Smart Cities Market Size, Share, and Growth Forecast for 2025 - 2032

Smart Cities Market Size and Share Analysis

The global smart cities market is predicted to reach a size of US$ 620.5 Bn by 2025. It is anticipated to witness a CAGR of 18% during the forecast period to attain a value of US$ 1,256.8 Bn by 2032.

Smart cities aim to reduce carbon footprints through energy-efficient solutions, such as smart grids and public transportation systems. By 2030, around 60% of the global population is estimated to live in urban areas. This shift necessitates smarter infrastructure to handle increased demands for energy, water, and transportation.

IoT devices, AI, and 5G are enabling real-time data collection and processing, driving innovation in smart city solutions. Governments across the globe have increased funding and policies to promote sustainable urban development. For example,

• The U.S. has allocated US$ 100 Bn for smart city initiatives under the Infrastructure Investment and Jobs Act.

Key Highlights of the Industry

• By 2032, over 50 billion IoT devices are estimated to be deployed in smart city applications globally.
• Integration of AI technologies is driving predictive analytics for urban planning, traffic management, and public safety.
• AI-based traffic systems are set to reduce urban congestion by 30% by 2032.
• Renewable energy sources and smart grids are being integrated to optimize energy use and reduce emissions.
• Development of electric vehicle (EV) infrastructure and public transportation systems integrated with smart technology is likely to spur growth.
• Smart transportation solutions are projected to account for 30% of the total market share in 2032.
• Unique surveillance systems using facial recognition, AI analytics, and drone monitoring are enhancing urban security.
• Increased adoption of energy-efficient buildings with IoT-enabled HVAC systems, lighting, and security is set to create opportunities.
• By component, the software segment is anticipated to hold a share of 57% in 2025 as it facilitates seamless communication between devices, sensors, and platforms.
• Based on application, the smart security segment is predicted to hold a share of 22.2% in 2025 owing to increased crime rates in urban areas.
• Smart cities market in North America is set to exhibit a CAGR of 12% through 2032 owing to government support to modernize urban infrastructure.

Market Attributes	Key Insights
Smart Cities Market Size (2025E)	US$ 620.5 Bn
Projected Market Value (2032F)	US$ 1,256.8 Bn
Global Market Growth Rate (CAGR 2025 to 2032)	18%
Historical Market Growth Rate (CAGR 2019 to 2023)	10.3%

North America to Lead in Terms of Adoption of Cloud Computing

North America smart cities market is estimated to hold a share of 33% in 2025. Governments in the U.S. and Canada have allocated significant funds for smart city initiatives with a focus on modernizing urban infrastructure. For example,

• The U.S. Infrastructure Investment and Jobs Act (2021) invested US$ 100 Bn for digital infrastructure, including smart city project.
• Canada’s ‘Smart Cities Challenge’ has funded over US$ 300 Mn for community-driven technology adoption.

North America leads in the adoption of cutting-edge technologies like IoT, AI, 5G, and cloud computing, which are crucial for smart city applications. By 2032, around 75% of urban areas in North America are predicted to integrate IoT-based solutions for traffic, energy, and public safety. Smart city solutions in North America prioritize energy efficiency, renewable energy adoption, and carbon footprint reduction. For instance,

• By 2032, 50% of urban energy grids in the U.S. are projected to be managed through smart grid technology, decreasing energy waste by 30%.

Software Acts as the Foundation for Integrating Hardware and Services

Software is anticipated to hold a share of 57% in 2025. It acts as the foundation for integrating hardware and services, ensuring seamless operation of urban infrastructure.

Software facilitates communication between IoT devices, sensors, and platforms, enabling real-time monitoring and management. AI and big data analytics are integral to managing complex urban systems, from traffic to energy distribution. For instance,

• By 2032, 60% of smart city software solutions are likely to incorporate AI for predictive analytics and automation.

Cloud computing enables cities to store and process massive volumes of data generated by IoT devices, improving scalability and efficiency. As urban systems become increasingly interconnected, software solutions for cybersecurity are essential to protect sensitive data and infrastructure.

Rising Crime Rates to Propel Demand for Smart Security Solutions

Smart security is projected to account for a share of 22.2% in 2025. Rapid urbanization has increased crime rates and security threats, posing a demand for smart security solutions. For instance,

• Urban crime rates are predicted to rise by 6% to 8% annually, driving demand for enhanced surveillance and monitoring systems.

AI-powered facial recognition and behavior analysis, combined with IoT-enabled sensors and cameras, improve the accuracy and efficiency of security systems. Smart cities are investing heavily in unique video surveillance systems to monitor public spaces and critical infrastructure. For example,

• AI-driven facial recognition in smart cities can reduce false alerts by 30% to 40%, enhancing public safety.

Smart Cities Market Introduction and Trend Analysis

Potential growth in the global smart cities industry is predicted to be driven by integration of IoT-enabled devices, cloud computing, and AI. For instance,

• By 2030, over 90% of urban areas are predicted to adopt IoT for monitoring and management.

Carbon-neutral cities are likely to gain prominence, with a focus on renewable energy, electric vehicles, and green infrastructure. The period is also predicted to witness enhanced focus on citizen engagement through mobile apps and real-time service platforms. For instance,

• Over 70% of global cities aim to achieve carbon neutrality by 2050, driving innovation in energy management.
• By 2030, 75% of urban residents are anticipated to use city-wide mobile platforms for accessing services.

Historical Growth and Course Ahead

The smart cities market growth was robust at a CAGR of 10.3% during the historical period from 2019 to 2023. Government authorities worldwide made hefty investments in smart city projects.

• The European Union allocated € 96 Bn through initiatives like Horizon Europe.
• In the U.S., the Smart Cities Initiative distributed over US$ 165 Mn for projects involving AI, IoT, and smart mobility.

Key technologies like IoT, 5G, and AI became integral to smart city ecosystems. Smart city initiatives also focused heavily on energy efficiency, waste management, and reducing carbon footprints. For example,

• By 2023, IoT device penetration in smart cities reached 80%, enabling real-time data collection and analysis.
• The deployment of 5G networks accelerated, with over 60% of urban areas in developed countries covered by 2023.

Market Growth Drivers

Launch of Smart Transportation and Mobility Solutions to Spur Demand

AI-driven traffic lights, sensors, and cameras are being integrated to monitor and manage traffic flow in real-time, decreasing congestion and optimizing traffic light patterns. These systems use data analytics to predict traffic patterns and make adjustments, improving travel time and reducing fuel consumption. For instance,

• Cities using AI-powered traffic systems have seen a 20% reduction in traffic congestion and 10% to 15% improvement in travel time efficiency.

Integration of self-driving cars, buses, and trucks is revolutionizing urban mobility. Autonomous vehicles (AVs) decrease the need for personal car ownership, minimize road accidents, and contribute to better traffic flow. For example,

• By 2025, 30 million autonomous vehicles are predicted to operate on roads, transforming the transportation landscape in cities.

Smart transportation solutions provide better mobility for all urban residents, including those in underserved areas. They help improve public transportation networks while offering seamless integration of various transport modes. For instance,

• In cities like Singapore, London, and New York, smart transportation solutions have led to a 15% to 20% increase in the use of public transport due to improved efficiency and convenience.

Rapid Digitization of Infrastructure to Spur Demand

Smart buildings use digital technologies to optimize energy use, improve comfort, and enhance the management of facilities. These buildings integrate systems like smart HVAC, lighting, and security systems to automate operations and reduce resource consumption.

Building Management Systems (BMS) use IoT devices and sensors to monitor conditions in real-time and adjust settings like lighting and temperature accordingly. Smart grids incorporate unique metering, sensors, and real-time data analytics to manage and optimize the production, distribution, and consumption of electricity.

The digital infrastructure allows utilities to improve grid reliability, reduce energy loss, and increase the use of renewable energy sources. Energy storage systems, powered by big data and AI, predict and balance energy supply and demand, enhancing the resilience of power grids. For example,

• Over 70% of global cities are set to implement smart grid solutions by 2030, contributing significantly to energy efficiency and sustainability.

Market Restraining Factors

Digital Divide and Infrastructure Gaps May Hamper Demand

In several region, rural areas lack the infrastructure to support fast internet connections or even basic broadband access, thereby creating a digital gap between urban and rural areas. Lower income communities even in urban areas might face high costs and limited availability of internet services, making access to smart city innovations difficult.

• In Africa, the Internet penetration rate was only 28.2% in 2020, compared to 87.5% in North America, highlighting the disparity in digital access between different regions.
• A 2021 report found that 70% of urban households in the U.S. had access to broadband internet, while only 48% of rural households did. This urban-rural divide in internet access further complicates efforts to implement smart city technologies across the country.

Market Growth Opportunities

Rising Government Initiatives and Investments to Create Opportunities

Government authorities across the globe are launching national smart city programs to promote sustainable urbanization. These programs are focused on improving infrastructure, public services, and energy management, and public safety. For instance,

• The Smart Cities Mission launched by the Government of India in 2015, aims to develop 100 smart cities by 2030 with a focus on providing efficient urban infrastructure, clean water, sustainable energy, and better transportation.
• This initiative has an estimated funding of US$ 15 Bn to develop these cities.
• Around 60 cities have been selected under this mission with projected worth US$ 8 Bn being sanctioned.
• The EU has launched the European Green Deal, which includes a set of policies and funding to help the continent’s cities transition to smart, sustainable cities. This deal includes investments in green technologies, public transport, and circular economy practices.
• The European Union is set to invest €1 Tn through 2030 in green technologies, clean energy, and smart infrastructure projects.

Emergence of Sustainability and Environmental Goals to Open the Door to Success

Adoption of solar power, wind energy, and other forms of renewable energy is a significant part of smart city initiatives. Cities are implementing solar-powered streetlights, solar rooftops, and wind farms as part of their environmental strategies to decrease dependence on fossil fuels and lower emissions.

The capacity of solar energy installations in smart cities is witnessing rapid growth. In 2021, solar power contributed to over 3% of global electricity generation and is set to account for 20% of global electricity by 2030. For instance,

• Cities that have invested in solar-powered streetlights and other infrastructure have reported energy savings of up to 50%.
• Masdar City in the UAE, a global leader in renewable energy, is built as a carbon-neutral city with solar power accounting for most of its energy needs.

Competitive Landscape for the Smart Cities Market

Companies in the smart cities market are forming alliances with local governments, municipalities, and public entities to secure large-scale projects and funding. These partnerships assist in navigating regulatory landscapes while ensuring the successful implementation of smart city solutions.

Businesses like Cisco and IBM have partnered with local governments to implement smart city solutions, including smart traffic management, energy efficiency, and digital infrastructure. Collaborations with technology providers enables companies to integrate modern technologies like AI, IoT, cloud computing, and 5G in their smart city offerings.

Continuous investments in research and development enables companies to stay ahead of the curve. Threse innovations are often focused on enhancing sustainability, improving urban mobility, and optimizing resource management.

Recent Industry Developments

• In January 2025, Oman Broadband Company and Singapore’s ST Engineering announce their collaboration on novel smart city initiatives in the sultanate in alignment with the digital transformation goals of Vision 2040.
• In January 2025, Viper Networks announced a comprehensive strategic rebranding initiative, adopting the name 0Wire. The company also launched a 0Wire Wholesale for 5G roaming and messaging services as well as 0Wire Energy for smart city and renewable energy projects.
• In January 2025, Salt Lake City launched mySLC, a one-stop online communication and knowledge hub digital tools for residents to submit requests and provide feedback.
• In January 2025, the Ministry of Land, Infrastructure, and Transport of South Korea launched the K-City Network 2025 to promote smart city expansion.

Smart Cities Market Report Scope

Attributes	Detail
Forecast Period	2025 to 2032
Historical Data Available for	2019 to 2023
Market Analysis	US$ Billion for Value
Key Regions Covered	North America Europe East Asia South Asia and Oceania Middle East and Africa Latin America
Key Market Segments Covered	Component Application Region
Key Companies Profiled in the Report	Cisco Systems, Inc. Microsoft Corporation IBM Corporation General Electric AT&T Ericsson Huawei Technologies Co., Ltd. Oracle Corporation Panasonic Corporation SAP Siemens AG Schneider Electric Signify Hitachi Vantara
Report Coverage	Market Forecast and Trends Company Share Analysis Competitive Intelligence DROT Analysis Market Dynamics and Challenges Strategic Growth Initiatives
Customization and Pricing	Available upon request

Market Segmentation

By Component

• Hardware
• Software
• Services

By Application

• Smart Security
• Smart Building
• Smart Transportation
• Smart Governance
• Smart Energy
• Smart Healthcare
• Smart Water Network Systems
• Smart Education

By Region

• North America
• Latin America
• Europe
• East Asia
• South Asia and Oceania
• Middle East and Africa

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