The global smart home industry is ripe for growth, but obstacles stand in the way of manufacturers and brands who seek to fulfill their market potential. Inflation and supply chain disruptions1 caused Q1 2023’s global smart home devices shipments to fall by 5.6% year-on-year, with smart speakers and networked video entertainment devices experiencing the sharpest declines of 15.4% and 7.8% respectively. That said, analysts at International Data Corporation (IDC) expect the market to bounce back this year and even reach 1.1 billion shipments by 20272.
Zooming in on regional trends reveals growth slowdown in mature markets and fertile grounds in others. The US, for example, saw smart devices per household rise from 6 in 2022 to 10 in 2024, causing their five year CAGR decreasing from 60% to 50%3. As US brands rely on existing customers to add devices to existing smart home sets, meteoric growth within the region will be unlikely in the foreseeable future.
Opportunities in Europe and Asia Pacific (APAC) are however ripe for taking as customers make their first smart home purchase. Even amid cost-of-living pressures, 75% of U.K. consumers are still taking environmental considerations into their shopping decisions, with one-third willing to switch brands for sustainability4. European brands will therefore likely see success by touting benefits such as energy efficiency and waste minimization. Already valued at US$43.91 billion, the APAC market and in particular China are expected to present massive growth opportunities. By 2026, APAC is expected to account for over 40% of the global smart home market5.
The overall smart home market is still expected to trend upwards as customers form new habits around smart device usage. By 2025, EMARKETER expects the average time spent on smart speakers and connected cars to reach 45 minutes per day. Customers worldwide are expected to clock even more time on connected TVs (CTVs) at 2 hours and 30 minutes6. Increase in IoT usage will also be boosted by the proliferation of high-speed 5G connectivity, as the number of IoT mobile connections worldwide double between 2021 and 20267.
Modern cars equipped with voice assistants and “infotainment” systems already allow drivers to access maps, call functions, and entertainment on their commute. As autonomous vehicles become mainstream, drivers will be able to connect an even wider range of IoT devices into their car systems. Plus, with advanced systems handling much of the driving, commuters will be empowered to engage in other activities on their devices throughout their journeys.
Healthcare and fitness wearables such as hearing aids and FitBits are increasingly being integrated into the IoT systems, and can even be synced up with vehicle or home systems to allow users to access health statistics from anywhere. Use of connected wearables can be expected to rise as both consumers and healthcare providers work towards providing data-enabled personalized treatment.
Beyond homes and vehicles, entire cities are also becoming increasingly connected as city planners tap into IoT to solve problems such as traffic congestion and excessive energy consumption. Smart cities also have the potential to automate important communications such as crime reporting, health emergencies, and power or utility disruptions if all devices and systems are synced up for interoperability with one another.
Brands and manufacturers are also seeking alternative revenue streams as margins for manufacturing shrink. Today, manufacturing of a single smart home device can cost upwards of US$50 to US$200, with design and mandatory compliance certification processes costing an additional US$10,000 to US$50,0008. Cost pressures in APAC are even greater with fierce competition from low cost brands. Subscription services have therefore arisen as a way for brands to retain customers while simultaneously establishing consistent revenue streams.
Subscription services typically work by selling hardware for relatively cheap and offering additional software features on a subscription basis. Connected cameras with optional home monitoring capabilities are one example of this. That said, brands should be wary of scaring away customers who are already experiencing ‘subscription overload’. 9 in 10 customers in India and the Philippines already believe that there are ‘too many’ services that require subscription, wth 8 in 10 stating interest in subscribing to consolidated hubs instead9.
Even those who subscribe may move on once a better alternative comes along, as 42% of US users report feeling ‘locked in’ to their monthly payments10. Instead of hopping directly onto the subscription bandwagon, brands will be well-advised to take a ‘look-before-you-leap’ approach since the risk of being phased out remains if the market shift from hardware to software-based sales does not prove to be significant enough.
To date, the Connectivity Standards Alliance (CSA)’s has steadily released updates to the IP-based connectivity protocol Matter, with version 1.1 released on May 18, 2023 followed by version 1.2 on Oct 23, 2023. With Matter 1.3 newly released on May 2024, the burgeoning smart home market is now receiving yet another major boost with the addition of kitchen appliances, water management, and EV supply equipment into the ecosystem.
Guarantee customer satisfaction and device interoperability by ensuring compliance with CSA’s open-source standard — now accessible with the GRL smart home service package; complete with Matter, Thread, and Zigbee compliance services.
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