M2M market: Smart Home in UK

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M2M market: Smart Home in UK

In their report, the Technavio team covers the present scenario and the growth prospects of the Smart Home M2M market in UK for the period 2014-2019.

Highlights:

  • Almost 24.3 million households, which accounts for 91% of total UK households have ISP connections. Thus, high broadband household penetration in the UK is harnessing the growth of the smart Home market.
  • In addition, high consumer awareness on the smart automation and advanced technologies related to smart home is driving the initial growth rate.
  • Currently, the market is dominated by the Wi-Fi enabled smart home devices. However, slowly the market is expected to be dominated by the BLE-based connected home devices.
  • Due to this technology transition, scope for innovative products is equal for all the vendors. Hence, this region providing an opportunity for the new entrants into this market.
  • Improvement of network connectivity and therefore bandwidth to access the smart home technology is aiding the market to increase the revenue levels.
  • Decline in services charges and offering of bundled devices by major smart home providers are expected to drive the service revenue.

Chart: Smart Home UK market size

Top Vendor offerings
Some of the products offered by the major vendors in the Smart Home M2M market in UK are listed below.

Company Products offered
AlertMe.Com (British Gas) Energy Analytics. Energy Control. Home Automation. Omnia Platform.
BT Broadband Extenders. Home Monitoring. Switches. Wi-Fi Solutions.
Cisco Smart Connected Residential.
Honeywell C7057/CR 7075. EL7305/ EL7316. H4600. H8808/ H8908. LYNX Touch. NetAXS-4/NetAXS-123. Tuxedo Touch. Z-Wave.
Samsung Home Appliances. Kitchen Appliances.
EE Wi-Fi services for the connected home.
Vodafone Broadband Household Internet service.

table: smart home UK market drivers and trends
Smart Home in UK: market drivers and trends
Source: Technavio 2015
Click to enlarge
Market size and forecast
The Smart Home market in the UK was valued at US$2.33 billion in 2014 and is expected to reach US$6.94 billion by 2019, growing at a CAGR of 24.39%.

The smart home market revenue is expected to increase rapidly in the forecasted period. One reason behind the growth is the increase in the electricity bills on an annual basis. In the UK region, an average household spends $2000 on the electricity bills. This has led to the increasing demand of energy conservation to preserve the natural energy sources. For instance, UK government has taken an initiative to roll out smart meter in every home of UK by 2020. Smart meters are the next generation energy generators which displays and controls the energy consumption and also provides the opportunity for remote meter reading. This initiative would help the household to decrease $250 per year by switching to other energy suppliers.

The market is expected to witness the steady growth rate as well as the revenue growth in the period 2014-2017. This is because of the growing awareness among the consumers and the provision of the low bundled service charges by the telecom operators. Due to stringent government regulations, customers deploy smart home applications at their residences and hence the revenue growth can be witnessed.

Suddenly, the growth rate increases rapidly in the year 2018 due to the decline in the prices of the smart home products and the services. Therefore more customers install the systems on a large scale from the equipment manufacturers and the service providers. The installation and the maintenance charges are very low and doesn’t show much impact on the adoption rate. The technology innovations are under the experimental stage in the current position and adopting to the changes very soon may have a significant impact on the growth rate and hence decline can be witnessed in the year 2019.

Chart: Smart Home Market in the UK ($ billions)
Smart Home Market in the UK ($ billions)

Other reason for high revenue growth of the smart home technology in the forecasted period is the growing demand of the security access and the control systems. Customers want to hold their privacy information secured by proper authentication as hacker activities are growing with the developed technologies. So, smart home technology provides the smart cards and the biometric identification systems in place of the legacy door locks providing an easy identification of the unknown entrants. For instance, Nest provides the camera system “Birdi” that has the cloud enabling feature helps to record the short range on spot videos and send to the owner and also the emergency centres if the scenario goes worst.

The Smart Home market in the UK region is witnessing significant growth in the future due to the high penetration of the internet usage among the households. In terms of the online activity, the UK stands first than any other nation in the world. In addition, the improved efficiency through the cloud services for various applications has been spread over this smart Home market. The life expectancy of the people residing in this region is above 80 years who needs assisted living which can be fulfilled with the smart Home applications.

Broadly five aspects can be quoted for the increased adoption rate of the smart home technology. “Convenience” is one of the reason, which helps the users to control the lighting, heating, cooling and all the multi-media systems from a remote location. This helps the user to get connected to the audio and the video devices and can communicate with the people in the other locations. This technology also provides the video feature which creates a home theatre environment giving access to check the visitor’s entry at the door.

Security” is one more aspect with the help of the advanced camera and detecting alarm systems gives the alerts signals to the users and also to the emergency contact centres if required without any manual control. This feature also provides the fingerprint identification in case any unwanted person tries to break in the security system. “Accessibility” is the other criterion for increased adoption rate of connected home technology. This would majorly be beneficial for the elderly people or for the working consumers who can control the daily labour intensive tasks through voice commands.

Efficiency” in terms of reducing the energy resources by controlling the lights and set thermostat devices for the required room temperatures automatically would save the electricity bills. This also reduces the extinction of the natural sources and helps to preserve them for the future generations. “Resale” is the final criterion to be observed. When comes to conventional technologies, smart home features provide high market value giving every chance for the buyer to sell at a great deal providing the investment back in major proportion.

In addition with the improved bandwidth, the connected home has got the capability of functioning efficiently resolving the risk concerns. With the help of the secured login, the products are monitored and controlled by the remote users. The smart Home market also helps to reduce the energy bills through proper controlling by sending the user alerts. Hence it not only enhances the livelihood of the inhabitants but also helps to preserve the natural energy resources for the future generations.

Therefore due to greater benefits when compared to cost of the system the smart technology is providing, there is a significant growth in this market and expected to witness threefold increase
in the future years.

Remark: To calculate the market size, the report considers the revenue generated from the following:

  • In the connected homes category, solutions that have a smartphone application or a web portal for user interface. These include M2M platforms, solutions, and services in the Energy Management and Climate Control Systems, Home Appliances, Lighting Control Systems, Home Entertainment Systems, Security and Access Control Systems, Healthcare Systems, and Others segments.
  • Under Home Entertainment Systems, the report covers only the M2M modules and services involved with home entertainment devices. For instance, for a smart TV solution installed in a home, the report considers the revenue generated from platforms, smart phone application usage, and web portal usage. The report does not include the revenue from the sale of TV sets.
  • Under Home Appliances, the report covers only the M2M platforms and services involved with the home appliances. For instance, the report includes the revenue generated from the M2M platforms and services for washing machines and refrigerators, but not the washing machine itself.
  • Under Energy Management and Climate Control Systems, the report includes the revenue generated from the hardware, services, and installation of M2M devices. It also includes the revenue generated from the applications as well as web portals. For instance, the report considers the revenue generated from smart thermostat products as well as the services related to the same.
  • Under Security and Access Control Systems, the report considers the sales of security equipment, platforms, and services provided by the major connected home security solution providers such as Comcast, and Verizon. The report does not include the security devices that are operated or controlled only with switches, timers, sensors, and remote controls.
  • Under Lighting Control Systems, the report considers the revenue generated from the M2M module, smart lighting devices, hardware, and services.
  • Under Healthcare Systems, the report is restricted to the residential usage of connected health M2M solutions. Hence, the report considers the revenue generated from the wearable devices used by patients as well as the wearable devices, and smartphone applications used by their caretakers. The report does not include the connected health M2M hardware, platforms, and services used by any healthcare service provider.
  • The others category includes the revenue generated from pool control, spa control, sprinklers, and fountains control.
  • Devices or solutions that are operated or controlled only with switches, timers, sensors, and remote controls are not included under the scope of this study.
Report Assumptions

  • In order to calculate the market size for services, average revenue per user for the bundled devices offered by the leading smart home providers are considered. For the forecast period
    the average services charges were reduced 2-5% in 2014-2016, and 10-20% from 2016-2019 gradually every year.
  • For technology, average spending of an user from smart home security, thermostat, and automatic light control was considered. To do the calculation, retail ASP of these devices were calculated from the leading online sales portals, and price mentioned by the vendors and leading smart home providers were considered.
  • Technavio believe that, Smart Home market will witness significant changes in Technology innovations. Most of the equipment will move from Wi-Fi enabled communication to BLEbased communication. Hence, the front-end price of the devices will decline moderately in 2015-2017. Also, due to lack of clarity on adoption of BLE technology, the market won’t witness a major decline of ASP of the devices in 2015-2017. After 2017, there will be significant decline of the ASP of the devices.
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