IC opportunity | Seize smart home market of 650 billion
When pandemic we work home online. Many people have to deal with three meals in the kitchen, and look after the elderly, children or pets at the same time. Staying home and consumption upgrading bring about an explosion in demand for smart home equipment. This year, China’s smart home device market shipments are expected to reach over 260 million units. Smart home of whole house is covering more and more ordinary families, giving us a different way of life: turn off the light simply with your fingers or mouth, open the curtains lying in bed, get the rubbish packed without hand, get the floor cleaned automatically......
IDC expects in 2022 China’s smart home device market shipments rise 17.1% year-on-year, over 260 million units
Source: IDC - 国际数据公司 - 中国
After epidemic outbreak in 2020, the smart home devices market also experienced a IC shortage due to the production capacity of consumer electronics, especially mobile phone electronics. After a period of recovery, consumer electronics led by smartphones is heading towards an inflection point. Facing IC order cutting, however, the growth of the emerging smart home devices is impressive (expected to reach 17.1% in 2022).
01 Overview of Smart Home Market
A smart home is a living environment based on a house and installed with smart home systems. To achieve ideal smart living environment, the integration of related facilities is required.
In 1975, the first common network technology communication protocol home automation - X10 was created and separate electrical devices began to change into a system. 1978 saw the creation of its accessory products, namely a 16-channel command console, a light module and a device module. Soon, the wall switch module and the first X10-timer came out. In 1984, the "City Place Building" project by United Technologies Corporation kicked off the "smart building" phase. Later, the smart home trend began to sweep the world.
In the 1980s, the three-piece of electrical appliances are still a rare luxury for ordinary Chinese families. When color TV, refrigerators and washing machines became common, they were more like electrified furniture in a corner, to meet our basic needs. Today, a smart house is no longer a technological fantasy. Hardware such as ICs and sensors forms "bricks and tiles" of smart home; network communication, security, automatic control, audio and video and other home life related facilities integrate. It brings a huge change to our daily life, work life and redefine our home life. Efficient life takes the place of tedious household time, it’s convenient, energy-saving, environmental, safe and reliable, human living environment will have a great improvement.
According to the classification of smart home, the four major application areas with the highest awareness are smart security, smart lighting, smart home appliances and smart audio and video, which overall account for 76% of the market share of smart home products in China (2018). In addition, there are smart central control, smart communication (including building intercom), smart access control and smart sensing.
Smart home is based on a diverse range of smart home devices. IDC's report in March 2022 shows that China's smart home device shipped 63.37 million units in the fourth quarter of 2021, up 4.1% year-on-year. 2021 China's smart home device market shipped more than 220 million units, up 9.2% year-on-year. Behind the nearly double-digit shipments is the upgrading and adjustment of China's smart home market, with new development opportunities springing up.
China has become the world's largest consumer of the smart home market. According to forecasts, the size of China's smart home market could reach RMB 651.56 billion in 2022.
Source: IDC - 国际数据公司 - 中国
With the increasing maturity of AIoT, 5G and other technologies, the smart home industry is moving from single smart product and smart interconnection to overall smart home. Once there were only hard and soft decoration, now there is “smart decoration” which can become standard.
People no longer buy single smart home product such as a smart TV or a smart toilet, but rather buy a complete set of smart home products in a "one-stop shop" fora a truly smart living experience. All basic equipment, from the door, to lighting, curtain, HVAC and others, is given intelligence, functions of TV, refrigerator and washing machine are more diverse and smarter. The center of smart home transforms from separate products to single use case, eventually to user personalization and home line.
In the future fully intelligent smart home, there will be a smart center, which can integrate multiple technologies of deep learning, interactive language, avatar understanding and other domains, with the support of camera, communication IC and other hardware. Then technology and hardware stability and compatibility will get improved, which will bring new challenges and opportunities to upstream IC industry.?
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02 Smart Home and IC Industry?
In the long IC industrial chain, smart home is part of downstream emerging end device market. Let's focus on the core of smart home industrial chain: the upstream is technology part, including IC and other part suppliers, module manufacturers, sensor manufacturers, etc. The midstream is manufacturers of whole smart house, single smart product and traditional home appliances, while the downstream is sales.
Upstream industry is related to transmission, sensing, and computing of smart home. IC suppliers include wireless communication IC suppliers, sensor suppliers, smart home IC solution providers (such as Marvell, ST, Silicon Labs, TI, Qualcomm), etc.
Smart home products require a wide range of ICs, mainly the following three categories: master control ICs (MCU & SoC), communication ICs and sensor.
MCU
It’s MCU that control and realize the functions of smart home and other IoT terminals. MCU, the kernel component of intelligent control, is a miniature computer, consisting of CPU, memory and various ports. Compared with 8-bit and 16-bit MCUs, which were the mainstream of the market in the past, 32-bit MCUs have been developing rapidly in recent years due to their efficient performance and are widely used in smart home and IoT. According to IC Insights, 32-bit MCUs is dominant since 2015. Thanks to the development of IoT and smart cars, from 2021-2026, 32-bit MCUs will grow at a CAGR of 9.4% to US$20 billion.
According to IHS, the CAGR of China’s MCU market in the past five years is 7.2%, four times of the growth rate of the global MCU market in the same period; China’s MCU market reaches 25.6 billion yuan in 2019. In the Chinese market, consumer electronics is the largest market for MCUs, accounting for about 27%.
In the era of smart home, for MCUs, more functions and certain arithmetic are required. Although the MCU market is divided by six major overseas manufacturers ST, Renesas, NXP, TI and Infineon, with the development of Chinese IC industry, many MCUs now have Chinese alternatives with lower price.
SoC
SoC (System on Chip), is a chip circuit that integrates CPU, GPU, NPU, memory, baseband, ISP, DSP and other key elements on a single chip to achieve complete systematical functionality. Compared to MCUs, SoCs tend to be more powerful, have more integrated functions, can support complex multitasking systems, and are more expensive. SoCs generally undertake the task of running calculations (e.g. implementing voice recognition functions) and MCUs are mostly used to perform controls (e.g. driving motors).
Taking smart home audio as an example, Bluetooth SoC manufacturers include comprehensive ones such as Qualcomm, Nordic, MediaTek, and professional ones such as Broadcom Integrated, Torchcore Technology, Jellyfish, CSCL, involving smart speakers and other smart home devices.
With AI and 5G technologies, it’s already era of Internet of Everything. AIoT market is gradually heating up and smart home is one of the four major application areas of AIoT. SoC greatly promotes AI. The SoC integrates the functions of other chips and plays a role in the sensors of smart home device, like biometric sensor SoC, environment modeling and positioning navigation (SLAM) SoC.
The incremental market for end applications in China's SoC industry is promising. Smart wearable devices, smart homes, smart logistics, autonomous driving, all these consumer electronics, commercial electronics and automotive electronics provide huge momentum for SoC market growth, this year China's SoC production expected to reach 18.5 billion.?
Communication IC
The key to connect smart home devices to internet is the communication networking technology, it needs communication ICs like Zigbee (short-range low-speed connection) IC, Wi-Fi IC, NB-IoT (cellular network) IC, Bluetooth IC and so on. Now Wi-Fi and Bluetooth ICs are mainstream, accounting for over 60%, representative suppliers include Qualcomm, Broadcom, TI, Nordic, NXP, Silicon Labs, etc.
With use case broadening and higher demand of smart home, there is a broad market of localized ICs in China. The level of localization of wireless communication chips has been enhanced, for example, after 2018, Torch Core Technology and Jellyfish Technology laid out Bluetooth 5.0, which gradually entered the high-end Bluetooth market.
Sensor
Sensors, important devices for collecting data and sensing the environment, have developed rapidly recent years. Over the years, the combination of sensors and MEMS is a new technology trend. MEMS sensors, integrating communications, CPU, battery and a variety of sensors, have small size, low power consumption and cost, high integration and intelligence.
At present, the main applications of sensors in the field of smart home are: voice interaction sensors, LIDAR sensors, infrared sensors. Head suppliers of sensor are Honeywell, Bosch, Omron, Siemens, occupying more than 70% of the market share in China.