Against the backdrop of repeated global COVID-19 outbreaks, growing demand for contactless services, and the gradual normalization of home office models, it is expected that this will further catalyze the update and iteration of smart home technologies and the expansion of the overall smart home market. This article will take you through an analysis of the main business models, industrial chain layout, and market size of the smart home industry to introduce you to the global smart home industry.
What is smart home?
Smart home technology is based on residences as a platform, integrating network communication technology, home appliance automation, Internet of Things, cloud computing, and artificial intelligence with home devices to form an efficient and intelligent integrated residential equipment management system. This system aims to enhance the safety, energy efficiency, comfort, convenience, and intelligence of the home environment. According to product functionality, smart homes can be divided into five categories: monitoring and security, energy conservation and environmental protection, leisure and entertainment, intelligent control, and others.
Analyzing from the components of smart homes, the smart home software layer serves as the foundation for hardware and can achieve hardware-software interaction and optimize user experience. The smart home control layer is divided into three categories: AI assistants, mobile phones and tablets, and control panels, which are used to control and monitor devices at the application layer. The smart home application layer refers to the aforementioned five major categories of smart home products.
What are the business models in the smart home market?
According to the time nodes of product and service delivery, the current smart home market can be mainly divided into the pre-installation market model and the post-installation market model.
The pre-installation market model for smart homes refers to a scenario where professional smart home solution providers offer their smart home service proposals to real estate developers or home improvement companies before the completion of house renovations. These proposals generally include areas such as smart lighting and smart gateways. In the pre-installation model, for smart home providers related to home improvement customer services, they need to coordinate with the client's renovation progress but have a relatively faster capital return rate; for industry participants collaborating with real estate developers, they can effectively build brand influence among large clients. Such projects generally have a larger sales scale and considerable profits, but they also face issues such as high upfront investment, long construction periods, and slow capital return rates.
The smart home aftermarket market model refers to the process where end customers directly purchase smart home products through online or offline channels after the completion of home renovations, and then deploy smart home services based on the existing home wiring. In terms of online channels, the initial investment cost and brand threshold for the aftermarket market model are relatively low; in terms of offline experience stores, they can help market participants enhance their brand influence and improve user experience, but the initial capital investment in stores is significant.
What is the industrial chain layout of the smart home industry like?
The upstream of the smart home industry empowers it through transmission technology, perception technology, and computing technology, covering component and technical service providers. The midstream mainly includes domestic and international smart home product manufacturers and solution providers, while the downstream primarily reaches end consumers through various sales channels.
The upstream of the smart home industry mainly includes providers of transmission technology, sensing technology, and computing technology. Its main participants include wireless communication chip suppliers, wireless communication module suppliers, sensor suppliers, and AI technology providers (platforms). Among them, wireless communication chips are the core components of the transmission layer and directly reflect the mainstream technical routes and product performance.
The communication module suppliers in the upstream transmission layer mainly purchase smart home wireless communication chips to manufacture communication modules that transmit wireless signals. Compared with the upstream smart home wireless communication chips, the overall production threshold of the wireless communication module industry is relatively low, there are many manufacturers, market concentration is relatively dispersed, and competition is fierce.
The perception layer in the upstream chain is provided by sensor suppliers. The sensor industry has high technical requirements, and relevant industry participants need to invest a significant amount of capital and talent costs in the early stages to develop and update their key technologies. Currently, the global sensor market is dominated by suppliers from the United States, Japan, and Germany, with representative companies including General Electric, Honeywell, Bosch, Siemens, Omron, etc.Benefiting from national policy support, China's sensor industry and related enterprises are expected to form a development pattern that integrates technology research and development, production, application, etc., and continuously move towards industrialization, systematization, and scale-up.
The processing layer in the upstream chain mainly involves AI technology providers and AI service platforms. They are primarily responsible for providing software and hardware products as well as solutions for smart home enterprises. Currently, Google and Amazon have competitive advantages in the international AI market. The Chinese AI intelligent open platform market has a high concentration of enterprises, with leading companies such as Baidu, Tencent, Huawei, and Alibaba having significant advantages. Enterprises like SenseTime and iFlytek have also formed their own differentiated competitive advantages in niche technologies.
Looking at the midstream of the smart home industry chain, there are currently a diverse range of participants in the overall midstream smart home product industry, including internet companies, traditional home appliance companies, and emerging smart home product companies. In terms of overall midstream development trends, large enterprises are generally moving towards platformization, ecologicalization, and scale-up.
From the perspective of application technology classification, smart home solution providers can be divided into wired application providers and wireless application providers.
Cable smart home systems generally use media such as twisted pair for information transmission. Data transmission is secure and stable, with signals confined within the line, making them highly resistant to interference and reliable. Even very large systems, such as a multi-story building, can maintain stable data transmission. Cable applications must be installed before renovation; it is very difficult to install such cable smart home systems after renovation.
The system of smart home wireless solutions relies on electromagnetic waves to transmit data. Common transmission protocols include Zigbee, wifi, Z-wave, radio frequency, etc. The greatest advantage of wireless systems is their overall low cost, which can save a significant amount on design costs and initial wiring expenses. Some wireless solutions are even only one-tenth the cost of wired ones. Wireless systems also possess high flexibility and are easy to expand, as there are no physical line limitations. They basically achieve plug-and-play functionality, and configuration is very convenient, with most tasks being completed by users themselves. However, a major pain point for wireless systems at present is the potential power supply issues with some components, such as temperature and humidity sensors, human body infrared sensors, etc. The current solution is to use batteries.In the field of smart home wireless solutions, local solution providers have broad development prospects.
Looking at the downstream of the smart home industry's industrial chain, the current pre-installation consumer market for smart homes mostly adopts a B2B procurement model, targeting downstream enterprise customers such as real estate developers, home improvement service providers, and system integrators. In the midstream of the post-installation market, smart home product manufacturers can promote and distribute their products to end customers through online and offline channels.
What is the size of the global smart home market?
In recent years, the continuous iteration of cloud computing, Internet of Things, and wireless communication technologies has driven a large-scale expansion of the smart home market, further developing the industry towards industrialization and scale.
Globally, the market size of smart homes has rapidly increased from nearly $150 billion in 2017 to nearly $200 billion in 2021. The annual compound growth rate from 2017 to 2021 was nearly 7%.The outbreak of the COVID-19 pandemic in 2020 has given rise to new consumption trends such as 'home economy' and 'home office work', with users' awareness of smart home-related products and services continuously increasing. Against the backdrop of continuously developing user consumption habits and recurring COVID-19 cases, the global smart home market is expected to expand at an accelerated pace to nearly $300 billion by 2026, with a considerable market size and growth rate. It is estimated that the compound growth rate from 2022 to 2026 will be nearly 10%.
From a regional perspective, the core markets in Europe and America accounted for nearly 65% of the market share in 2021. During the forecast period, the Asia-Pacific market is expected to see significant growth momentum. Among them, the importance of China's smart home market in the global smart home market is expected to continue to increase.
Analyzed from the category dimensionality,Currently, among the various sub-categories of the global smart home industry, the smart leisure and entertainment market accounts for the highest proportion, but the smart monitoring and security market, as well as the smart energy conservation and environmental protection market, are developing at the fastest pace.
Security monitoring devices account for a small market share in the current global smart home market, at only about 2% in 2020. However, due to consumers' increasing emphasis on home security, this proportion is expected to reach nearly 4% by 2025. The market size for security monitoring smart home devices is also expected to expand rapidly from $1.8 billion in 2020 to nearly $10 billion by 2025, with a compound growth rate of about 20% from 2020 to 2025.
Energy-saving and environmental protection equipment was the smallest segment in the smart home industry in 2015, accounting for about 1%. However, due to the global emphasis on carbon neutrality and environmental protection by governments, it is expected that this proportion will increase to over 5% by 2025. The market size of energy-saving and environmental protection smart home devices will also grow rapidly from over $5 billion in 2020 to about $15 billion by 2025, with a compound growth rate of over 20% between 2020 and 2025.
Currently, leisure and entertainment devices account for the highest share in the overall smart home industry, with smart TVs being the main category, contributing to most of the market share in leisure and entertainment smart home devices. It is expected that leisure and entertainment smart home devices will maintain an annual compound growth rate of about 10% over the next five years and reach a market size of about $200 billion by 2025. However, due to the rapid growth of other categories, their market share is expected to decline to about 70%.
In the future, the global smart home market is expected to show trends such as expanding demand for intelligent innovation products, continuous expansion of application scenarios, co-development of aftermarket and pre-installation markets, and collaborative development with multiple related industries.Moreover, against the backdrop of repeated COVID-19 outbreaks, users' demand for creating healthier, more convenient, and comfortable home environments is constantly growing. Users' awareness of the importance of smart home products and services has been enhanced, and user habits are being continuously cultivated. This has further stimulated the consumer demand for smart home products and services, driving the global penetration rate of smart homes and the continuous expansion of market scale.
