The serious side of the smart home market

Many forces are converging in the smart home market, influencing its future direction, like inflation, energy prices and climate change. Like never before, the smart home market is prepared to be the catalyst for consumers, a lever that can be used to combat these global phenomena. At the forefront are energy management tools that can be called upon to reduce energy usage, saving homeowners money, all the while providing utilities with options to keep the lights on, avoiding rolling blackouts. Matter, due for release in the Fall of 2022, will play an important role but so will evolving sales channels, which will bring smart home technology to consumers via pathways besides retail. 

According to the latest smart home device analysis report from Omdia, the global smart home market was valued at about $79bn in 2021, an increase of 27% relative to 2020. The market is forecast to reach $280bn in 2026, at a compound annual growth rate (CAGR) of 28.8% from 2021 to 2026. In terms of unit shipments, there were about 624million smart home devices shipped globally in 2021, increasing to 1.9 billion shipments in 2026. Likewise, the installed base for smart home devices is forecast to more than triple over the next five years, reaching 5.4 billion devices globally in 2026. 

Understanding and managing the home has not been simple to this point, with many point devices what has been lacking is a core system to manage the home, especially relating to energy management. This means the energy sector and homes are at an inflection point. As legislation, not only in the US but other regions like the EU, require homes to switch from gas and other energy sources to purely electric, the strain on existing grids, components and infrastructure is reaching extreme levels. In July 2022, the US Senate struck a deal that aims to expand consumer tax credits for electric vehicles (EVs). The bill adds tax credits for used EVs and removes the 200,000 car sales exemption, meaning Tesla cars are once again eligible for the credit. Today, many homes, especially in the US, aren’t equipped to handle charging one EV, let alone two EVs. For example, the Ford Lighting is said to require a 90 AMP charger, with many US homes topping out at 200 AMP service. Increasing service to homes is a costly and time-consuming process, not only for homeowners but utilities as well. 

In short, the energy space is not just about how much energy is being used but increasingly how it is used. For example, as more homes becoming fully electrified, a solution is needed to manage when the EV is charged or when electricity is drawn from batteries or solar arrays. A ‘smart’ solution will also determine when there is a surplus of energy available and use this time for running major home appliances or HVAC systems. Consequently, smart electrical panels will play a pivot role as more homes become 100% electric, add one or two EVs, install solar arrays, batteries, and generators because things will get complicated fast for homeowners and utilities can rely on the enhanced connectivity to bring more devices into distributed energy resource management systems (DERMS) and virtual power plants (VPP). 

While energy systems, like smart electrical panels and breakers, will aid homeowners and utilities, Matter will bring a new level of connectivity and interoperability to homes, dramatically increasing consumer choice of brands and devices to add to compatible ecosystems. As inflation drives down spending, consumers will likely be more cautious and strategic when purchasing smart home devices, but Matter could broaden the number of low-cost choices for consumers, bringing devices once incompatible with HomeKit, into the fold. With the exception of only a few categories, Omdia expects most smart home devices will see a price reduction in the coming years, meaning smart home devices will not only be more compatible but less costly. 

Other sales channels, like apartments (multifamily dwellings), home builders and tradespeople are all expected to see a rise in smart/connected device adoption over the next five years. In fact, in 2021, the global installed base for smart home devices in apartments reached 9.9 million. In 2026, the installed base is forecast to exceed 180 million. Likewise, in the US, there were more than 1million smart home devices installed with new home construction in 2021 and is forecast to reach 13 million in 2025. 

The role of the smart home is becoming more serious. Smart faucets, showers and shutoff valves can monitor water usage and detect hidden leaks, which is becoming more important as regions around the world come under water restrictions due to extreme drought conditions. This means plumbers, electricians and heating/cooling technicians will be relied on more in the future to help homeowners make important decisions, whether it is personal or to comply with local laws and regulations. The smart home market is on the cusp of a dramatic shift, away from convenience and novelty to pivotal role within the community.