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Brands Go Big On Smart ACs

Brands Go Big On Smart ACs

With connectivity on the rise, brands are going all out for smart air conditioners – ACs that can connect to the home Wi-Fi system and be controlled via an app. Like many of their intelligent cousins, smart ACs might seem a little gimmicky at first, but there is nothing quite like getting cool air flowing through the home before one sets foot in the door after a full day at work or a long trip. Walking into an environment that is comfortable, not having to sit and wait for hours to the office or home to cool down cannot be undermined. Being able to remotely control the AC is also a much more economical option than letting it run for hours on end.

Turning the not-so-smart AC into a smart gadget. The answer lies with the smart plug, or smart AC controller. Instead of plugging the AC directly into the socket, it may be plugged in the smart plug, and then the smart plug into the socket in the wall. This instantly gives the feasibility to control the AC using voice assistants such as Alexa or Google Home. In fact, the global smart-AC-controller market marked a growth of 28 percent in 2018. And it is forecast to flourish at a CAGR of 26 percent, likely to garner USD 8770 million by the end of 2025. Tado GmbH, Honeywell International Inc., LG Electronics, Ambi Labs, and Sensibo are some of the prominent global players in this segment.

How smart air conditioner works. With the smart air conditioner, users can get the benefit of operating AC from faraway locations. To enable users with this flexibility, the air conditioner requires integration of a hardware (IoT-enabled device) and a software (IoT solutions). Seamless integration amongst AC, hardware, and mobile app allows for flawless data transfer and synchronization in order to control the appliance accurately.

The air conditioner will be connected with IoT hardware through Wi-Fi. The hardware controls the air conditioner via infrared just like a remote. Data transfer between hardware and mobile app takes place through the internet connection using cloud technology.

Automated AC on and off will be possible by integrating GPS-based features. Having defined the geographical range of the smartphone, whenever the device enters and exits a defined geographical boundary, the hardware interacts with the AC via Wi-Fi to on and off the appliance respectively. Using cloud technology, it is possible to allow users to change the settings of an air conditioner from the mobile app itself.

Smart air conditioning is distinct for a few reasons. The most notable is temperature control. Other smart appliances generally only operate on an on/off basis. Essentially, you can command it to turn on or off using the smartphone. But smart air conditioning goes one better. Smart air conditioning can perform a whole range of functions remotely, at a command! Timers may be set, temperature turned up or down, AC turned on or off and a whole lot more. Total control over the air conditioner is possible!

Global market dynamics

The global air-conditioning market is on a growth trajectory. Sales in 2018 over 141 million units and a value of over USD 103 billion, as estimated by BSRIA and USD 135.2 billion as estimated by Zion Market Research. It is expected to grow at a CAGR approximately 11.7 percent for the five-year period from 2019 to 2025.

By region, North America is expected to hold a substantial share of the global air-conditioning market in the future, owing to the early adoption of air-conditioning technology and high adoption of a healthy lifestyle. Considering the maturity, the US air-conditioning market has experienced good growth. Focus is on upgrading of AC units with intelligent solutions such as Wi-Fi.

Canada’s renewed growth in the construction sector is propelling the North American air-conditioning market. Moreover, rising demand from the downstream sector, high standards set by the government for promoting energy-efficiency, and growing preference for minimizing energy consumption are anticipated to persuade building owners to migrate to more efficient technology.

The European market for air conditioning is characterized by a weak economic situation in countries like Greece, Spain, Russia, Turkey, and Italy. Europe is relatively small as a sales region, accounting for seven percent by volume and almost twelve per cent by value globally.

The healthy growth in 2018 has been boosted by the hot summer, a positive economy, and construction activities. In the southern parts of Russia, sales of air conditioners continue to record 15 to 20 percent increase per annum. Cooler summer and currency fluctuation were the main reason behind the decline of sales in Turkey. The rising demand for AC replacement may generate lucrative opportunities for the companies operating in this regional market. Manufacturers have been focusing on producing energy-efficient air conditioners to cater to the needs of the European market.

The Asia-Pacific region continues to account for the largest share with 56 percent of global value. China, Japan, and South Korea remain the market leaders on the VRF market due to the earlier adoption of the systems. As the Chinese government is increasing its targets against air pollution, building owners have started to pay attention to indoor air quality. This has triggered Chinese AC manufacturers to deploy more resources on R&D in order to offer greener solutions, making it a key selling point for end users.

The residential sector will hold a considerable percentage share of the region’s air-conditioning market due to the rising product use in emerging economies including India. Chinese manufacturers will give strong competition to other air-conditioning manufacturers in the region, owing to the lower-priced systems as compared to other globally established brands. Japanese manufacturers are investing in green light, HVAC, and BAS systems/technology to reduce carbon footprints and save energy.

The surging demand for energy-efficient products may impact the Latin American market in a positive way. Regulations related to energy-efficient utilization and an increase in customer awareness are anticipated to drive this regional market’s growth. Increasing exports of compressors in Brazil, Mexico, and Argentina is likely to further drive the air-conditioning market in Latin America. Rapid urbanization and increased spending on infrastructure are also fueling this regional market. Major industry participants like Lennox, Watson Inc., and Daikin Industries Ltd. are planning to set up new plants in Brazil, Argentina, and Mexico.

Economic and population growth, urbanization, and rising temperatures in countries such as Bangladesh, Brazil, Ghana, India, Indonesia, Kenya, and Vietnam are the main drivers for increasing demand for cooling.

In South Korea, the Ministry of Trade, Industry, and Energy raised the standard of rating significantly to increase the distinction of air conditioners’ energy-consumption efficiency grade and promoted development of power-saving technology. As a result, most of the products in the market that used to be the first grade in energy consumption efficiency fell to the fourth grade.

The fluctuation in oil prices in the Middle East had an impact on construction and the AC industry. The AC market in Iran remains affected by the lack of energy subsidies and higher import duties. India was one of the first countries in the world to launch a national cooling action plan the India Cooling Action Plan in September 2018. Sales in the African counties are affected by the trade regimes and high import duties. Nigeria and Egypt have been identified as market leaders in the AC market.

Some key players of the global air-conditioning market include Midea Group, Hisense Electric Co., Carrier Corporation, Panasonic Corporation, Hitachi Ltd., Samsung Electronics Ltd., LG Electronics Inc., Daikin Industries Ltd., Electrolux AB, Sharp Corporation, and Mitsubishi Electric Corporation.

Key growth drivers

The global air-conditioning market is likely to grow significantly in the upcoming years, due to improving economic conditions, rising per capita income, and increasing pollution levels. Technological advancements witnessed in developing countries are also driving the air-conditioning market globally. The rising level of air pollution is harming not only the environment but also the people living in that particular environment. Pollution is giving rise to fatigue and headaches, which are common symptoms caused by poor air quality. This is further propelling the global air-conditioning system market. However, the high cost of air-conditioning system may hinder this market growth. As air conditioning has become more of a necessity keeping aside the needs and wants, the challenge for AC manufacturing companies will be to make air-conditioning systems cheaper and more effective than before.

The demand for air conditioning in the residential sector will hold a substantial share, owing to the rising demand for air-conditioning systems in household appliances and home air conditioning and urbanization. Technological advancements across various verticals and lucrative investments in the automobile sector are anticipated to further fuel the demand for ACs over the projected timeline.

Accelerated penetration of inverter technology

As an energy-saving product, and thanks to standards encouraging their use in several countries, inverter ACs are becoming more popular. In China, inverter ACs accounted for 70 percent of the total retail volume in 2018 (ending July 2018), and grade-one energy-efficient ACs accounted for 44 percent of it, indicating a 14 percent year-on-year growth. Two years ago, inverter ACs represented only 30 percent of all room ACs in Thailand. This figure increased to 50 percent in 2018 and is expected to reach 60 percent in 2019 and 80 percent in 2020. In India, inverter units in split-type room AC market accounted for about 15 percent in 2017 and 35 percent in 2018. Similar trends are observed in Japan, Australia, Europe, Singapore, Taiwan, and Vietnam. However, the percentage of inverters in the traditional USA unitary segment is still very low at 4 percent. One factor hindering the uptake of inverter technology is the high initial cost, which today is roughly 20–25 percent higher while manufacturers are developing inverter units with seasonal energy-efficiency ratio (SEER) reaching 20–24.

“The share of smart air conditioners, particularly in the commercial sector, is increasing as these products enable a higher degree of monitoring and control of air quality. Wireless technology has become much easier to integrate. HVAC manufacturers continue to increasingly implement inverter technology, as well as offering fully integrated systems.”

Saziye Dickson
Senior Market Research Consultant, Worldwide Market Intelligence,
BSRIA

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