In a few more years, our homes will become another key interface, increasingly similar to our smartphones, where a wide range of products and services are integrated. The battle for the smart home has started, with many tech giants and a range of industries already making a beeline for Asia.
According to forecast by consulting firm A.T. Kearney, the Asian smart home market will grow to US$26 billion in 2022 and surge to US$115 billion by 2030, accounting for more than 30% of the global market. Growth in the region will be driven by China and Japan, with highly-connected economies such as Singapore, South Korea and Taiwan also playing a key role.
China is leading the region in terms of device shipment. Its market size and increasing household incomes have fueled demand, while a strong local manufacturing and technology ecosystem has supported the development of affordable smart home devices. One company, Xiaomi, plans to invest around US$1.5 billion into the IoT sector over the next five years. South Korean consumer electronics giant Samsung has also been working to make all of its products IoT ready by 2020. Thanks to a robust portfolio of products including TVs, appliances and smartphones, and its leadership in 5G connectivity, Samsung is well-positioned to deliver an IoT ecosystem to consumers. Samsung will unite all of its IoT applications into its SmartThings app to connect and control any SmartThings-enabled device directly from mobile devices, TV or car. Its voice assistant Bixby will bring Samsung’s personalised intelligence service to more devices, including smart TVs and new Family Hub refrigerators.
We foresee a future where all home devices will be connected to the internet, with all these devices controlled mainly by voice. Just as smart speakers have gained traction in the US, a similar situation is unfolding in APAC. Reports indicate the APAC smart speaker market will witness a CAGR of 26.1% between 2019 and 2027. Alongside Google Home and Amazon Echo, Alibaba’s Tmall Genie, Xiaomi Mi AI Speaker and Baidu Raven are expected to lead the way, together with the voice technology that sits behind them. South Korean and Japanese companies have also jumped onto the bandwagon: Samsung launched Galaxy Home in 2018 and LINE Clova beat Amazon and Google to market in Japan.
Government policies are also at play. Globally, over a thousand smart city pilots have been launched, and China is home to half of them. The Chinese government has put in place policies that encourage real estate developers to include smart home features into their properties. This is also true for several other APAC markets, such as Singapore and Japan, where growth is being driven by the government’s top-down smart city initiatives. In 2017, Singapore launched the Visionaire, the country’s first smart condo building, which comprised some 600 units featuring up to ten of the latest smart home appliances from Samsung, such as washing machines and air-conditioners.
In Japan, the government is moving forward with “Society 5.0” focusing on the opportunities that digitisation offers to improve quality of life for a hyper-aging society. Makers of smart home products in Japan are looking to innovative intelligent systems that effectively support the elderly at home. The Tokyo-based unit of Chinese consumer electronics manufacturer Haier Group, for instance, plans to launch an internet refrigerator that, using Google’s Android operating system, will be able to analyse what’s inside it, and recommend a corresponding menu. It will also offer a safety feature for people who live alone: if the refrigerator has not been opened for a number of days, a security company will be notified.
As much as we see development and demand accelerating, the current smart home is also characterised by “fragmented devices.” The smart light switch, smart lock, and so on, are devices that do not necessarily work cohesively to render total automation. Consumers in Asia are now concentrated at the migration stage, where devices are replaced a piece at a time. This is essential for smart homes to become mainstream.
A more critical and perhaps necessary area of development is the interoperability of products, and there has already been marked improvement among products from different manufacturers. Advancement of APIs, industry alliances and efforts to standardise communication of applications are proliferating across the smart home ecosystem to drive progress. Samsung, for example, has been working with partners such as the Open Connectivity Foundation (OCF), which is dedicated to providing the key interoperability element of an IoT solution, to set common industry standards.
Discussions on social media and online reviews are rich in insights about what features consumers expect from their favorite brands. According to a report by Digimind, the most pressing consumer demand for smart home brands in APAC is to prioritise user privacy. A recent WARC report found almost half of the APAC consumers surveyed say that data-privacy concerns are stopping them from buying smart home devices and appliances. This should come as no surprise as consumers in APAC grow more skeptical about technology companies with regards to user privacy and security. In response, companies like Samsung are doubling down on improving security, incorporating its trusted Samsung Knox technology into its connected devices
Indeed, the future for smart home players in APAC looks bright as penetration is projected to hit 8% in 2020 and grow to 18.8% by 2024. Even more encouraging is that the scope of smart homes will likely go beyond appliance automation as they will be the key interface for a range of industries looking to provide services to consumers. Home insurance, consumables re-ordering, security, maintenance and repair, cleaning, grocery selection and consumption, health monitoring, delivery, entertainment content, and many more, will all increasingly depend on smart home integrations to reach new and existing customers. Through lower price points, improved functionality and better value proposition, the idea of living in connected homes will become even more attractive to tech-savvy Asian consumers.
The writer is Sharon Soh, head of integrated strategy and marketing at UM APAC.