**Translation** City Operating Systems Rising: Smart City ICT Infrastructure Market on Track to Reach $494.8 Billion Over the Next Decade

Cities are entering a stage that requires an “operating system”—the digital underlying architecture connecting transportation, energy, buildings, and government affairs is becoming the new core of urban competitiveness.

According to the latest report released by Precedence Research, the global smart city ICT infrastructure market size will grow from $170.67 billion in 2025 to $494.81 billion in 2035, with a compound annual growth rate of 11.23%. If we only look at the numbers, this is a steadily growing infrastructure market; but if we see through the numbers, we are talking about a “morphological” change in cities themselves.

Why do cities need to spend this money?

The global urbanization rate has exceeded 50%, and large cities are facing severe carrying pressure—traffic congestion, energy waste, public safety challenges, and aging traditional infrastructure. Over the past two decades, cities have alleviated some problems through fragmented information systems, such as intelligent traffic lights and online government service platforms. But this is far from enough, because these systems are isolated from one another, forming “data silos.”

The engine of market growth comes precisely from cities’ demand for “holistic response capability.” The report shows that governments and municipal authorities are the largest end users, accounting for a 38% share. City managers are treating ICT infrastructure as a kind of public utility—like water and electricity supply—becoming the foundational support for urban operations.

From sensing to cognition: Why is AI/ML growing the fastest?

Changes in technology structure are even more revealing. IoT currently holds the largest technology share (35%), but AI/ML has a compound annual growth rate of 17.5%, significantly higher than the overall market. This means the focus of smart city construction is shifting from laying sensors (perception) to training city models (cognition).

Data generated by sensors, if not intelligently analyzed, is just bits flowing through pipes. The involvement of AI gives urban systems the ability to understand: streetlights can adjust brightness based on real pedestrian flow, traffic signals can predict congestion two hours in advance and disperse it early, and emergency rescue systems can automatically dispatch the nearest resources at the moment of an alarm. Cities are no longer just “seeing” what is happening; they are also beginning to “anticipate” what is about to happen.

Transportation and energy: two priority tracks for urban digitalization

At the application layer, smart transportation and mobility currently occupy the largest share at 30%. The transportation system is the city’s circulatory system and one of the most suitable scenarios for data optimization. From adaptive signal control to autonomous driving coordination to Mobility as a Service (MaaS), transportation is evolving from a physical network into a data-driven network.

Even more noteworthy is that smart energy and utilities are growing at a rate of 16.8%, becoming the fastest-growing application segment. The low-carbon transition requires cities to manage energy production, distribution, and consumption with precision. ICT infrastructure has become the prerequisite for the energy system to move from “rigid” to “flexible.”

Software and hybrid deployment: Urban IT architecture is bypassing the integration challengeBy component, hardware/infrastructure dominates with a 45% share, but software's growth rate (CAGR 16%) has already begun to outpace the overall market. This suggests the market is shifting from "expanding scale" to "deep operations." Urban differentiation will no longer come from the quantity of hardware devices, but from algorithms, platforms, and data governance capabilities.

In terms of deployment mode, cloud/SaaS already accounts for 42%, while hybrid deployment is growing at 16.5%. Government data is highly sensitive, and pure public clouds often cannot meet security and sovereignty requirements. Hybrid architecture offers a compromise: distributed governance in which public data goes to the cloud while critical data remains on-premises. Behind this architectural choice lies the harbinger of future competition over "urban data sovereignty."

Asia-Pacific: The Next Engine of Global Urban Digitalization

By region, North America continues to lead with a 40% share, but Asia-Pacific's growth rate (CAGR 16.5%) points to a shift in the center of gravity over the next decade. China, India, and Southeast Asian countries are driving infrastructure development through national-scale smart city initiatives, with 5G, IoT supply chains, and software talent notably concentrating in Asia-Pacific.

This also means that the power to set standards for global urban digitalization remains fluid. Over the next decade, regions that can define urban operating systems and interface standards will rise from industrial competition to competition in governance models.

Conclusion: Cities Are Evolving into Programmable Environments

Connecting these trends reveals a more complete picture: urban infrastructure is gradually moving from a "physical layer + isolated applications" structure to a deep architecture of "physical layer + perception layer + cognitive layer + decision-making layer." Digital twin technology can simulate city operations in a virtual world, allowing planners to preview policy outcomes before committing to real-world changes.

Of course, technological optimism needs to be tempered. The deep digitalization of urban systems also brings risks such as privacy erosion, cyberattacks, algorithmic bias, and the digital divide. ICT infrastructure grants managers unprecedented visibility, but it also creates new tensions between public power and individual rights.

Even so, the trend is clear: the future city is no longer a static geographic unit, but a "programmable environment" that can sense, optimize, and learn in real time. $494.8 billion is merely the entry ticket for this transformation; the real urban renewal is just beginning.