March 22, 2023
Along with technological advances and improving standards of living, there has
been a rapid development in the area of “smart homes” in recent years.
In essence, smart homes are equipped with internet-connected devices
that allow homeowners to monitor and manage a range of appliances and systems,
from thermostats to lights.
While these smart-home products can improve people’s quality of life, the
penetration rate of these technologies is relatively low in China. Smart homes may
be poised to become a visible trend in the home furnishing industry and could potentially
reshape the sector’s competitive landscape.
Furthermore, leading domestic companies may be able to catch up with, or even
outperform overseas brands, by leveraging the rapid sector growth, their
leading advantages in distribution channels, as well as their ability to produce
products that offer value for money.
China's smart home industry is growing rapidly
China’s GDP per capita now exceeds US$10,000, which bodes well for the
transition to smart homes. In addition, smart homes can provide security,
convenience and comfort to consumers, which is in line with consumer demand as
well as consumption upgrading.
Statista estimates the smart-home market in China at US$15bn in 2020 and
US$45.3bn in 2026 with a six-year CAGR of over 20%. The current penetration of
smart-home technology in China is 13%, and is below 10% in most product
categories. Potential
breakthroughs in intelligent technologies and ongoing advances in the smart-home
ecosystem could potentially accelerate the rate of smart-home penetration.
Rich variety of smart-home
products covering multiple use cases
While smart televisions, robot vacuums, projectors and stereos are at a mature
stage with a relatively stable market size, most smart-home products such as
smart locks, curtains, lighting, dishwashers and toilets are in the growth
stage, and they could potentially see substantial upside in their penetration
rates.
Other products such as smart
water meters and power meters are still in their infancy, but their market size
could be considerable in the future. The outlook of the smart-home market could
be bright, as smart-home products become more mature.
Figure 1: Most of China's smart-home products are in a growth stage (2021)
Note: The size of the bubble represents the size of the market
Source: chinabaogao.com, CSHIA, askci.com huaon.com qianzhan.com, zhiyan.org, leadleo.com, CICC Research
Supportive policies facilitate smart-home transition
China has continued to introduce policy support for smart homes in
recent years. These policies cover the application of advanced technologies,
fostering smart home-related consumption, facilitating the development of
scenario-based smart-home furnishing, and strengthening interconnectivity among
various products. This could potentially create a healthy environment for the
smart-home industry and allow it to develop rapidly.
For example, the 14th Five-Year Plan for the development of the digital
economy released in January 2022 guided a transition towards interconnectivity
among various smart-home products and expansion of mobile applications for
digital life. This could potentially be conducive to facilitating the
transition of the smart-home sector towards interconnectivity.
For more details, please see our report Smart home, smart life: Domestic leaders flourish in rising sector published in March 2023.
