Exponential Growth in Store for Smart Home Market -$144 billion by 2025
One of the fastest growing areas of tech | US accounts for 44% of all revenues in the sector | 21% of Americans own a smart speaker
Published: 21st Aug 2019
A new research report from Meticulous Research indicates that the smart home market is set to grow at a CAGR of 16.5% starting in 2019 to hit $144 billion by 2025.
The research is entitled Smart Home Market by Product (Smart Speakers, Smart Lighting, and Smart Home Security), Standards & Protocols (Bluetooth, Wi-Fi and Zigbee) and Geography – Global Forecast to 2025.
A previous report from IHS Markit estimated the market’s worth to be approximately $17 billion in the year 2017.
The report forecast that the market would be worth approximately $116 billion in 2022, which would be a CAGR of about 46.8%.
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 2017, consumer electronics were the largest category of smart home devices by revenues, bringing in an estimate of $11.8 billion in the global market.
Similarly, the category saw the largest number of unit shipments during the same year, with climate control and lighting following closely.
The main driver for the category’s performance was the home audio or smart speakers and other related appliances.
Recent statistics lend credence to this as presently, approximately 21% of Americans own a smart speaker. In comparison with 2017 when only 7% of Americans owned the same devices, there has been remarkable growth in the space.
Factors Contributing to the Massive Market Growth
Among the factors contributing to the rapid growth in the space is the need for enhanced security measures, to which smart home devices seem to 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 more 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 radio.
Therefore, in spite of challenges such as hesitance among certain populations such as elderly persons 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 the widespread Wi-Fi connectivity in many cities and the protocol is universally acceptable. 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. These are 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 IHS Markit, it accounted for 44% of all revenues in the sector.
Not surprisingly, the number of people expected to shop for smart speakers in the US this year is 31 million. According to eMarketer, that would be an increment of 31.6%, from 23.6 million buyers in 2018.
And by 2021, the figure is expected to climb to 38 million as more than 4 in 10 US users look to smart speakers for shopping capabilities.
Besides technology adoption rates, another factor that makes a major contribution to its 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.
The IHS market report points out that the EMEA market will be the largest by 2022, representing 43% of global revenue shares.
Current trends reveal that it is no longer a matter of whether the smart home market will grow, rather, the question is by how much.