The North American market and its vendors have dominated smart home market adoption and revenue. However, as smart home momentum continues to build over the next 5 years, vendors will increasingly have to adapt their smart home strategies and products in response to the impact of developing Chinese and Asia-Pacific smart home markets.
Despite this anticipated surge, smart home players engaged in driving smart home adoption across Asia-Pacific face a host of economic, political, technical, social, and national barriers, as well as competitive challenges. However, the opportunity offered in the world’s most populous region is significant.
China as a Global Smart Home Influencer
From fast follower to global influencer, the Asia-Pacific smart home market, and China in particular, will increasingly help determine the shape and consumer appeal of global smart home offerings. The emerging trend, already forming, will be further exacerbated by the early impact and emerging recovery from COVID-19 in the Chinese market. Overall, the Asia-Pacific smart home installed base will grow from 66 million in 2020 to 316 million (a 30% CAGR) between 2020 and 2026. In the same period, the smart home installed base in the United States will grow a mere 3.6%.
The influence of the Chinese smart home market will benefit from the commitment of its largest players emerging from the impacts of COVID-19 lockdown ahead of the U.S. and European competitors, and committing new resources and strategies to drive and cement smart home adoption and engagement. For example, the ability to manage systems in the home without physical touch, and risk of contagion, has also gained greater value. In addition, the greater demand for home delivery of goods and services and the potential to further strengthen the ties between smart home offerings, such as voice control and delivery at smart-enabled access points, provide greater incentive for key players to take advantage.
This year, driven by investments from Alibaba, Baidu, Xiaomi and others, China alone will see shipments of voice control front ends (mainly smart speakers and smart screens) reach over 69 million units, surpassing those in the United States (55 million units) for the first time. Largely on the back of that voice control device adoption, other smart home devices categories such as smart lighting, smart locks and smart plugs will follow suit over the next five years.
Prioritizing Safety After COVID-19
The impact of China’s forecasted surge with respect to the overall global smart home market remains uncertain. While reduced consumer confidence and the pandemic has affected discretionary spending, which covers most smart home purchases and subscriptions, conditions related to COVID-19 also emphasize and reveal greater value around home safety and comfort.
While this is playing out across the globe, China is where the first effects of the pandemic were seen and where, at the start of 2Q 2020, the first signs of a post-pandemic economy are emerging. China, as well as being the manufacturing heart of the global smart home market, is also the standard bearer for widespread smart home adoption across Asia-Pacific.
The smart home market has advanced at varying speeds in markets around the world and to varying degrees of success. Many aspects of the market remain and will continue to be extremely localized in demand and provision. What is key globally, however, is minimizing the cost and the complexity of smart home adoption. Developments geared toward the cost-consciousness demands of the Chinese market and supported by the economies of scale serving the Chinese home market delivers, will help open large segments of the region, including India, as well as the world to the solutions developed there.