Market Insight

China’s domestic smart connected home appliance market is still in its nascency but growing rapidly

August 15, 2016  | Subscribers Only

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Unit-shipments of several smart-connected home appliance segments were higher than expected in 2015, mainly because the leading appliance makers and online retailers lowered prices to retain volumes and reach yearly sales targets. Several domestic home appliance segments suffered negative or lower volume growth rates last year, so they actively developed the smart home appliance market segment.

The traditional development pattern was once driven by production capacity and pricing. However, beginning in 2012, market leaders stopped establishing new capacity, to reduce the risks of oversupply. To improve profits, they are now leveraging stronger in-house design capabilities to create smart appliances and positioning them as high-end diversified products. On the other hand, low prices are still hurting their profit performance, so they are exploring new business models to increase customer loyalty.

China’s leading online retailers, Alibaba and JD, became an important market driver in 2015, as they provided appliance makers with cloud-based services and connectivity-module solutions.

~~Domestic smart home appliance markets are still in a nascent stage of development. Currently, conventional appliances with connectivity-modules are considered to be smart appliances. Operating the appliance remotely is still considered to be one major selling point for smart home appliances. The applications (or apps) were mainly designed for a single appliance, rather than a full network of smart-home products. So far, connectivity features have not become a major attraction for majorities of consumers. Some consumers simply do not use these new features, even though they purchased smart appliances. Players within supply chain need to work to improve the user experience.

The domestic smart connected room air-conditioner market in China is expected to grow from 4.1 million units in 2015 to to 37.6 million units in 2020, with low-priced and flagship products leading the domestic smart room air-conditioner market. Midea Group and Haier Group are leaders in domestic smart room air-conditioner market. Both these leaders are expanding product sectors of smart room air-conditioners this year.

The Chinese market for smart washing machines and refrigerators will continue to be smaller than the smart room air-conditioner market over the next five years, due to this segment’s general lack of benefits from the use of this technology and a dearth of internet applications.
Due to slowing growth in domestic white-goods markets, appliance makers are now actively developing connected small home-appliance market, including air purifiers, robotic vacuum cleaners, water heaters, rice cookers and microwave ovens. These product segments will enjoy rapid unit growth in China over the next five years, due to their smaller volume base. On the other hand, these product segments might continue to be niche segments, if appliance makers do not improve their practicality.

Wi-Fi will be the most popular connectivity technology for smart home appliances, over the next five years. Single-chip Wi-Fi is expected to become the main connectivity technology for the smart home appliance market. Qualcomm Technologies Inc. is a leader in single-chip Wi-Fi market, because it is a major supplier for Midea and Haier.

Bluetooth modules have been designed more for connected electric toothbrushes and other portable personal products, due to their lower power consumption requirements. However, the domestic smart electric toothbrush segment in China is still a niche market, due to high prices. Philips, OralB and other international brands, are dominating this product segment but if local makers launch low-cost smart electric toothbrush with retail prices under $40 in 2017 or 2018, this product segment will grow rapidly.

While adoption of smart technology in domestic niche home appliance types - such as dishwashers, clothes dryers, coffee machines, and wine cellars – will begin in 2018, IHS expects smart-connected technology will be adopted by more domestic niche home appliance product segments.

This analyst insight is based on the latest IHS Markit Smart Connected Home Appliance Market Report – China – 2016, which analyzes the current state of the connected home appliance market in China, along with trend forecasts and analysis. This report is a part of the IHS Market Home Appliance Intelligence Service.

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