Will Microns Latest Product Lead to IoT Riches?

By Harsh ChauhanMarketsFool.com

The booming Internet of Things (IoT) market will pose one major challenge as more devices connect and communicate with each other: Security. Future Market Insights pins the size of the IoT security market at $17 billion in 2020, up from just $7.8 billion in 2014 as device makers add embedded security solutions in their devices to maintain data integrity.

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Micron Technology (NASDAQ: MU) doesn't want to miss this gravy train, so it has joined forces with Microsoft (NASDAQ: MSFT) to launch a new product to address cybersecurity challenges in IoT devices and sensors.

Image Source: Micron Technology

Micron's latest move

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The jointly developed security technology deploys Micron's flash memory that's integrated into the IoT device at the hardware level, and then uses Microsoft's Azure service to send data safely to the cloud. Micron is using its proprietary Authenta technology to power this solution, which allows system developers to use existing flash memory sockets in IoT devices to bolster security features without the need for any additional hardware that eliminates any extra costs.

Micron's solution also allows system administrators to securely remedy the device if it is compromised, thanks to its capability of granting cloud access to authenticated hardware based on Microsoft's Device Identify Composition Engine. Micron believes that hardware-level security integration is the unique selling proposition of its solution, which will allow end-users to scale up their IoT deployment while keeping costs under control.

What's more, Micron and Microsoft are going to release software development kits so that even older IoT devices can take advantage of this security solution. This opens up a big opportunity for Micron given the potential size of the end-market, while the increasing adoption of the Azure cloud service should be another tailwind for Microsoft.

Why the Microsoft partnership could be a masterstroke

As it turns out, Microsoft was adding 120,000 new Azure cloud customers every month in 2016. TechCrunch reports that the tech giant's Azure Internet of Things solutions suite processed over two trillion IoT messages every week in 2016, thanks to its growing adoption by enterprise customers.

Now, 43% of enterprises are using Microsoft Azure this year as compared to 26% last year, according to the RightScale 2017 State of the Cloud Report. By comparison, Amazon Web Services' (AWS) adoption rate has increased just 3% from last year. Additionally, a higher number of respondents interviewed by RightScale are either experimenting with or planning to use Azure as compared to AWS.

Therefore, Micron could piggyback the growing popularity of Microsoft's cloud offering by pitching its security solutions to the latter's existing customer base. In fact, the chipmaker's Authenta technology will soon be available to Azure users after Microsoft showcases it to developers at an event in May.

So how big is the opportunity for Micron?

Future Market Insights forecasts that the hardware side of the IoT security market will grow at an annual pace of almost 16% until 2020 -- hitting $8 billion. This is a sizable opportunity given Micron generated just under $15 billion in revenue over the past year.

Therefore, IoT security could be a big deal for Micron as it will contribute significantly to its revenue, provided the company can capture a lion's share of this market. The good news for investors is that the semiconductor specialist has tied up with a fast-growing cloud service provider -- Microsoft -- to take advantage of the opportunity, and this could give its top line a nice boost going forward.

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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.