Exponential Growth in Store for Smart Home Market - $176 billion by 2025
One of the fastest growing areas of tech | US accounts for 30% of global smart home market in 2020 | Household penetration to reach 21.4% by 2025
Published: 21st Aug 2019
The November 2020 report from Statista indicates that the global smart home market is set to increase at an astounding growth rate (CAGR) of 17.9% for the 2020-2025 period. Starting in 2020 with $77 billion, the expectations have the smart home market value reach $176 billion by 2025.
The research is titled “Digital Market Outlook Smart Home Worldwide 2020-2025.”
The last year’s report from Meticulous Research estimated the market’s worth to reach some $144 billion by 2025, achieving growth of CAGR 16.5% for the 2019-2025 period.
Even though the recent report from Statista accounts for COVID-19 effects on the global economy, it’s evident that smart home products thrive in this environment.
Among the factors that are likely to account for this growth is the fast proliferation of Internet of Things (IoT) devices. These have played a significant role in encouraging the idea of using smart devices across various sectors.
At present, some of the sectors that are enjoying the most widespread use include the residential, industrial and commercial sectors.
Smart Home Market Is Not a Passing Fad and Is Seeing Massive Growth
But unlike most technological waves that come and go, the smart home concept is highly unlikely to be a fad.
Rather, it seems set to make a massive impact on the market, as the consistent growth in consumer enthusiasm with regards to smart home devices indicates.
The trend has similarly sparked interest in smart device manufacturing companies as well as startups to become aggressive participants in the burgeoning space.
Smart home systems control entertainment systems, lighting, appliances and climate among other things. They can also control household security using things such as alarm systems and smart access control.
When connected to the internet, such devices are a crucial component of the Internet of Things.
In 2020, household penetration of smart home devices reached 21.4% worldwide. Compared to that, penetration in the US is expected to rise from 36.6% in 2020 to 57.2% by 2025.
To further prove just how strong this market is, it’s worth considering the average revenue each smart home brings. While the worldwide average in 2020 is $349.02 per smart home, the US average reaches upwards of $492.39.
Factors Contributing to the Massive Market Growth
Among the factors contributing to the rapid growth in this space is the need for enhanced security measures, to which smart home devices make a significant contribution.
Additionally, the devices hold the promise of better energy and operational efficiency, which also makes them a more popular alternative to traditional devices in some markets.
At the same time, the internet is more easily accessible to homeowners now than ever before, particularly in the developed world.
Notably, smart speakers, as a consequence of their artificial intelligence features, have the capability of augmenting, and in some cases replacing the functions of other devices like radios.
Therefore, in spite of challenges like hesitance among the elderly and high procurement costs, the trend is making big waves.
The global smart home market currently has various segments based on products, standards and protocols, as well as geographical factors.
When it comes to the products, there are three major segments which include wireless, wired and hybrid protocols. Wireless products fall into categories such as Wi-Fi, ZigBee, Bluetooth, Enocean and Thread.
On the other hand, wired products are categorized as Ethernet, Modbus, DALI, LonWorks, BACnet, X10, UPB and KNX. Hybrid protocols include C-Bus and Insteaon.
Among these, the wireless class has seen the most traction because it has consistently developed new standards and protocols over time. Of all the wireless protocols available for smart home use, Wi-Fi is the most popular.
A major reason for this has to do with widespread Wi-Fi connectivity in many cities and the protocol is universally accepted. As a result, most smart home devices are compatible with Wi-Fi.
North America in Dominant Position
With regards to segmentation by geographical locations, there are five major regions: North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.
At present, North America plays the dominant role globally in the smart homes sector. It has one of the highest technology adoption rates.
Both of the aforementioned reports estimated the US to be the largest market for smart home devices. According to the Statista report, it accounts for 30% of all revenues in the sector for 2020.
When looking at the smart home energy management segment, global figures for 2025 reach 262.4 million households worldwide. Out of that, the estimate 40.4 million households are in the US only.
Besides technology adoption rates, another factor that makes a major contribution to US dominance is the fact that it is home to a significant percentage of major players in the market as well as start-ups.
Other key players are Honeywell International (US), Johnson Controls International (US), Schneider Electronics (France), Robert Bosch (Germany), LG Electronics (South Korea), ABB (Switzerland) and Sony Corporation (Japan) among others.
Throughout the report’s forecast period, the US is expected to retain its dominant role. But Asia Pacific seems to be playing catch up faster than any other region.
Some of the factors behind Asia Pacific’s speedy growth include an increment in spending power, the growth of its young population and rapid growth in internet connectivity. By virtue of these factors, it is, in fact, the fastest-growing region globally.
According to the Statista market report, East Asia will become the largest by 2025, representing 30% of global revenue shares. This will place it above the US, which is expected to achieve 27% market revenue share of the market’s global worth of $176 billion.
Current trends reveal that it is no longer a question of whether the smart home market will grow, rather, by how much.