IHS Technology: The Growing Home Appliance Market


The IHS Home Appliance Intelligence Service is designed to help businesses understand the trends that drive the growth of home appliances and the allied electronics, semiconductor and technology markets. Below are snapshots of the trends currently seen by our dedicated home appliances research team:
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Smart connected home appliance market is expected to grow faster from 2015 onward

The smart appliance market had achieved little success since its introduction a decade ago but its revival now seems to be on more solid ground. The smart appliances which is seen as a niche segment, is predicted to enjoy robust growth from 2015 to 2020 because of many favourable circumstances.

First, in the last decade consumers have evolved and quickly adopted new technology products, as seen by higher adoption of smartphones, growing familiarity with touch controls and the world of apps, and access to the internet. Consumers seem to be more inclined, despite some concerns and reservations, to embrace these connected technologies, new applications and functionalities that the technology will bring - as long as they find the right price-to-value balance.

Secondly, as smart appliances are expected to be more energy-efficient than their traditional counterparts, there is a push by governments and regulatory authorities to support and develop this trend. This may be done by incentivizing consumers and manufacturers to shift towards energy and water efficient appliances, and by increasing deployment of the smart-grid/meters in support of utility companies.

Thirdly, and most importantly, to maintain growth many appliance makers are shifting focus from the low-profit, low-growth traditional ‘non-smart’ segment toward the high-margin, revenue-oriented smart appliance segment.  Seeing this as a big-ticket opportunity, appliance makers are challenging themselves to feature connectivity in all their appliances by 2020.

‘Change of mindset’ and directly ‘engaging with the end-consumer’ will be two of the most important factors that determine success says Dinesh Kithany, senior analyst, home appliances, IHS Technology. Traditional appliances manufacturers need to stop think and operate as mere ‘manufacturing companies’ and instead approach the market more as ‘technology providers’. Adopting aggressive communications on all fronts, they need to continuously engage not only with distributors, sales depots, retailers, and OEM players as they have done in past, but also directly with end-consumers.

Some consumer electronics companies like Samsung and LG, who have shifted focus from other mature businesses like mobile and TV to smart technology devices, could gain first-mover advantage. They could benefit from the convergence of mobiles and TVs with their home appliance business, as all of these integrate well with smart technology. As a result, they are better placed to bypass the initial technology barriers that other traditional appliance companies might face, even though traditional appliance makers like Whirlpool, Electrolux, GE Appliances, Miele, and BSH also now have acquired significant capabilities and experience in this segment in the last few years. Chinese companies like Haier and Midea have also become notable players by getting involved early in the game, aggressively marketing and shipping smart appliances since the end of 2014, each expecting their individual technology platform to become the industry standard. For example, Haier is promoting its U+ smart home platform, while rival Midea is developing its M-Smart system. Even technology companies, not previously known for producing appliances, are entering this emerging segment, including Google, Apple, Microsoft, Xiaomi, Cisco, Intel and others.

This smart appliance market will soon turn out to be a ‘volume game’ rather than a ‘value game’ as with many technology options available to consumers, not only in the form of many connectivity platforms like Wi-Fi, ZigBee, Z-Wave, Bluetooth, and NFC; with many operating systems (iOS, Android, Azure, Tizen) but also with many other options like retro-fit kits, chips, or thermostats, which aid connectivity. The declining cost of connectivity modules would be another key growth driver.

“Saying so, the smart home technology market will start to consolidate in the next two or three years. There will be just a couple of connectivity platforms, operating systems, and a number of technology-oriented appliance companies that will dominate the market. The recent announcement of ZigBee partnering with Thread is one such example. Consolidation will also drive consumers toward earlier adoption of smart home technology, with growth occurring much like that experienced by the mobile industry in the recent past.” adds Kithany.

Based on recent study by IHS Technology’s Home Appliance Intelligence Service, the global smart connected white-goods market is forecast to grow from an estimated less than 1 million units shipped in 2014 to over 223 million units in 2020, equivalent to a five-year compound annual growth rate of 134%. The total addressable smart connected major home appliance (MHA) market is forecast to be 470 million units worldwide between 2015 and 2020.

The forecast is based on a conservative approach with an opportunity for the market to grow even more, depending on how rapidly appliance makers educate and engage with end consumers, as well as provide the appropriate price-to-value balance. The appliance types covered in this research include washing machines (WM), clothes dryers (CD), dishwashers (DW), refrigerators (REF), room air-conditioners (RAC), and large cooking appliances (LCA).

The penetration of these smart connected appliances is projected to grow from an estimated 0.2% in 2014 to 31.3% in 2020, with that of smart room air-conditioners reaching 52% and smart washing machines 42% in 2020. China is projected to be the leading market for smart connected major home appliances, followed by the United States. As demand for smart connected appliances develops in other countries, the share of Americas is projected to drop from an estimated 30% in 2014 to 16% in 2020.

If other types of small connected home appliances expected to gain popularity in next two years are added—like coffee machines, robotic vacuums, rice cookers, microwave ovens, air purifiers, and electric toothbrushes—the total addressable smart connected  home appliance market is forecast to be closer to 700 million units worldwide between 2014 and 2020.

To summarize, IHS Technology identifies three critical factors which will affect smart appliance adoption: i) energy management initiatives, such as dynamic pricing, government initiatives, structure of utilities; ii) the standards for interoperability adopted; iii) other marketplace dynamics covering product pricing, retail environment, competitive landscape, the growth strategies adopted by appliance manufacturers suppliers.

 
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