Smart homes is the current moving trends of building residential and commercial space across the globe and UAE has become a destination of marvel engineering.
Definition / Scope
A smart home is a home that is equipped with a special connected platform – integrated system is automated and controlled via a central unit enabling its occupants to remotely control and program an array of automated home electronic devices.
Home Automation include centralized control of lighting, HVAC (heating, ventilation and air conditioning), appliances, security locks of gates and doors and other systems, to provide improved convenience, comfort, energy efficiency and security for the customers.
The advancement in technology has also made these systems more affordable, secure, and easier to install and use. In the recent years, smart home industry has gardened a large popularity due to:
- High affordability by individuals
- Simplicity through smartphone and tablet connectivity.
Traditional home automation devices were designed to control systems within a house and within a limited range of connectivity, however due to regular developments in the technological and connectivity areas of appliances, people can now monitor and control these devices when they are on the move.
Energy management system, security and access control systems are driving the smart homes market. The growth of the smart homes market in the coming years is expected to be high with the market size estimated to reach $58.68 billion by 2020, at an estimated CAGR of 17% from 2015 to 2020.
North America will lead the chart and is the birthplace for various industry majors.
Market Overview
The smart home market is going to be one of the sector with the highest growth rate in the real estate sector across the globe. The market size of this industry is estimated to be $58.68 million by 2020 at an annual growth rate of 17%.
The government has understood the importance of energy efficiency in the homes due to which different initiative are being to allow different market participants enter the market. North America is the leading country for smart homes with having a market share of 41%. Smart Home or Home Automation is a word coined for automation for the home, housework or household activity.
Top Market Opportunities
The main aim of any people based sector is to make its customer base happy and satisfied. Most of the Home automation is done during the construction phase of a house; but due to emergence of wireless technologies, there are companies which even provide automation in existing homes.
Here, the Smart Home Industry meets with the Telecommunications Industry- Each new technology in the communication sector is taking a step closer to the ultimate aim of Convergence i.e. a customer receiving multiple services to his home over the same channel; which includes a Broadband line, a landline and cable TV service on the same channel as customers today want to be hassle free when it comes to payments towards the services availed.
The Ultra High Speed Next-Generation-Networks like Fibre Optics are highly secure, reliable and scalable. The core features of fibre optics make it a perfect medium to deliver Smart Home services along with the conventional Triple Play .i.e. Voice, Video and Data.
This whole model also provides certain advantages:
- Customers with no smart home technology can now get the same without much hassle due to minimal wiring and masonry work.
- Customizable offerings wherein a customer can choose the level of automation he/she may want in the house
- Allows the customer to pay for Entertainment, Internet and Data service and Home automation service in just one bill.
- Telecom industry has a huge potential in this unexplored area, and also as they do not have to invest significantly in terms of capital expenditure.
For smart Home solution providers, it adds an extra source of revenue in addition to their full scale integrated offerings that they sell under their own brand names.
According to GSMA, the Middle East is the second fastest growing region for M2M connections in the world and the number of M2M connections is expected to reach a quarter of a billion this year, with China at the forefront of this growth with 50 million connections.
It is reported that in 2015, du- Telecom Company will offer its customers a full suite of smart home solutions from smart television to air conditioning and lighting for about US$2,000. Companies like Samsung and LG have already launched smart fridges, washing machines and vacuum cleaners that relay information back to the user’s mobile phone.
Market Trends
The main growth of smart home industry are:
- Rising awareness towards energy conservation and to manage energy consumption through automation technologies.
- Increase in the use of smartphones where home automation based apps are also contributing to the growth of overall home automation market globally.
Smart Homes Technology is one of the many technologies tide which is gradually taking over the globe. In simple words smart home technology provides effective communication between devices at one’s home and gives benefits of comfort, convenience, energy savings, entertainment and security.
Industry Challenges
The entire real estate industry has faced a jolt and breakdown and Dubai is no exception and is currently going through a restructuring. During the boom in the UAE real estate sector, properties were sold even before they were constructed and it changed drastically during the crisis as the first owner had no intention to stay there.
During these trying times the main intention for the developers was to make profits and so attention was paid to increase the property value by installing any form of home automation.
But now, due to continuation of crashing prices, the property developer has to differentiate himself by creating something more valuable to lure the customers.
These has come in the form of Smart Home offerings. In spite of the advantages provided by this market, there are significant challenges that home automation providers need to deal with:
- Educating the developers and architects of the benefits of having a fully automated home also involved in luxury/semi-luxury apartments. It would also help them – the developers to expand their portfolio in commercial offerings.
- Interact with them to make appropriate changes in the structure and architecture of the building to try out the implementation of automation technology to bring out the best result for the end user.
- To ensure that the developer decides to sell the properties at a price which includes the installation and package costs of the home automation solution that has been provided so that he doesn’t incur losses.
The main market risk for this industry would be that that do we actually trust technology enough to let it control our homes? And the industry still remains fragmented and there is no standard platform for home automation. As Internet of Things is gaining popularity in Dubai, due to Smart City initiatives, home automation is expected only to boost up.
Internet of Things is defined as the network of devices that contain embedded technology to sense or interact with their internal state or external environment.
According to Shifra Smart Homes, these are the factors which people consider important while selecting a smart home solution.
Other Key Market Trends
Awareness also plays a very important role in order to bring this technology in the homes of people. Smart Home technology in the Dubai region has been around for quite a while, but the awareness quotient for smart homes wasn’t very impressive with only 47% responding positively when asked if they were aware of the technology, according to Shifra Smart Homes.
Based on the data we collected, only 16% perceived of this technology as a completely integrated solution whereas the rest were either not aware of this technology (as seen above) or thought it to be more like an automation or complicated system. Fairs, Exhibitions and Word Of Mouth are the major sources of awareness of smart cities in UAE.
Competitive Factors
- Home automation solutions are provided in from low, medium to high range of sophistication in the kind of technology and price range. With the variety of equipment vendors available in the market, new players will be a threat for market leaders. Differentiation of the services remains the most important factor in ousting your competition.
- Lower pricing of integrators allows them to be chosen over sophisticated smart home players.
- Large number of individual product providers impose an advantage to the customers as they have a variety of options to choose from.
- Large number of OEM’s existing globally where the products can be sourced from and UAE being a very lucrative and emerging market for any supplier to sell in the region, the bargaining power of the supplier is reduced.
- Smart Home solution provides a tough competition with a large number of companies providing the same content and also the pricing for these market players is similar so, therefore there is a limited services in terms of offerings.
Key Market Players
- HDL Dubai
- Smart Home Group
- Utech UAE
- Shifra Smart Solutions
- Novus Automation
Strategic Conclusion
Though very aspirational, The Smart Home sector is still in its progressive stages where on one hand it is a booming sector with other sectors merging with it and on the other hand it has a long road to go in order to make a mark in the industry as a whole, and providing profitable services to people; The infrastructure is already in place, particularly in Abu Dhabi, the world’s most fibre-connected city, and Dubai’s Smart City 2020 plan will also encourage investment in smart homes.
