Smart speakers and video entertainment products dominate smart home devices market

The global smart home devices market, inclusive of smart speakers, digital media adapters, lighting and thermostats, is forecast to ship 549.5 million devices in 2018, growing 26.8 percent over the prior year. The two fastest growing categories, smart speakers and video entertainment products, are expected to represent 71 percent of the market in 2018 and see a CAGR of 12 percent from 2018 to 2022.

The video entertainment category, comprising largely of smart TVs and digital media adapters, is expected to be the largest part of the smart homes market. With TVs being the centerpiece of many homes, device and platform makers are competing for users’ attention with the inclusion of smart assistants and other over-the-top services. While Amazon’s Alexa leads in this space today, the Google Assistant is expected to gain dominance in the future as an increasing number of international brands include support and consumers’ familiarity with the Assistant on smartphones leads to growing demand for the Assistant on TVs, according to the International Data Corporation (IDC).

However, the number of smart assistant-enabled TVs and digital media adapters shipped remains relatively small as the smart speaker overshadows other form factors in which smart assistants can be accessed in the home. This trend is expected to change in the near future as more vendors enter the market with smart assistant-embedded entertainment devices.

The race for dominance in the smart speakers segment is becoming fierce. Smart speakers are one of the primary modes of access to a smart assistant, and consumer awareness and adoption of these devices and platforms is increasing rapidly thanks in large part to extensive marketing campaigns by Amazon, Google, and Apple. Amazon’s portfolio of Alexa-enabled speakers continues to represent the lion’s share of the market, but Google is gaining momentum and showing signs of closing the gap rather quickly. Apple, on the other hand, is struggling to get out of the gate with sluggish HomePod sales and shipments – in part due to the device’s high price point and Siri’s inferior performance as a smart assistant platform compared to Alexa and Google Assistant.

Outside of video entertainment and smart speakers, tremendous growth is expected in the home monitoring/security category as Amazon’s recent acquisition of Ring comes to fruition by driving prices down and making the category more accessible. Meanwhile, Google’s move to maintain Nest as a premium, subscription-based service will hinder growth in the short term as consumers struggle to see the benefits of recurring payments.

However, as the market evolves, subscription services from the likes of Nest or other smart home products are likely to steal the share from traditional home monitoring service providers. Other devices like connected thermostats, smart lighting, and other products will round out the rest of the smart homes market. Growth for these categories is expected to be 25.3 percent as these products are often the second or third purchases on a consumers’ smart home journey.

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