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Berg Insight's Smart Homes and Home Automation 2nd edition

Berg Insight's Smart Homes and Home Automation

Table of Contents

Market Study
Published: November 2013
Pages: 160
Tables: 54
From: GBP 833.00  Buy Now!
Research from: Berg Insight
Sector: Mobile Content & Apps

How should the mobile industry address the vast business opportunity in connected smart homes? Berg Insight estimates that revenues from shipments of home automation systems in Europe and North America will grow at a compound annual growth rate of 43 percent from US$ 2.2 billion in 2012 to nearly US$ 12.8 billion in 2017. Get a 360 degree perspective on the rapid evolution of the worldwide home automation market in this 160 page strategic report.

Executive summary

Smart homes and home automation (HA) technologies have been around for two or three decades. These technologies have been a niche segment either for the very affluent, or extreme technophiles who wanted to do a few things like control their lights or window shades remotely, or stream audio-video content between rooms, or do some basic home monitoring. Initial HA systems focused on security and utility management, but newer all-in one systems give users real-time control over almost all the systems in the house while at home or away, resulting in a smarter and more energy efficient home tailored to the homeowner’s lifestyle.

Berg Insight sees a new day dawning for this industry due to a perfect confluence of key market, regulatory, strategic and technology trends. First is the pull from consumers who desire to use products such as iPhones and iPads to control and enhance their lifestyles with the touch of a button on user-friendly and intuitive interfaces. The regulatory drivers come from governmental directives, whereby countries and utilities are mandated to better control the generation, distribution and consumption of power in residences. The strategic push comes from new powerful entrants into this space such as broadband providers who are already inside consumers’ homes and are looking for the next growth opportunities to increase ARPU, reduce churn and become solutions providers rather than just 'dumb-pipes'.

In the US, broadband companies such as AT&T, Comcast and Verizon have shown their hand as they have made recent strong advances into this space. Finally, the technology is coming together with increasing focus on standardization and interoperability, even as the cost of modules, chipsets and software is trending down.

It is important to understand the different possible gateways and business models into the smart home from broadband and wireless providers, utility companies, consumer electronics manufacturers, retail outlets, to traditional security and home automation suppliers, distributors and dealers. It is also important to differentiate the different dynamics between the luxury homes segment versus the mainstream, as well as the complexities involved in retrofit of existing housing stock, versus new home construction. Companies also have to strategize whether they wish to offer standalone smart homes technologies, or move towards multifunction whole-home systems.

For the last couple of years, many home automation companies have struggled. Part of the reason is that the convenience and comfort functions offered by HA systems are not critical or essential and thus suffer when the financial and economic picture is gloomy. A second reason is that the best time to install a HA system is during new home construction, but new construction has been at a virtual standstill in many regions. Usually the large homes segment is immune to economic fluctuations, but this time the malaise has been so widespread that even the high-end segments have been affected. There will continue to be short-term challenges for the HA industry. The economic and housing gloom could stretch out much longer than currently envisaged. Other challenges include lack of awareness of HA offerings and the fact that consumers in many segments do not see a strong reason for HA systems. The costs involved in terms of equipment, installation and ongoing maintenance and service, are all perceived as deterrents. However, there are signs of economic growth and increased residential construction in many parts of the world. In addition, new initiatives such as Google’s Android@Home can bring increased consumer awareness of HA systems and facilitate interoperability between equipment from multiple vendors.

Berg Insight forecasts that global revenues from shipments of home automation systems will grow at a compound annual growth rate (CAGR) of 33 percent from US$ 2.3 billion in 2010 to nearly US$ 9.5 billion in 2015. These numbers include all 3 categories of home automation: professionally installed, Do-It-Yourself (DIY) and the more recent category systems installed by broadband and utility service providers. Significant revenue contributions will come from retrofit of existing homes, both luxury and mainstream. The home automation industry is also opening up a new potential market for cellular M2M devices and services. Berg Insight forecasts that the number of cellular connections used by home automation systems worldwide will grow at a compound annual growth rate of 85.6 percent from 0.25 million in 2010 to 5.5 million connections in 2015. The vast majority of these are security and access control systems. Shipments of cellular M2M communication units for home automation systems are forecasted to grow from 0.2 million units in 2010 to 1.8 million units in 2015.

Increasing adoption of smart home technologies will result in a US$ 9.5 billion market in 2015

According to a new research report by Berg Insight, the number of new smart home installations worldwide was 0.44 million in 2010. Growing at a compound annual growth rate (CAGR) of 65 percent, this number is expected to reach 5.38 million by 2015. The total revenues will simultaneously grow at a CAGR of 32.8 percent from US$ 2.3 billion in 2010 to almost US$ 9.5 billion in 2015. Smart homes and connected home technologies have been around for decades, but up till recently, this has been a niche segment either for the very affluent or extreme technophiles. 'Things are changing for this industry due to a perfect confluence of market, regulatory, strategic and technology trends”, according to the report’s lead analyst Alan Varghese. “First is the pull from consumers in the mobile age, who desire to use products such as iPhones and iPads to control their lifestyles through user-friendly interfaces. The regulatory drivers come fr

om governments, whereby countries and utilities are mandated to better control the generation, distribution and consumption of power in residences. The strategic push comes from new entrants such as broadband providers who are already inside consumers’ homes and are looking for the next opportunities to increase ARPU, reduce churn and become complete solution providers. Finally the technology piece is coming together with increasing focus on interoperability, even as the cost of modules, chipsets, and software is trending down', says Varghese. There is an increasing shift in smart home technology adoption from custom and luxury residences to mainstream and production homes. Whereas only 0.1 percent of mainstream homes had any form of automation in 2010, almost 4 percent will have that by 2015.

Furthermore, since new housing construction is in a slump worldwide, vendors are focusing their attention on retrofit of existing housing stock, and easy-to-deploy technologies such as wireless. Berg Insight finds that this market will soon be crowded with dealer-installers from traditional industries such as security service providers, as well as new entrants such as broadband, wireless and utilities service providers, so finding the right partnerships, business models and pricing is key to success.

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