Table of Contents
Market Overview and Outlook, with annual growth at 8.7% in 2012 the North American smart homes market continued on its route to recovery. The total market stood at US$1,861million in 2012. Driven by a regaining momentum in the housing market, innovations, better affordability, and an overall increasing end-user awareness, strong growth is predicted over the forecast period to 2015. By 2014 market revenues are expected to surpass pre-crisis levels of 2008. Despite growth, the penetration rate of smart home installations remains low hinting at significant long term opportunities in this market.
Trends by Market Segment, the product market accounted for US$675 million in 2012. While the number of smart home installations will continue to grow and system functionality increases, prices for hardware components will continue to decline, due to commoditization and competition. Revenues will increase across all product segments, with the exception of end-user interfaces where tablets and smart phones devices will continue to reduce the number of user interfaces.
The system Integration market accounted for US$988 million in 2012. Besides a trend towards systems that are simpler to install, the system integration market will remain the largest market segment by 2015 and plenty of opportunities for system integrators continue to exist, not at last through the integration of an increasing number of applications.
The smart home services market accounted for US$198 million in 2012. This will be the fastest growing segment as there is an increased emphasis on services, especially cloud based where remote managed services/diagnostics dealers can not only charge to install the remote managed devices, but earn recurring revenues and reduce their service costs by making remote assessments and repairs. Trends by Customer Segments and Geography, while the market for smart home products sold in commercial markets, like hotels and offices, already increased for 2010 and 2011, strong signs of recovery in the residential sector were seen in 2012.
While custom installations for the luxury segments will continue to account for the largest revenue opportunities in the NA smart homes market, highest growth is in the mid- and low range products. This means also the market becomes more spread geographically and less focused on the places for the rich. Trends in Technology and Applications, constant progress and innovation in technology means future smart home systems will continue to increase in functionality and their suitability for new applications. By 2015 this market will see an increased number of applications, e.g. in healthcare (health alert systems, patient monitoring, etc.), energy management (lighting controls, shading, intelligent thermostats, smart metering and grid connected controls, etc.) as well as some smart appliances (refrigerators, washers, etc.). Many other applications exist.
Smart phone devices have already proven a real catalyst for growth in the smart home market. Like no other innovation it has increased awareness for the benefits of smart home applications among a broad end-user segment. Constant innovation is a key imperative for success and drives change in the fast moving smart homes market and lines to adjacent markets such as home energy management and intelligent residential controls become increasingly blurred.
Trends in Market Shares and Competitive Landscape, in 2012 Crestron remained the market leader in the North American smart homes market, however with more affordable systems other manufacturers such as Control4 and Eland grew at faster pace. A fast moving market with frequent technology innovations also reflect on the competitive landscape. Manufacturers of traditional high-end user interfaces such as AMX have lost share with the adventure of smart mobile phone devices. Providers of remote managed services such as Vivint and ADT Pulse that package various smart products with their service offerings, have become more visible and so have manufacturers of smart devices (e.g. Philips for smart bulbs, Honeywell for intelligent thermostats, etc.), especially when they can be integrated with other smart home applications. In addition the market has seen increasing presence from telecommunication, utilities and some renewed interest from software companies.
Notable acquisitions: Linear acquired 2Gig Technologies, Leviton acquired HAI (2012), 4Home (Motorola) was sold to telecommunications company Arris in 2013. Life Ware, still a significant player in 2010, exited the market in 2012 as their business went down in recession. With further integration and convergence, the market will continue to experience high levels of M&A activity. Trends in Route to Market, while the professional channel via dealer/ system integrator will continue to dominate the custom installation segment, the increasing demand for more affordable, easier to install systems means that the DIY route via home improvement store/ online retail and specialist trade will gain importance.
The total market for HEMS was estimated to be worth US$ 21.6 million in 2012 recording a 76% growth on the previous year. The growth rate will remain very sustained till 2015, when the market sizes will hit US$ 57 million. These market sizes are for hardware and software installation of HEMS devices only and do not include the software subscriptions and the connecting devices, such as thermostats. Despite the noticeable growth, the HEMS market remains niche in the US and the smart meter utility driven mass market has so far failed to materialise. Demand response features, which would fully develop the HEMS potential, are available to small selected pilots only. Utilities have been slow in the activation of smart meters and consumers are still unaware or misinformed on the potential of the product and on the value proposition of the key players. In an effort to make the product more accessible, simpler and user friendly, most suppliers have launched new platforms and selected new channels to market, including telecom services and direct sales through retail or professional installers. The price for the solutions remains high and payback is often too long to make the proposition attractive to cost driven consumers. The communication protocols for HEMS depend on the type of solution. Wireless LAN (WIFI) and HAN (Zigbee and Znet) are the most common in the US. The competitive landscape is very crowded, rather fragmented and dynamic with frequent merging and acquisitions, alliances, market entries and exits. Icontrol, Ecofactor, OnPower, Ecobee, Tendril and Vivint are some of the key hardware and software competitors. Each of these companies offer different solutions and have a differentiated access to market. Other market stakeholders are the utilities and the telecom providers. Internet platform giants like Apple and Microsoft, who had tried a direct entry to the market, are now participating as indirect financing partners of start-ups.
Residential Environmental Controls, the market for Intelligent Residential Environmental Controls was estimated to be worth US$ 57.6 million in 2012. In this edition of the report, all residential controls with zoning capabilities have been classified as intelligent controls. Undoubtedly, there is an overlapping between these types of devices and the devices analysed in the Smart Home and HEMS sections of the report. Intelligent thermostat without zone control ability, such as Nest, have not been included in this section of the report. The market for environmental controls is expected to grow in the next three years in the USA, although it will remain niche as a result of the high cost of its solutions.
The main drivers in the market will be: Increasing demand for comfort zoning controls in US homes; Uptake of home automation and energy management market with integrated intelligent environmental controls; Utility programs; Consumer awareness increasing also as a result of marketing; Increasing offer and competition, which drives prices down; Possible market entry of new competitors on the HVAC side; Growth of the US economy and of the construction activity including LEED certified houses.
Routes to market for environmental controls are HVAC and smart home distribution, utility telecom platforms but also DIY stores. The latter is becoming increasingly popular in the USA. The market leader remains Honeywell, although challenged by a number of manufacturers also active in the markets for smart homes and HEMS.
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