Chinese smart home market is in the early stage with startups contemplating their capabilities and business models. Technology upgrading, use case innovation, and consumption growth are expected in the coming decade.

Home Smart Home

The concept of smart home dated back to the invention of remote control. Modern smart home is ideally equipped with automated lighting, air-conditioning, water, security gear, and entertainment systems allowing interconnection and communication. Connected to the Internet via smartphones, it is an important node of the Internet of Things (IoT).

With the help of IoT-enabled automation control, sensors, AI, cloud computing and embedded system, smart home can provide a secure, energy-saving, convenient and comfortable living environment.

According to the "2018 Chinese Smart Home Development White Paper" published by China Smart Home Industry Alliance & China Academy of Information and Communications, North America, Europe and the Asia-Pacific region topped the world in smart home development with US ranking first in market size, followed by China, Japan, Germany, and UK. Despite its growth potential, Chinese smart home market is at the very early stage, ridden with obstables.

 

Government support and technological development 

The Chinese government has continued to issue policies to speed up the development of AI and IoT. For one thing, initiatives and strategies such as the National Plan for New Urbanization, both the 12th Five-Year Plan and the 13th Five-Year-Plan, and Smart Cities Projects aim to enhance technological and business environement for industrial upgrading.

For another, smart home providers could directly benefit from the ready-to-use infrastructure and technologies.

China Telecom (中国电信), China Mobile (中国移动) and China Union (中国联通), the leading Chinese telecom carriers who invest heavily in IoT infrastructure, are increasingly encouraging the commercial use of NarrowBand IoT (NB-IoT). Supporting broad coverage and low power consumption, NB-IoT makes it possible to securely monitor and remotely control a large number of devices, appliance, machines and vehicles at a low cost. Smart home businesscould benefit from NB-IoT by to build their ecosystems in delivering a variety of online-to-offline services.

AI, a technology crucial to smart home innovation, has been an important part of China's strategic plans since 2015 and has already penetrated all aspects of social life. Thanks to continuous financing from government and private sectors as well as a bigger talent pool, China' s AI market has grown rapidly. 

As algorithms are steadily improved, voice recognition and computer vision, two of the most mature applications of AI, could be widely adopted by smart home devices in multiple scenarios.

Consumer awareness & industrial standards

Although it ranked second in market size as released in the white paper, Chinese smart home market was worth only one-third of the US's. Moreover, the penetration of Chinese smart home player is extremely low, at only 4.9% compared to 32% in the US. Such low penetration rate indicates a poor customer awareness.

Smart home market has been beset by weak demand. Although the idea has been popular for a while, people hardly buy smart home products on their own accord. Since many Chinese cities are densely populated, the average urban household lives in cramped abodes with a small per capita space, especially in large cities such as Beijing and Shanghai, where people tend to more aware of intelligent devices. It is essential for Chinese companies to come up with innovative application scenarios to create consumer demands.

Moreover, clearer industrial standards and regulations are critically needed for safe design and use. Since a person usually spends more than half a day in a smart home, it is important to ensure its quality to earn consumer trust. Without comprehensive rules, smart home business can be castle built on quicksand and thus impracticable. 

Mix of industrial giants and startups in smart home market

The so-called smart home companies are Original Brand Manufacturers (OBMs) including companies providing final products, solutions and control systems, supported by providers of operation system, cloud service, and content. At the top of the smart home industry value chain are suppliers of chips, sensors, and modules. OBMs sell devices online or offline to consumers or provide one-stop solutions to real estate and hospitality companies.

Traditional home appliance giants such as Haier, Hisense, Gree and Midea are upgrading their products lines to incorporate the smart home scenario. Tech companies like Xiaomi(小米) and Alibaba(阿里巴巴) are establishing smart home ecosystems comprising software development, manufacturing and sale of device.

Right now, most start-ups are focusing on single-purpose product such as smart lock and cleaning robot. Once the consumer demand is identified and topped, they might see exponential growth in sales.