Industry cooperation set to usher in a new wave of smart home technology adoption.

The connected home market is on full throttle with nearly two-thirds (6.3 million) of Australian households having at least one IoT at Home (smart home) product at the end of 2021, according to new research from Australian emerging technology analyst firm, Telsyte.

Increased time at home and greater awareness of products and services has seen more than 1 million additional households adopting IoT at Home products such as smart speakers, smart lighting, and smart security cameras since 2020.

The Telsyte Australian IoT at Home Market Study 2021 found sales of IoT at Home products reached $1.7Bn in 2021 (up 15 per cent) and is forecast to grow to $4.4Bn by 2025. The study is now in its ninth year and, according to the Telsyte’s taxonomy (below), the fastest growing categories in 2021 included smart security lighting (up 50 per cent), installation services (up 40 per cent) and smart speakers (up 28 per cent).

The study found interest in smart security products remains high; not just for traditional monitoring but a range of new uses including keeping an eye on pets, children, and for deliveries.

Telsyte believes smart speakers are a gateway product for the IoT market. In 2021 some 2.9 million Australian homes (or 29 per cent) had at least one. Google and Amazon remain the market leaders with over 80 per cent combined installed base share. The research found Apple’s HomePod mini sold more than 125,000 devices in 2021 and is gaining ground following slow sales of its original more expensive smart speaker.

The study found a growing desire for home improvement using technology. Among invested adopters with more than five different types of IoT at Home products, close to two-thirds of their smart home budget is focused on convenience and better connectivity, compared to 45 per cent among potential adopters.

Telsyte believes household appliances are ripe for disruption, and new business models such as subscriptions could emerge from this segment.  In lower cost categories such as robot vacuums, 1 in 10 households have already adopted, with half (51 per cent) of consumers indicating they are interested in a home that will “automatically” cleans itself.

According to Telsyte’s market tracking, the average number of connected devices in Australian homes is set to increase from 20.5 in 2021 to 33.8 by 2025, driven by IoT at Home devices. Around half of this figure is expected to be made up by IoT at Home devices by 2025, with the rest made up of smartphones, tablets, computers, game consoles, smart TVs, and other gadgets.

The exponential growth of IoT at Home devices is expected to be driven by demand for volume products (e.g., smart lightbulbs) and increasingly smart appliances towards 2025.

The lounge and kitchen remain the top two rooms consumers are looking to “modernise” the most. However, the study room, “zoom room”, or home office area, entered the top five spaces smart home products were used for the first time. For example, some now use smart speakers to help them in their home office, for timers, dictation, and other virtual assistance.

Despite the growing momentum, Telsyte research highlights the key hurdles that remain for the industry.

While some commoditisation is occurring (e.g., in smart lightbulbs) and prices are coming down for high-end appliances (e.g. smart fridges), overall the cost of smart home products and services could rise along with growing inflation, prolonged chip shortages, and demand outstripping supply in some tech categories.

The shift from free-standing homes into smaller apartment style living could mitigate the uptake of some products, such as smart gardening and smart doorbells. Additionally, around 1 in 5 (20 per cent) of survey respondents indicated that they might not reside in their current home soon, creating a delay in purchase.

Cybersecurity and privacy concerns have fallen from the number one barrier to third among potential adopters.

Telsyte Managing Director, Foad Fadaghi, says smart home privacy concerns are decreasing but concerns remain.

“Around 30 per cent of people reject any notion of the smart home and are worried about privacy and surveillance,” Fadaghi says.

Among those yet to be interested in a smarter home, concerns of complicated installations has risen from 12 months ago, highlighting a lack of standard which have plagued the industry until now.

Industry growth, longevity hinges on standards

Getting smart devices to work together requires standards-based protocols. The arrival of the new industry standard, “Matter”, aims to unify industry approaches and allow devices across multiple platforms to communicate with each other. Telsyte believes the simplified process and compatibility issues are critical to improving consumer sentiment around IoT at Home devices, especially among those yet to be fully invested.

Matter has more than 120 companies in the alliance, including Amazon, Apple, Arlo, Google, Oppo, Samsung, and Schneider Electric. The final specification is expected to be released around mid-2022 for popular IoT at Home devices such as lightbulbs, power plugs, door locks, security sensors, bridges/hubs, smart TVs, and set-top-boxes.

If there are no supply shortages, Telsyte anticipates at least 30 to 40 per cent of IoT at Home devices sold could be Matter compatible by the end of 2023.

Smart energy to smart driving – EV integration the next frontier

With power prices top of mind with consumers, the smart energy segment remained the largest segment by revenue in 2021 with six out of the top ten smart components households plan to install belonging to the smart energy category.

Better energy efficiency, security and cost savings have been the top three “most important benefits” during the last few years (79 per cent, 71 per cent and 60 per cent respectively).

The increasing awareness of climate change is expected to further drive the adoption of smart energy products. Telsyte believes that use of smart technology in greenfield sites will accelerate as developers look to smart batteries, EV charging stations and biometric systems to differentiate.

Furthermore, smart energy homes are helping to generate demand for Electric vehicles (EVs). Their integration with smart batteries and solar systems, could insulate a household against the rising cost of energy and maintenance cost of non-electric vehicles.

In Australia, sales remain embryonic with less than 2 per cent of new cars sold being EVs. Despite this, Telsyte research shows around 1 in 3 (31 per cent) are interested in buying an EV if there is a charging station available near their home.

Furthermore, Telsyte research shows 1 in 6 (16 per cent) consumers are already interested in new concepts around the future family car, including an all-inclusive EV subscription. Such offerings include the lease of the vehicle, all aspects of servicing and maintenance as well as installation of an EV charging station at the home.

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