China’s smart home industry has completed market cultivation and has entered the promotion stage. Numerous smart home manufacturing companies have joined the smart home manufacturing sector, with various smart home terminal products continuously emerging, functionalities being improved, quality being enhanced, and applications becoming more user-friendly.
Currently, the main market for smart homes in China is still in some high-end sectors: villas (retail, engineering) and smart communities (engineering). The fastest-growing markets are smart hotels (engineering) and smart offices (engineering), while the smart home market for ordinary residential areas (retail) is developing very slowly.
The primary reason why smart homes are difficult to penetrate ordinary residential areas is still the high price. Currently, the cost of home automation is generally above 100,000 yuan, which is hard for the general public to accept. If the price of smart home systems could drop to the range of 30,000 to 50,000 yuan, with a cost of 500 to 1,000 yuan per square meter, such smart home products would be more practical and could also provide reliable and stable conventional functionalities.
In 2016, the national sales area of commercial housing reached 1.573 billion square meters, a year-on-year increase of 22.4%. The potential annual new market for residential smart homes is over 603 billion yuan; with more than 400 million households in China, the potential stock market for residential smart homes is around 12 trillion yuan. Additionally, as an application platform, smart homes can generate countless business demands, similar to PCs and smartphones. Residential households will become the focal market for companies competing in the smart home sector. Thus, it is evident that the market prospects for China’s smart home industry are very broad.
Overall Industry Development Trends
Since the concept of smart cities was proposed, enthusiasm for construction has been continuously rising across various regions. Currently, China has announced three batches of smart city pilot projects, totaling 290 cities. According to the deployment of smart city construction by relevant national ministries and local government arrangements, it is expected that by 2017, the number of cities initiating smart city construction and those under construction will exceed 500. Forward-looking predictions suggest that as the construction of smart cities accelerates, the related market scale is expected to expand to hundreds of billions, even trillions.
Smart cities represent a new model that integrates modern science and technology, consolidates information resources, and coordinates business application systems to enhance urban planning, construction, and management. The initiation of the national smart city pilot work has provided greater growth space for smart homes.
Smart homes, as a tertiary indicator in the national smart city pilot indicator system, mainly refer to the construction status of home safety, convenience, comfort, artistry, and energy conservation. This includes: 1) smart home control, such as smart appliance control, lighting control, anti-theft control, and access control; 2) digital service content for homes, including the installation of home facilities. Currently, major pilot cities across the country have begun the construction of smart communities. The Jinjiang District of Chengdu, Sichuan Province, has launched the province’s first smart community pilot project, with smart homes serving as the basic model for promotion throughout the province. Shenzhen, as the leading city in the construction of “smart communities” nationwide, has accumulated 162 pilot projects. The smart community in Chongqing adopts a 1+N model, selecting 82 communities as smart home pilot projects to create a “smart community”. Currently, Chongqing’s “smart community” covers 760 neighborhoods, benefiting over one million people.
Industry Structure Development Trends
With the development of the smart home industry, its competitive landscape will also become increasingly clear. Overall, the main competitive forces in the smart home industry will be divided into four major camps: terminal manufacturers, internet companies, video websites, and operators.
The representative companies of terminal manufacturers include Midea and Haier, with their layout in hardware, product forms including smart TVs and smart appliances, and a business model based on hardware revenue;
Internet companies are represented by BAT, Xiaomi, and 360, with their layout in hardware + software + services + content, product forms including smart TVs, boxes, routers, and portable Wi-Fi, and a business model based on hardware revenue, data acquisition, backend operations, and service integration;
Video websites are represented by LeTV, iQIYI, etc., with their layout in hardware + content, product forms including smart TVs, and a business model based on hardware revenue and annual service fees from content;
Operators are represented by telecom, mobile, and unicom, with their layout in hardware + software + content, product forms including smart applications and routers, and a business model based on annual service fees from content.
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