Market Insight

Insights from AWE 2017: Participants are Establishing an Ecosystem for Smart Home

March 16, 2017

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Smart connected home appliances are becoming appliance makers’ strategic products. For example, Midea planned to output 6 million units of smart connected room air conditioners in the China domestic market this year, compared with its nearly 11 million units of total shipments within this market in 2016. Besides single smart connected home appliance, Midea is promoting total solutions for smart home in order to establish a full ecosystem.

Challenges for local appliance makers

  • After decades of development, home appliance makers are encountering challenges to improve the performances of appliances and to develop new features. At the same time, the rapid growth of internet is challenging appliance makers to change their development pattern and to explore new business models.
  • They are trying to connect conventional ‘non-enabled with connected technology’ appliances to the internet in order to attract younger users. For example, several appliance makers designed bigger tablets with 21-inch displays embedded to the doors of refrigerators.
  • Users can do everything on such tablets which is embedded in front of their refrigerators. The costs of these 21-inch tablets are approximately $200. This means this kind refrigerators with embedded 21-inch tablet are high-end products with narrow market sizes.

International brand owners

  • Compared with local appliance makers, international brand owners who attended AWE did not highlight the feature of connectivity. They focused more on improvising the performances and efficiency of home appliances.
  • For example, Whirlpool optimized the algorithms and improved sensor technology for better experience of washing clothes in automation. Hitachi introduced its refrigerators with vacuum compartments and ultra-slim insulation system. This kind of refrigerator provides more storage capacity compared with the same sized refrigerators having general ‘standard’ insulation material.

Market challenges

  • The domestic smart connected home appliance market is still at the nascent stage. Controlling your home appliance remotely is still one of the major applications/use-case for majorities of smart connected appliances. It is difficult to set up a smart home automation network of smart connected appliances because appliances from different makers/brands are still not compatible with each other.
  • Lack of interoperability is still a major barrier which many smart appliance makers have to tackle. Users have to control different appliances through different apps over their smartphones. Although several leading appliance makers agreed to open their cloud interface with each other, the interconnection and intercommunication still is a big challenge for appliance makers and users. This is even a wider challenge across smart home device market.
  • The conflict of interest will impact the cooperation among the competitors. Thus, they are being cautious about cooperating with rivals. Appliance makers want to set up an ecosystem of smart home in order to decide the rule of the game within smart connected home appliance market segment. They are actively improvising their own Cloud-based platforms to acquire more data on consumers’ usage and habits, and to provide more IoT (Internet of Things) services and products in order to increase consumer loyalty.

New business models

  • All appliance makers are exploring new and effective business models. They are very open and flexible in developing the smart connected home appliance market. Bulks of appliance makers have established a strategic partnering relationship with Huawei Consumer BG (Huawei) within the smart home industry.
  • Huawei, the biggest provider for telecom equipment and devices in China, is promoting its smart home management system named HiLink. Huawei’s smartphones will be pre-installed with HiLink apps. Users can run this app, which can easily connect their smart connected home appliances from different appliance makers into one network of smart home. Thus far, consumers can use the HiLink app to control more than 100 series of smart connected appliances from approximately 80 appliance makers.
  • Huawei planned to ship 90 million units of smartphones in the domestic market in 2017. There would be more than 40 million units of Huawei’s smartphones with HiLink apps by the end of this year if it would achieve the target. Besides smartphones, Huawei planned to ship 10 million units of smart routers in the China domestic market this year. It is working towards making its smart routers as control centers of smart home and access to the internet. Huawei is aiming to become a solution provider of smart home. Huawei is also cooperating with real estate firms to set up showrooms based on the HiLink smart home system.
  • Huawei is not a home appliance maker, so it has no conflict of interest with any home appliance companies. Thus, it developed dozens of partners during the past one year. Smartphones will be one important access for smart connected appliances in the future five years. Huawei also hopes HiLink increases its consumer loyalty and shipment volumes within the smartphone market mainly because other local smartphone makers has no clear plan to develop smart home market in China. Huawei’s strategy in smart home is accelerating the development of the domestic smart connected appliance market.

Outlook

  • Eventually, consumers will have more and more smart connected appliances and devices in their homes. Naturally, more users will need to establish the smart home network in their homes in order to enjoy an easier, more comfortable and convenient life, thereby optimizing the benefits of using these smart connected devices.
  • Appliance makers are thereby promoting these smart home network solutions, by adding in more and more technologies and features in order to improvise the performance, reliability and usability of smart connected home appliances. For example, appliance makers need to improvise by adding the feature of voice control technology, which is one part of smart home and artificial intelligence (AI).
  • The new entrants are providing their solutions for smart home control and access to internet, new services related to connected appliances, and cloud operations. All players within the smart home market need to cooperate more closely with one another in order to achieve interoperability amongst different connected appliances and smart devices for this sector. They all need to explore new business ‘revenue’ models and establish a new ecosystem for smart home in order to retain sales growth and to increase customer loyalty.
  • More emphasis is been made on using artificial intelligence (AI), with the current trend of adding voice assistant and face recognition features; use of big data and IoT framework in order to enhance living in seamlessly connected devices within the smart home environment. This not only applies to home appliance market but to wider consumer devices such as smart TVs, smart lightings, security, health and wellness devices, including AR/VR gaming devices, robots and drones. Important to note: autonomous vehicles are also becoming extended homes for entertainment and being connected to the smart home devices.

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