The smart home market has been steadily growing, with security cameras, smart speakers, and smart TVs currently dominating the market. According to Counterpoint’s latest research, growth at a CAGR of 21% is projected from 2019-2025. We are expecting six billion Wi-Fi capable smart home devices will be shipped globally between 2020-2025.
Smart speakers have been the fastest-growing smart home devices due to the low entry barrier. They offer access to voice assistants and let you control other smart home devices. Security cameras offer additional layers of security and peace of mind, whereas connected TVs challenge conventional cable viewing by helping people ‘cut the cord’. In the next five years, other segments such as dishwashers, refrigerators, and laundry machines with smart home capabilities are likely to get more mainstream.
In the latest episode of “The Counterpoint Podcast” host Ritesh Bendre and Counterpoint Research analyst Maurice Klaehne discuss the current state of the smart home market. Maurice sheds light on why we believe Wi-Fi 6 will drive the smart home connectivity by 2025. The discussion also touches up the strongest growth areas in the segment as more household items become connected. These include white goods, smart lighting, and home automation segments.
More than six-billion Wi-Fi capable smart home devices to be shipped between 2020-2025
Boston, Toronto, London, New Delhi, Beijing, Taipei, Seoul – 24th April 2020
According to Counterpoint’s latest Smart Home research, the global smart home market is projected to grow at a CAGR of 21% from 2019-2025. The strongest growth areas include white goods, smart lighting, and home automation segments as more household items become connected to a smart home ecosystem.
Sharing the research findings, Research Analyst Maurice Klaehne, noted, “The current smart home market is dominated by three categories, smart TV, security cameras, and smart speakers. Each of these markets have different drivers which have made them successful. Smart TV’s have seen great adoption in North America and China as streaming media options such as Netflix or iQiyi have grown in popularity over the years. Connected TVs are also challenging conventional cable viewing habits and making people ‘cut the cord’. The COVID19 pandemic will further accelerate this trend.”
Klaehne continued, “For security cameras, price reductions in connected cameras have enabled more people to purchase cameras for their home to offer additional layers of security and peace of mind. Lastly, smart speakers have been one of the fastest-growing markets to date due to the low barrier for entry for consumers to gain access to a smart home device. Smart speakers satisfy multiple smart home use-cases, capable of streaming music, enabling personal voice assistant services such as Alexa, Google Assistant, AliGenie, Siri, and others, and acting as a smart home hub even for other devices.”
Speaking about future growth areas, Senior Analyst Hanish Bhatia, added, “Connected white goods and smart lighting systems will be the fastest-growing segments over the forecasted period. White goods such as dish washers, refrigerators, and laundry machines are increasingly becoming ‘smart’ through added Wi-Fi or other connectivity modules. These give consumers more data on their device which can then be used to better manage home energy consumption and help in product maintenance and care. For smart lighting systems, there are currently pain-points around pricing and properly connecting the system to a smart home hub. However, costs for these systems will continue decreasing and improved connectivity solutions will alleviate these pain-points in the future.”
Commenting on the key connectivity drivers, Bhatia, elaborated, “Wi-Fi is expected to be the major driver to enable smart capabilities and will contribute to three-fourths of all connectivity types in smart home devices in 2025. More than six billion Wi-Fi capable smart home devices will be shipped globally between 2020-2025. China and North America will contribute close to half of all those shipments. Further, the increased speed and load capacity capabilities of the latest Wi-Fi 6 version will be key to keep dozens of content and performance-centric devices seamlessly connected in a smart home and thus feature in a majority of shipments by 2023. We will also see major cost reductions in Wi-Fi 6 modules over the next years which will also help grow this segment.”
The comprehensive research on Smart Home is available at Counterpoint’s Research Portal
BONUS Podcast: Wi-Fi 6 to Drive Smart Home Connectivity by 2025
Amazon recently launched an array of Alexa enabled devices which included a refresh of the old device portfolio as well as the introduction of new devices and device categories. Alongside, Alexa ecosystem expansion through partnership and platform building is also proceeding at a rapid clip. As a result, Alexa enabled smart home device counts reached 20,000 devices in August 2018 from a mere 4000 devices at the beginning of 2018. This article takes a quick look at Amazon’s Alexa ecosystem expansion strategy.
Device Portfolio Expansion:
Amazon is further pushing down the price of its smart assistant with the Echo Input now in the sub ~$30 range, previously it was nearer $50. This is again a move to gear-up aggressively against Google Home Mini.
With the launch of Amazon Basics Microwave, Amazon is experimenting with the home appliances category. Finding a use case with pre-programmed functionality like modes for common recipes will be easier. However, going beyond that to automatically adjust timer by detecting food ingredient and offer to personalize cooking mode by detection. User preferences are the key to distancing itself from other competitors in this category.
The Echo wall clock is another attempt to increase its connected device presence in the sub $30 price segment. However, it doesn’t have a microphone, instead, it relies on the existing Alexa device over Bluetooth. Amazon has observed that timers and alarms are a frequently used application for Alexa. The clock keys into this but offers little else besides having its own display.
Echo Auto was a smart move to take an early move into the automobile industry. With its location awareness feature, it is well tuned to do routine tasks based on the car’s location along with performing basic navigation activities.
Google will likely bring new products in this category, as the company is already experimenting with mobility solutions. Alibaba introduced its digital assistant Tmall Genie in partnership with the leading automaker in September 2018. However, its presence is limited to China.
Amazon Alexa Device Portfolio
OEM Partnerships
Certification: Amazon’s “Works With Alexa (WWA)” certification program where different device companies can optimize the responsiveness, accuracy, and reliability of its Alexa functionality by maintaining certain standard protocols. As of November 2018, the number of WWA certified devices exceeded 5000. This programme is helping to increase Amazon Alexa presence without any direct resource involvement with the third-party partners.
Built in Alexa: Additionally, Amazon is also working with over 100 top brands in different categories to create devices with “Alexa built-in”. These devices come under “Alexa Built-in Badge Program” which gets additional market exposure through the Amazon storefront and is included in other marketing activities. Companies like Bose, Facebook, Sony, Dell, Lenovo, Huawei etc. started promoting its smart product products under this program. This is a co-branding strategy by Amazon to create higher Alexa brand value among its potential customers through association with leading brands.
Creating Developer Ecosystem:
Amazon’s existing cloud ecosystem is valuable when expanding its developer ecosystem for Alexa. The company created many offers including AWS credits and free Echo Dots for successfully building Alexa skills to encourage new developers. Other programs include the Alexa Skills Challenge for developers with many rewards and recognition through the “Alexa Champions” awards. As a result, there are more than 50,000 Alexa skills available on Amazon skill stores in November 2018.
Alexa Connect Kit (ACK) will further help to build the developer ecosystem with Amazon Web Services Cloud platform. It gives developers an option to convert any device into an Alexa enabled device. We believe, it will increase the number of Alexa enabled devices multifold, however, few developers will likely understand consumer pain points and the required skillsets to create good use cases for customers.
Alexa Skill Blueprints is an interactive instruction-based graphical user interface which provides an easy window for anyone without coding skills to create their own version of Alexa skills. This is a great step to democratize the service platform as well as help the Amazon team to understand popular new skills requirements for Alexa.
Failed Attempts:
Amazon’s attempt to become the default smartphone assistant started with Alexa built-in (along with Google Assistant) on the Huawei Mate 9 in 2017. Later introduced with HTC U11 and a few other devices in the same year. However, Alexa so far has received low traction in the smartphone ecosystem due to its limited additional smartphone platform support.
As Google is further tightening its control on Android, the result will likely mean Amazon is effectively closed-out of Android. Amazon also made a similar attempt on the Windows platform with limited success so far.
Looking forward:
The message from Amazon to Google, Microsoft, and Apple is clear – “catch me if you can”. Amazon wants to put Alexa everywhere before its competitors. However, Google Assistant being a default feature in Android devices is a major threat to Amazon. Google will likely expand its ecosystem expansion strategy beyond smartphones toward automotive and home appliances in the next few years.
Apple, however, is very slow with its Siri updates and will likely follow its strategy of a closed hardware ecosystem with a premium value proposition. Microsoft, on the other hand, is concentrating its efforts on enterprise applications around the Windows ecosystem.
Kudos to Amazon for trying short-term multi-dimensional Alexa ecosystem expansion strategy. Where it is launching products in different categories as well as expanding the developer ecosystem. However, Amazon needs to carefully select its battle for the long run. Amazon with its huge e-commerce database and understanding of consumer preferences should be in a better position to optimize Alexa and other AI assets for future commerce platform expansion. Immediate Alexa platform expansion strategy should include multi-language support and local awareness optimization.
The current stage of digital assistants is instruction based and with limited contextual awareness. Google is significantly ahead of Amazon in supporting multiple conversational turns. With the improvement of sensor fusion and deep learning, digital assistants will improve. The next big leap for digital assistants will be triggered by applications like intuitive user action prediction and suggestive assistant support for future tasks etc. Additionally, easy natural interaction without saying repetitive keywords like (“Alexa” or “Ok Google”) will help adoption.
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