies into existing systems without requiring extensive rewiring, thereby reducing installation costs and waste. The initiative aimed to upgrade building management systems with advanced sensing and control capabilities, supporting the transition toward smarter, more sustainable urban environments. By leveraging single-pair Ethernet technology, the partnership intended to extend long-reach connectivity to the edge, enabling real-time data accessibility and asset optimization essential for the "Global IoT in Smart Cities Market".

Key Market Players

• Cisco Systems
• International Business Machines Corporation
• Microsoft Corporation
• Siemens AG
• Schneider Electric
• Huawei Technologies Co., Ltd.
• Intel Corporation
• Hitachi Ltd.
• NEC Corporation
• ABB Ltd.

By Offering	By Application	By Region
Solutions Services	Smart Transportation Smart Building Smart Utilities Smart Citizen Services	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global IoT in Smart Cities Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• IoT in Smart Cities Market, By Offering:

• Solutions
• Services

• IoT in Smart Cities Market, By Application:

• Smart Transportation
• Smart Building
• Smart Utilities
• Smart Citizen Services

• IoT in Smart Cities Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE