Market Insight

How Apple Could Impact the Smart Home Market – Following WWDC 2016

June 14, 2016

Blake Kozak Blake Kozak Principal Analyst, Smart Home and Security Technology

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At its annual developers conference on June 13, 2016, Apple announced HomeKit will have its own app called “Home.” It will be released with Apple’s upcoming new operating system, iOS 10, and allows users to control internet-of-things (IoT) devices in the home. Apple also announced that it will expand Siri, by allowing third-party app developers to take advantage of voice controls. Finally, Apple TV is getting a makeover with its new tvOS for the fourth-generation Apple TV.

Our analysis

The recent announcement of the Home app is a positive step forward for Apple, because there is finally a central app to manage the IoT devices comprising the HomeKit ecosystem. Prior to Home, users needed to download third-party apps, in order to control their devices. Moreover, what has been a very long and drawn out release -- partially because of the security requirements developers must meet such as encryption with 3072-bit keys and secure Curve25519 that guarantee the security of HomeKit devices -- may finally gain traction in the smart home market

Currently, there are about 20 HomeKit-compatible brands, according to Apple’s website; however, the announcement suggests many dozens more are either already compatible or are in the process of becoming compatible. By way of comparison, Samsung’s SmartThings supports about 50 brands. It’s also important to note that Apple handsets had a global market share in of 13 percent in 201, while Samsung had a share of 22 percent, which means the Samsung platforms currently hold an advantage.

For Siri and voice control, Apple is far from first to offer this type of functionality to developers -- and this announcement is likely the result of needing to compete with the likes of Amazon Echo (Alexa). Siri can be asked to turn on devices or initiate scenes in the Home app, such as “going to bed,” where the lights turn off and the blinds close. Furthermore, Apple announced the ability for single login and search capability for television shows or genres (tvOS), just by speaking to Siri. While this is a necessary step, there are other platforms already offering apps and voice control for entertainment, including Comcast X1.

As they relate to the smart home market, these latest announcements from Apple are far from groundbreaking, but Apple customers – by and large -- are not interested in individual devices or widgets. Many Apple users are interested in advances in the Apple ecosystem, which will be provided as these developments continue to evolve. The challenges Apple now faces are twofold:

First, the number of compatible devices is far less than other existing ecosystems today. As a result, users will likely buy into the closely controlled Apple ecosystem, knowing the devices will work (and it is only a matter of time before more device developers create products that are interoperable)

Second, unlike Amazon Echo, Siri isn’t “always on.” However, Apple does allow a “Hey Siri” feature for older devices on AC power, while iPhone 6S and other newer models do not require AC power.

Overall, the unique benefits from Apple’s latest smart-home announcements include the following:

  • Potentially easier installation and pairing of devices to the central platform
  • The Home app icon provides a continuous list of the types of scenes and devices available, which will help promote other products and speed purchasing
  • A single app brings all products together, but the iOS offers something slightly different – the ability to use the control center to manage devices, so there’s no need to manually open an app; moreover, interaction with devices can happen within the lock screen
  • With the HomeKit ecosystem, like other do-it-yourself systems, devices can be purchased ad hoc and when they are needed – which is a benefit over professional services
  • Greater integration with voice assistance, through more open developer programs

Despite the new Siri enhancements, HomeKit still uses a mobile app as its primary user interface. After the launch of the Amazon Echo, this smart-home paradigm seems a bit antiquated to many industry watchers.  Apple has placed a big bet on serious security being required by consumers. If that turns out to be true, HomeKit has a major advantage over competitors. If not, they’ll have a cost disadvantage. 

Finally, Apple TV is an optional component, but it’s an important one for the full HomeKit experience, and it remains to be seen whether or not consumers’ previous reluctance to buy Apple TV becomes an obstacle for HomeKit adoption. It’s also questionable whether a non-mobile, permanent device is even necessary, as the user interface platform in the smart home, does Apple still need an Echo-like device that is more focused on smart home rather than media streaming, or is it enough to rely on transitory mobile devices? We should know in the next 12 months, once iOS 10 is rolled out and developers begin integrating devices more heavily into HomeKit.

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