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Would you believe it? The next five years will be the era of Smart Home 2.0

2014 was generally viewed as the beginning of smart homes, marked by Google’s symbolic acquisition of smart thermostat maker, Nest for US$3.2 billion. Since then, smart home companies have sprung up.

After five years of trial-and-error, the smart home market is starting to mature and see stable growth in its transition from 1.0 to the 2.0 era. 

According to the global smart home forecast by Strategy Analytics, total consumer expenditure of smart home appliances, systems, and services in 2018 stood at approximately US$96 billion. This will reach US$155 billion in 2023 with a 10% compound annual growth rate (CAGR).

Forward Business and Intelligence has even more optimistic estimates: the shipping volume of global smart home appliances is expected to grow 31% year-on-year growth to reach 640 million units in 2018, and will increase further to 1.3 billion units in 2022 at a 20.8% CAGR.

The Market Push

A detailed analysis of the smart home market will reveal that a single product that becomes a market phenomenon is all that’s necessary to drive exponential market expansion.

For instance, the smart speaker is the fastest growing market sector in the past two years, with a CAGR of 39.1% for the next 4 years. It is expected to increase from 100 million units in 2018 to 230 million in 2022.

Studies on the Chinese market also show that the total volume of smart home devices in China will reach 150 million units, a 35.7% increase year-on-year. Total shipment will reach 300 million units by 2022, among which three categories—home security and surveillance, smart speaker and smart lighting—will make the greatest contribution to market growth. Statistics show that the sales volume of China’s expanding smart lock market will increase from 3 million in 2016 to 32 million in 2020. That’s a 10-fold growth in just four years!


This shows that although full automation remains an aspiration for smart home businesses, single products will continue to dominate the market in the coming 4-5 years as we progress into the 2.0 era.

Frankly, products and solutions of smart home 1.0 fall short in addressing user pain points, optimizing user experience, and overcoming deeply ingrained user habits and preferences. This has been the main reason behind low market penetration rates. Under these circumstances, it is more realistic to seek breakthroughs with single products that can serve to acclimate consumers and cultivate user habits.

It goes without saying, of course, that players with more resources and larger scale businesses enjoy greater advantages in the era of “single products.” In this scenario, patience and ability play an even bigger role in getting ahead of the competition.Would You Believe It? The Next Five Years will be the Era of Smart Home 2.0 

Figure 1. Single products will become an important driving force of the smart home 2.0 market. Above is Tmall Genie X1 smart speaker. (Image source: Internet)


The Technology Push

During the rise of emerging application markets, proprietors of technology are usually more “eager” than users in the realization of market potential.

Applications of technologies such as IoT and cloud computing have proven the viability of the smart home in the era of smart home 1.0. Although product and services were still in their infancy in terms of sophistication, a basic concept and understanding has nonetheless taken shape in the minds of customers.

Under the basic framework of smart homes in the 2.0 era, new technologies will become more aligned with practical user needs as they continue to be realized and widely applied. In summary, these are the technologies to focus on over the next few years:

  • Artificial Intelligence (AI): Al-based speech recognition technology is entering our home life through the smart speaker. Some regard it as a prelude to the next revolution in human-machine interaction technology, while AI's application in visual processing is gradually being extended to home scenarios. In short, we expect AI-empowered smart home products and solutions to become the norm.
     
  • Biometrics: Biometric authentication such as fingerprint and facial recognition are expanding from mobile phones to the smart home in the hope of finding a new market foothold. Composite biometrics, for instance, is already a common feature in smart door locks. In addition to security, biometrics shows great potential in identifying users and providing them with personalized lifestyle services.
     
  • Local Intelligence: Connecting to networks via the cloud is a standard feature of smart home 1.0 products. But in real-life scenarios, this feature may appear to be unnecessary, even ridiculous, because why would you need the cloud to control an appliance close at hand? As people gain a better understanding of cloud computing and with the rise of edge computing, it has become inevitable that local edge node devices will be imbued with more data and processing capabilities and embedded with a greater range of smart technologies. Even in terms of Al technology in general, the computational topology of “training in the cloud and reasoning at the edge” has become a more common approach. The localization of smart homes, therefore, could serve to create an environment in which new product types emerge. For example, the importance of the home gateway—the key to complete home automation—will become eminent.
     
  • Information security: Along with growing awareness of IoT security risks, information security in smart homes will also become a focus of attention. From hardware to software, and from node devices to gateways, those who can provide fast, flexible and secure deployment of products and solutions will have a competitive edge in the market.

 Would You Believe It? The Next Five Years will be the Era of Smart Home 2.0

Figure 2. The home gateway will play an increasingly important role in smart homes of the future. The figure shown is a diagram of the Avnet smart home gateway solution. (Image source: Avnet)


In short, the smart home industry will show a steady upward growth trend over the next five years, jointly driven by both the market and technology. This smart home 2.0 era will also be a process in which the industry gains its momentum. But when exactly will the smart home industry breakthrough occur? While we can’t predict this, it is only a matter of time that we will reach this milestone if we keep up our progress.

 

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