Table of Contents
STUDY GOALS AND OBJECTIVES
Home automation technology has been around for decades, but it is only now starting to enter the mainstream. The reasons for home automation’s growing popularity include developments on the demand side as well as the supply side. On the demand side, rising incomes and standards of living have combined with increased concerns regarding energy and security to increase the attractiveness of technologies that promise to enhance the owner’s quality of life, while also making the most efficient use of energy (especially electricity) and providing a sense of security. In addition, many would-be homebuyers are young, technologically savvy people with an affinity for the latest electronic devices, thus creating a favorable market environment for home automation systems.
On the supply side, the declining cost and complexity of new home automation products is helping to attract new buyers. Until a few years ago, the cost of quality home automation components was prohibitive for all but the enthusiast market, but now volumes are rising and prices are dropping. In fact, the cost of installation labor and the expense of educating electricians in this field are becoming the most inhibiting factors. Fortunately, other developments are helping to reduce the difficulty and cost of installation. These developments include the growing use of standards-based wireless technologies that allow home automation devices to integrate seamlessly and minimize the need for special wiring to connect them.
This report characterizes and quantifies the global market potential of residential building automation products, which different elements (integrated management systems; heating, ventilation, and air-conditioning [HVAC]; energy management; lighting; security). The goal of this report is to provide an understanding of the market factors, state-of-the-art developments and economic influences driving the residential building automation market. The study analyzes the different components of the industry, the influence of networking technology on building automation and the impact of the different components in various world markets such as Europe, North America, Asia (including Australia) and the rest of the world.
The study contains information that is useful for planning production and the targeting of market efforts for the delivery of residential building automation systems as well integration with other systems. Trends in the market are investigated, particularly the increasing emphasis on energy management, the growing need for security systems and the impact of computer technology on management. Attention is focused on markets for single-family homes. Projections are provided for the total building automation market through 2017, along with estimates of the market in terms of dollar revenue for each type of automation (i.e., integrated management system, HVAC, energy management, lighting and security) alone and the cumulative totals for the market overall. Forecasts are provided to quantify the differences between revenues for equipment (e.g., hardware, software, networks) and for consulting services, which include such facets as design and consultation work, installation, training, commissioning, operations and maintenance.
Traditionally, the equipment portion of these sales represented the largest opportunity. Currently, however, suppliers have been focusing more on services, which provide ongoing revenue streams, as opposed to equipment sales, which represent one-time purchases.
REASONS FOR DOING THE STUDY
Several forces are driving trends toward increasing levels of automation of systems that provide essential services in buildings, as well as the centralization of controls for these systems. Higher levels of automation are essential for maintaining the profitability of buildings, controlling the operating costs of all buildings and ensuring competitiveness of buildings in areas where tenants have other options for residence. The development, proliferation and flexibility of microprocessor-based controls, interface devices, distributed actuators, standardized network protocols, computerized interfaces and wireless communications have presented an opportunity for highly automated centralized building control systems.
Residential building automation systems are usually installed at the onset in new buildings, and integration suites are becoming increasingly common in major renovations where new systems such as structured cabling are being put into place. This study explores national and international building codes and standards, the major manufacturers of building automation equipment and component systems, and the technologies involved in those systems.
Standardized network protocols, interfaces, personal computers (PCs), handheld wireless devices and distributed touch pads are providing the primary human interface elements for building automation systems. The strength of the world building automation market relies on the health of local or regional construction markets. This, in turn, depends on world, regional and national economies.
Consequently, sales of these products have been largely seen in the world’s more advanced business epicenters: Europe, the U.S., China and Japan. This study analyzes the most prominent markets for these systems and breaks it down into four sections: Europe, North America, Asia (including Australia), and South America and Africa. The market’s economic potential is framed in the context of the construction market for each area examined and then consolidated to provide a complete picture of the market.
Extensive investigations have also been carried out to quantify the size of the market in five areas: residential home automation systems, HVAC, lighting, energy management and security. This was done to aid marketers, manufacturers, system integrators, contractors and other parties involved in the residential building automation industry to better direct their efforts at presenting their products and services to the most promising markets.
SCOPE OF REPORT
Residential building automation systems feature a suite of components that include (in alphabetical order):
- Energy management.
- Lighting management.
- Security and access control.
This report examines technologies, markets and factors influencing the markets for integrated control systems and systems that integrate the controls of various subsystems. Markets are forecast on the basis of historic activity and current opportunities, government initiatives and policies, and the status of the construction and renovation industries in specific nations.
The forecasts presented are for the total available markets. Some discussion is provided that compares actual revenues with market potential on various continents. Markets are broken down on a geographic basis and discussed within the context of the trends in construction activity, regulatory initiatives and the revenue potential associated with building automation systems.
The bulk of the revenue comes from North American and European markets while revenue in Asia, South America and Africa is also included. A detailed analysis of the residential building automation market potential in these geopolitical economic regions is used as a basis for estimating world markets for these products. Thorough analyses are carried out on construction industry practices in the target regions. Trends toward the uptake of building automation products and costs are examined, along with associated laws, regulations and common practices.
Identification has also been made of the prime party in the project chain that makes the decision on which and to what extent a building automation configuration is selected for a building project. Geographic and environmental factors influencing requirements for the systems are examined, as are national and international responses to global environmental challenges.
This report was prepared for individuals who are interested in the residential building automation market. Those individuals could include vendors involved in the research, development, manufacturing or marketing of these products. The report will help these individuals evaluate market trends and respond to market changes so that they can perform more effectively in their organizations. Lastly, financial analysts can benefit from the report. They will be able to determine the market potential for various products and evaluate the performance of various vendors in this space.
METHODOLOGY AND INFORMATION SOURCES
Both primary and secondary research methodologies were used in preparing this report. Information was obtained from a wide variety of sources, including interviews with manufacturer executives, inventors, engineers and marketers; government legislators and regulators; construction industry representatives; purchasing officers; building management firm representatives; and real estate development company representatives. Much of the market research numbers came from company financial reports and interviews with suppliers who outlined various market trends and company initiatives. Extensive use was made of the Internet, industry trade publications and print media. Digital and printed statistics were gathered to quantify and help verify trends in the level of activity within the various market sectors.
The approach taken to quantify the world markets for integrated business management systems involved several steps. Primary among these was delineating the technologies involved in building automation and the companies that produce them. The focus is on systems that have been tied together in some way rather than stand-alone building automation systems. Because the market is evolving, clear boundaries among various categories can be difficult to discern. Autonomous product categories have been shifting, as suppliers have been trying to deliver a more cohesive and integrated approach to building management. In addition, vendors have been broadening their product lines, such that many offer products in numerous categories. In some cases, vendors bundle systems together to entice potential developers; therefore, categorizing the revenue from different types of products can be difficult. Consultations with various companies and industry experts helped to break those categories down as finely as possible.
Another step involved developing a quantitative understanding of the characteristics of residential construction industries in different regions of the world. In addition, assessments were made of regulatory policies governing each region with respect to requirements for residential building automation systems. This was done with varying degrees of granularity, keeping in mind that special codes are enforced in different nations.
A summary understanding of the markets was developed for component systems of various residential building automation systems. With this information in hand, trade publications and Internet searches were performed, along with interviews with industry representatives, regulators and legislators to discern trends in the extent of implementation of fully-integrated building automation systems.
Attention was also paid to activity in the markets for systems that integrate disparate component systems. In this regard, networking and data transfer capabilities of the product lines of various component system vendors were taken as an indication of manufacturers’ thrust toward integrated, or integratable,systems.
Revenue from the various building automation products comes from two sources. New construction is one source. Analysts estimate that building automation elements account for 2.5% to 3.5% of the total construction project value for new homes. The revenue includes both equipment and services. In addition, owners decide to renovate their residences to make them more attractive. For this report, building automation revenue was divided into equipment sales and consulting services associated with these projects. The market for these products is shifting, with equipment accounting for a smaller percentage of a vendor’s revenue and consulting services accounting for a higher percentage. Consequentially, suppliers are not only trying to develop strong products, but they are also building up their distribution channels.
The world economy has become increasing complex, volatile and difficult to forecast. The financial projections in this report came from projections from various economic monitoring groups, including the International Monetary Fund (IMF), the World Bank and the CIA World Fact Book. Input from these various sectors was used to complete the five-year market projections. All revenues are expressed in U.S. dollars.
The International Monetary Fund projects that worldwide revenue will increase from about $82.8 trillion in 2012 to $103.5 trillion in 2017, representing a growth rate of 4.6%. However, the numbers will be distributed quite unevenly. The Asian, South American and African markets will demonstrate the highest growth rates. At 9.3% China’s growth is reshaping the world economy; however, that growth is not translating into the home automation market. To date, it has been a limited market lagging the significant pick up seen in the U.S. and Europe. The lack of underlying intelligent network infrastructure as well as the lack of an established high-end middle class has meant that growth in home automation has been smaller and more limited in China. The market is more established in Japan and South Korea than it is China. Those limitations will eventually be addressed and the potential for dramatic growth is expected in China as the decade closes.
The long-term projections are extremely tenuous. The world economy has become much more interconnected and much more volatile than it was in the past. Problems, such as the solvency issue in Greece, ripple throughout other countries’ economies. Many possible problems loom on the horizon. In addition, there is concern that high-flying markets, such China, may slow and force suppliers to take erasers to their business plans. Terrorism also remains a worldwide concern. Any future attack will probably have an adverse impact on the world’s gross national product (GNP). Therefore, while the forecast is for a growth of 4.6%, that number could possibly be lower, depending on how world events unfold.
All 2012 company financial data is projected from the time the research was conducted.
With more than two decades of experience, Paul Korzeniowski is a market research analyst and building automation consultant. His work has centered on determining major market trends in areas of interest such as the development of new networking standards, integration of various building systems and the emergence of new technologies such as wireless communications. He has authored reports on markets for building automation systems for a wide variety of publications, including Investor’s Business Daily, Business 2.0 and EnergyBiz.
This report provides:
- An overview of the major segments of the global market for home automation technologies, including lighting controls; heating, ventilation, and air conditioning (HVAC) controls; energy management controls; entertainment controls; security controls; and integrated (i.e., multifunction) controls
- Analyses of global market trends, with data from 2011, estimates for 2012, and projections of compound annual growth rates (CAGRs) through 2017
- A breakdown of the major enabling technologies for the various types of home automation products, such as controllers, user-interface devices, sensors, actuators and output devices (e.g., dimmers, automated window coverings, dampers), and wiring and networking devices
- Definitions, home automation functions, and enabling technologies
- Discussion of the market environment (e.g., economic conditions, consumer attitudes)
- Lists of developers and suppliers of home automation products
- Analyses of key patents
- Comprehensive company profiles of major players.
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