10 percent of households will be smart by 2025
The smart home market has seen significant growth since 2010, when fewer than 0.5 percent of homes in the Americas region had connected devices such as thermostats, lighting, security and entertainment, according to the device database of the IHS Markit smart home intelligence service. By the end of 2017, nearly 7 percent of households in the region will have a connected home, averaging six devices per home. Globally, in 2025, 10 percent of households will be smart homes.
Smart home device revenue will exceed $14 billion in 2017
- The global market for smart home was worth $14.7 billion in 2017, with the Americas region representing 48 percent of global revenues.
- In 2021, the EMEA region will represent the largest portion of device revenue with a 42 percent global share.
- When excluding large ticket items, such as major appliances, the global market size for smart home devices is forecast to be worth $3.3 billion by the end of 2017, reaching $9.4 billion in 2021.
- Although the EMEA and Americas regions are expected to represent more than 70 percent of revenues for smart devices over the next five years, Asia is expected to dominate in terms of unit shipments. In 2021, the Asia region is expected to represent about 46 percent of unit shipments. Leading the unit shipments in Asia in 2021 will include light bulbs, air quality sensors and video cameras.
Top five players account for 36 percent of revenue
- Nest, Amazon, Honeywell, Xiaomi and Netgear rounded out the top five for smart home revenue accounting for 36 percent in 2016 when excluding appliances.
- The top five players for unit shipments in 2016 accounted for 34 percent of global unit shipments and included Xiaomi, Amazon, Honeywell, Nest and Koninklijke Philips N.V.
- Globally, 19 manufacturers had more than 500 thousand annual smart home device shipments in 2016. 46 manufacturers had more than $10 million in revenue in 2016, when excluding appliances.
Top products to watch
The top smart home devices to watch in terms of unit shipment growth include radiator valves, air quality sensors, smart speakers and appliances.
- In 2016, 90 percent of smart radiator valves were shipped into Europe. By 2021, about 75 percent of radiator valves will be shipped into Europe, with Asia gaining traction, representing 24 percent of shipments in 2021. With the increased awareness of energy savings, radiator valves are expected to become part of smart home systems, especially in Germany and in other countries where district/common heating is popular.
Air quality sensors
- Air quality sensors are gaining traction across the three major regions but are mostly a device for the Asia region. In 2016, Asia represented about 64 percent of air quality device shipments. However, in 2021, the Asia region will represent 95 percent of the air quality device market.
- Air quality sensors are devices that measure Volatile organic compounds (VOCs) and Particulate Matter (PM2.5). There are only a few device brands that measure VOCs and even fewer that measure PM2.5; however, the list will continue to expand over the next five years.
- Currently, many air quality sensors available to the smart home market focus only on CO2, air temperature and humidity. By 2021, IHS Markit expects that more consumers will be purchasing air purifiers in addition to these sensors that detect air quality, especially in the major cities across Asia such as Beijing.
- Globally, there were about 1.1 million air quality sensors shipped in 2016.
- Home audio (smart speakers) will continue to be one of the most disruptive trends in smart home through 2021. The primary reason voice assistants in the smart home will gain significant traction across all three regions is the ability for these devices to aggregate disparate systems. So instead of using five different mobile applications in order to control the smart home features, voice can be used to aggregate all control, reducing the need to interact with a mobile device once the product is setup. Voice reduces complexity by removing the need for additional hardware such as tablets and mobile phones, so anyone that can speak can potentially interact with the home. This is significant because, today, most smart home solutions sit in one app (usually an aggregator app) and one single device behind a passcode. This limits family interaction with the smart home system. Voice is an enhancement to in-home displays (IHDs) that will likely be placed through the home.
- Although smart speakers will remain the primary form-factor for voice assistants in the smart home, home audio is also expected to gain traction. Several manufacturers and service providers are already integrating with leading speaker platforms to bring audio into the smart home. This is significant because to-date, the consumer smart home has not included audio (speaker systems) in any format. Audio has been reserved for the ultra-high-end automated households only but it is expected audio will become more main stream and offered by service providers (telcos and security companies) by 2021.
- Globally in 2016, there were about 7 million smart speakers shipped.
- Globally appliances were the fourth largest device type in terms of unit shipments in 2016 but will be the most shipped device type in 2021. The reason is that many appliances are already embedded with Wi-Fi capabilities that only need to be turned on by the manufacturer.
- What will drive manufacturers of appliances to the smart home will be the data that can be collected but this will be a challenge for many because most manufacture are not well placed to manage and service connected devices. For appliance manufacturers to be successful, partnerships will be critical, especially for voice control because many appliances are not well suited for embedded voice activation or control.
- In term of activations versus shipments, the quantity of appliances that are actually being used with a mobile app remains very small, despite many models and brands of appliances being shipped with the feature option. The reason for low percentage of connected appliances actually being used goes back to the use cases and ease of setup. For most major appliances, a refrigerator or dishwasher will work without connectivity to the network. In comparison, a Belkin WeMo switch not connected to the network would be useless. As a result, many connected appliances are not actually connected to a network and the reason is it remains cumbersome.
- Overall, appliance manufacturers need to make the setup dead simple and need to educate the customer on use cases in order to justify the process of connecting the appliance to a network.