Market Insight

Despite a drop in revenue, smart home households surpass 88 million worldwide

September 01, 2020

Blake Kozak Blake Kozak Principal Analyst, Smart Home and Security Technology
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Until now, the smart home market has mostly been a DIY venture, but an inflection point is coming that will influence vendors in the years to come. With ADT joining forces with Google and more recently joining the Zigbee Alliance to help develop a unified protocol, traditional/legacy hardware and software providers could be forced to change strategy.

The global smart home market was estimated to be worth $121 billion in 2019 and is forecast to remain relatively flat, growing only 0.3% in 2020 to $121.4 billion, according to the latest smart home device database from Omdia. Despite the rapid slowdown in revenue in 2020, the number of smart home households globally is expected to surge to 88.5 million worldwide, an increase of about 25% year over year. Additionally, of the nearly 500 million smart home devices shipped globally in 2020, about 54% are going to existing users.

What this means for the smart home is that existing users value their connected devices and continue to augment their systems with new and replacement products. Despite initial concerns by manufacturers, COVID-19 has not had the sharp impact that was expected, instead consumers have shifted their spending from travel, entertainment and eating in restaurants to improving the home, including smart home devices.

Although DIY installations are expected to continue to rise due to COVID-19 concerns impacting the ability for installers to get into homes, many countries are already experiencing relief, where door-to-door sales of systems can resume (mostly impacted in the USA) with MSOs also coming back online to sell connected home devices. However, the focus on DIY systems maybe short lived as manufacturers pivot to providing services and relying more on B2B approaches, rather than focusing exclusively on selling direct. The various channels that are expected to see a boost over the next 12 months include utilities (in Europe), home builders and multifamily apartment complexes. Not surprising, in medium to long-term (3-6 years) energy management will be a big focus as brands look to align with service providers, contractors and utilities to offer a holistic approach that targets saving money plus value-added services that help maintain big-ticket items like heating and cooling systems.

Despite consumers being at home more often, security devices could see an improvement in the short-term (1-2 years) as global uncertainty continues both financially and socially. This means more outdoor cameras and heavier investments in sensors and door locks. But long term, security devices may lose appeal in favor of devices that bring added intelligence and comfort to the home, from water sensors that detect leaks and usage to convenient lighting scenes and thermostats. But as homeowners add devices, the expectations of advanced AI capabilities and seamless integrations will rise in tandem, putting added pressure on brands and service providers that are already operating on razor thin margins and struggling to be profitable. This will mark the ascent of value-added services and increased role of professionals in the smart home – like the ADT and Google deal that brings together expertise from two very different realms –stimulating interest and renewing growth in an otherwise disjointed market.



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