Quick Glance at Smart Homes or Connected Homes

Fully automated homes or connected homes can be easily achieved with a single tap on the screen of mobile devices. The combination of existing technologies such as wireless communication protocol, smartphone applications, and coverage of mobile network data is bringing the home automation system to the next level.

Lighting and air conditioning, security systems, energy monitoring, and entertainment control are functions primarily presented in a smart-home system. These technologies combine convenience, comfort, and safety to home owners. The computer-based control system is now cloud enabled, which means home owners can remotely access the system and the data. The cloud-based smart home is one of the key technology breakthroughs as part of the Internet of Things (IoT), which is expected to be the next important innovation in the building industry.

Smart-home developers in the United States and Europe are partnering with leading insurance service providers. Such partnerships will boost the sales of smart homes and insurance services, and smart-home buyers will be entitled to insurance discounts as outlined in the partnerships.

The Emerging Market

The global smart-home market is expected to achieve market revenue of $50 billion by 2020, with a compound annual growth rate (CAGR) of 20%. North America accounted for approximately 40 to 45% of the global market revenue in 2015 and will remain as the market leader until 2020. One of the key market drivers is the national level regulatory pertaining to carbon emission reduction that promotes the adoption of building energy management systems.

A few years back, the smart-home system was considered a high-end product because it was deemed costly. However, the technology is currently in the innovation-trigger stage, and it will become prevalent in the mass market in the next 5 to 10 years. Rising demand and dropping prices are the main reasons for the exponential growth in market size; therefore, market participants from both the IT and electronics industries are striving to reinvent business models to stay competitive in the market.

The West: Google, Apple, and Schneider Electric

Google: Acquired Nest; Starting with Green

Palo-Alto-based company, Nest Labs, has gone through one of the most notable acquisitions by the Internet giant, Google, with a total worth of $3.2 billion in 2014. Its flagship product, Nest Learning Thermostat, has built-in intelligence to learn the living patterns of home owners. This self-learning, personalised product can achieve savings in heating and cooling bills up to 20%. Google’s approach is definitely on the right track as 40% of respondents in the United States believe that energy savings is the key benefit from the smart-home system. With a proven sales record and wide product range, Nest Labs’ expertise in the smart-home market is Google’s crucial winning token.

Google’s participation in the smart-home market is a prelude to future reinvention of other market participants’ business models. The company’s brand image among consumers is strong, which will likely have a positive impact in the development of smart homes.

Apple: Creating Standard Communication Protocol

Apple believes that a common communication platform helps capture significant market share. HomeKit by Apple is a framework in iOS 8 and designed for communication and configuration of all connected accessories in the home. As one of the top software development platforms for the past decades, Apple is continuously attracting its loyal iOS community to support and promote HomeKit. Hardware manufacturers can register as a Made For iPhone (MFi) licensee if they are keen to have their hardware integrated with the HomeKit platform. Popular communication protocols such as ZigBee Alliance and Z-Wave will definitely boost the confidence in HomeKit once they establish partnerships with Apple. In addition to the strong alliance formed by Apple, the Siri technology has jumpstarted the innovation of the voice command smart-home system.

Apple appears to be one of the non-conventional smart-home market participants that have recently penetrated the building industry. Similar to Google, Apple leverages its advanced communication innovation and brand equity to attract customers in the smart-home market.

Schneider Electric: Futuristic Conventional Technologies

Schneider Electric from France is a conventional building automation and electrical products manufacturer and has been improving the evolution of its building technology products and automation solutions. Before wireless technology was mature enough to be implemented in the smart-home system, Schneider Electric deployed the bus system as its home automation communication protocol.

Schneider Electric started its home automation business and provided full building technology solutions many years before Google and Apple. As an experienced market participant, Schneider Electric adopts vibrant changes in its solutions and products by continuously improving its protocol of wireless communication. As a building automation and energy specialist, Schneider Electric carries on its efforts in driving business in smart grids, smart buildings, and smart cities.

Competing European companies include ABB, Legrand, and Hager Companies. Other international giants from the United States include Honeywell International Inc and Crestron Electronics Inc. All these market participants offer diverse building automation products and solutions and aim to reduce energy consumption for building owners and occupants.

The East: Samsung, Panasonic, and Xiaomi

Samsung: Household Appliances at Your fingertips

South Korean home appliances titan, Samsung Electronics, is putting immense effort into transforming its home electronic products to be Internet enabled. By 2017, at least 90% of its new products will be able to connect to the Internet. The prospect of Samsung in the smart-home market will only become brighter when most of its products can communicate with each other and with home owners. As a competitive strategy, Samsung acquired SmartThings in August 2014. SmartThings has widened Samsung’s product range with lighting control, energy management, security sensors, and detectors. Leveraging its wide product range and technology know-how, Samsung’s future in the smart-home market remains bright. Additionally, the company has partnered with residential property developers in Malaysia and Singapore to develop the market of smart homes.

The opportunity for Samsung is globally abundant, given its success in the telecommunications and home electronics market. As a group, Samsung has construction and engineering divisions as well, positioning it competitively in the smart-home market.

Panasonic: The Smart Home Energy Management System (SMARTHEMS™)

Smart-home solutions developed by Panasonic are divided into 2 major groups: Anchor and SMARTHEMS™. Anchor is mainly designed for automation control such as lighting controllers, motion sensors, and video door phones. Panasonic is currently giving more attention to developing SMARTHEMS™ as its main solution for home owners.

SMARTHEMS™ is an energy management platform that aims to help buildings achieve zero carbon footprint status. Understanding the competitive threats of similar companies such as Samsung, Panasonic’s focus is zoomed into the development of an eco home with smart control. Although the control elements are relatively new in the market, the company emphasizes on revolutionizing the home energy management system (HEMS). Other market participants must be on the lookout for Panasonic’s future innovation in the smart-home market.

Xiaomi: Surprise from China

Xiaomi was founded in 2010, but this Chinese company did not appear to be a threat to smartphone makers such as Apple and Samsung. However, Xiaomi claimed the top spot in smartphone sales in China after only 3 years of incorporation. The company offered smartphones with an attractive price tag and sleek designs that are similar to its predecessors.

As the fastest growing smartphone maker worldwide, Xiaomi is investing in routers, smart TVs, set-top boxes, and home automation products such as security sensors and light bulbs. For example, Xiaomi recently introduced a smart air purifier, whereby the product effectively provides solutions to improve the home’s air quality. The Chinese company will definitely benefit from its home country’s population of over 1.35 billion.

While Xiaomi is enjoying overwhelming popularity in China with its products that feature value-for-money, comfort, and security, the company is making market in-roads in other parts of Asia-Pacific, particularly Southeast Asia and India.

Similar to Xiaomi, many other start-ups focus on smart-home solutions in China. These companies are benefiting from the large and highly fragmented domestic Chinese market.

The Evolution

More than a decade ago, home automation was considered a luxury that was only popular in the small niche market. The term smart home is increasingly used when entertainment or comfort features and security or safety functions converge and integrate in home appliances and control systems. Combining both comfort or entertainment and safety has brought home automation solutions to a new level.

In addition, the global warming issue has sparked the popularity of green campaigns in the last few years, providing opportunities to energy market participants such as manufacturers of solar panels and smart metering to promote their solutions to be a part of the integrated smart-home system. For instance, Panasonic’s eco home presents a unique perspective by emphasizing the importance of energy savings. One example is the collaboration between the Singapore government and Panasonic in 2014 on a feasibility study of establishing a Smart Home Energy Pilot for Housing and Development Board (HDB) flats.

Coupled with information and communications technology (ICT), Big Data will be crucial in data management and home automation; therefore, all data becomes important in the vision of building smart cities with every connected home and building. The connected home is the latest version of the smart home, whereby electronic devices in the home are connected through the cloud network. The puzzle of the connected home fits nicely into the overall picture of future smart cities or even smart nations.

The Competition

Both the East and the West offer highly advanced technologies and solutions in home automation. Competition is fierce, with the expected convergence of the building automation industry, ICT industry, and consumer electronic industry in forthcoming years. Convergence activities may include mergers and acquisitions (M&A) and partnerships as well as increased collaboration with educational institutions for research and development (R&D) purposes.

The home automation industry will likely witness further consolidation of companies to form one-stop solutions. The industry will have many products and solutions such as cooling, heating, lighting, security, communicative home appliances, switches and controllers, and sensors, all under one roof by a solutions provider.

Although competition is inevitable, the presence of Chinese solutions providers will likely change the competitive landscape. Effectively, industry participants from both the East and the West will likely face the emergence and dominance of Chinese competitors in the market.

Furthermore, the presence of Chinese solutions providers could mean the price war will intensify, and consumers may benefit in terms of affordability. On the other hand, pricing pressure of home automation products and solutions may affect revenues and profit margins, but such an effect will more likely happen after 2020 when the adoption of smart-home solutions accelerates.

Market participants from the East and the West need to leverage their core competencies to provide unique solutions. Strategies need to take place for the purpose of geographical expansion, right acquisition of customer groups, and identification of business or research partners.

Business models of market participants from various industries, regardless of ICT, building technologies, or energy management, will evolve in the highly dynamic homes and buildings industry. Transformational trends include growth of service-based business models, IoT, and emerging start-ups to redefine the competition in the buildings industry.

Beyond 2020, the global buildings industry may witness the emergence of service business models that effectively enable customers to buy home energy-efficiency outcomes instead of only the equipment. In other words, home and building owners will effectively switch energy-efficiency investment from capital expenditure to operating expenditure.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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