2020: The End of an Era in Smart Home

Like every industry, the global pandemic of 2020 impacted the smart home market. However, unlike many industries, the pandemic didn’t prevent industry growth—it helped it. New devices, services, and technologies were brought to market and were met by a consumer appetite to improve the comfort, efficiency, and safety of their homes. Even so, 2020 may yet stand as a landmark year for smart home, marking the end of an era and the beginning of the next. What will define the new era will be key initiatives developed through 2020 that will provide the bedrock for a transformation of the smart home market throughout the decade. It is worth looking at the key developments made this year and taking stock of the real change they herald.

The year 2020 saw the smart home industry laying foundations for smart home’s key place in consumers’ digital lives:

• CHIP: Although revealed at the end of 2019, it was throughout 2020 that Project CHIP specifications have taken shape, with the first specification set to publish in 2021. The project to standardize device communication data structures across product categories will bring scale to a market long restricted by vendor-specific implementations. Also in November, the project extended its efforts into the commercial building domain in a step that further broadened the market for smart home device and systems development. For more detail, see this ABI Insight.

• New Protocols: The year 2020 saw new protocols enter the smart home market. While Xiaomi demonstrated the potential for UWB in enabling gesture control in the home, Apple embedded UWB in its HomePod mini, heralding the potential for new levels of awareness and control across smart home systems. For its part, Amazon embedded Sidewalk (its LORA variant) in a host of new Echo and Ring devices in a bid to leverage smart home penetration to create a new metro network capable of supporting a range of applications across public areas. For more detail, see this ABI Insight.

• Device Intelligence: In September 2020, Amazon unveiled its AZ1 AI processor and its inclusion in key Echo devices. Smart home video cameras have been increasingly leveraging edge analytics to deliver greater device capabilities without the security, processing, and financial overheads of relying heavily on cloud computing resources. The shift into voice control devices highlights the value of edge analytics in devices that don’t have the heavy demands of transmitting HD video streams. Throughout 2021 and beyond, onboard edge analytics will increasingly push into a range of smart home devices from controller gateways to smart locks. For more detail, see this ABI Research report.

• Platform Intelligence and Control: In 2020, Amazon extended its Hunches functionality to enable proactive control of smart home devices. Previously the platform would make suggestions to the end user about actions such as putting a water heater into energy saving mode when the home is empty, but the new functionality removes the suggestion and can take action directly. Last year, Apple patented ways for smart home systems to recognize individuals within a home and use that to trigger personalized actions from smart home devices. UWB could deliver the levels of detailed understanding within the home to enable such in-home intelligent control.

• Consumer Engagement and Investment: The global pandemic highlighted the value of smart home control and aligned many of the efficiencies in smart home control to a new concern over wellness and environmental management within the home. More time spent at home and reduced spending outside of the home fueled investigation and investment among consumers. Although installation services were hampered, many aspects of the smart home market saw strong demand in the second half of 2020, across a range of devices, appliances, and consumer robotics. For more detail, see this ABI Research market data.

• Segment Desegregation: Increasingly smart home offerings and smart home consumers are looking for smart home installations that mix and match devices not just from different vendors but also from traditionally distinct market segments. Off-the-shelf devices are included in high-end installer-delivered systems. While this trend began in earnest with the popularity of voice control platforms, it was highlighted in 2020 when high-end smart home equipment player Savant acquired GE Lighting, taking the upscale provider into the stores of most DIY retailers with products as fundamental as smart light bulbs. In another example, Google took a stake in ADT, ingraining the company’s smart home offerings in the long-standing security player’s offerings and product development. For more detail, see this ABI Insight.

The developments and initiatives of 2020 listed above will provide foundations for a new smart home market. The year 2020 signaled that the Wild West-style days of each player competing for new territory (often through loss-leading voice control devices) to stake out single-ecosystem installations are ending. Competition will, of course, remain, but it won’t be at the level of single-ecosystem device connectivity. That step forward opens the smart home to far wider investment both on the supply side as consumer and home goods providers can develop products that apply across the smart home opportunity, and also on the demand side where property developers and managers can invest in smart home systems that aren’t beholden to a single ecosystem and can provide investment longevity and ROI. The introduction of new and emerging technologies and use cases will push the broad smart home market from specific applications to whole-home systems capable of understanding and reacting to the individual needs of the home and its occupants.

In 2020, we set out where smart home is heading in terms of functionality and capability in our report Transformational Smart Home; some of those capabilities started to emerge in 2020, and others will develop further out. What is clear is that the smart home industry is emerging as an industry inextricably linked with new and existing services and industries throughout the home and beyond. As the industry moves toward that vision, there remains a great deal of further development. Standardization on device communications is one thing, but there remain key areas where industry-wide cooperation is required, including data management and exchange, device and system security, monetization, and more.

Perhaps the greatest challenge will come from changing awareness about the privacy implications required of a transformational smart home. Last year also saw growing concern over the capture and use of personal data by the largest technology providers in the world, and each has had a strong incentive and a greater or lesser degree in engaging in the smart home market. Amazon, Google, and Facebook have all faced greater scrutiny about the use of personal data, and while Facebook has struggled in smart home, it is a key method for both Amazon and Google to push the reach of their data collection capabilities into the minutiae of consumers’ lives. As products extend into autonomous systems, it is clear that greater scrutiny about how collected data is leveraged and valued will be key.

One key aspect of the Wild West motif of the smart home market remains: in many markets, there is limited regulation regarding the collection and use of personal data. Tougher regulation and/or greater consumer concern could have a major impact on the incentives for smart home engagement for some players; however, 2020 may have been the year where the adoption and awareness of smart home has pushed the industry beyond the need of such players to educate and draw in smart home users. Regulation, while potentially limiting data collection and monetization, may even positively impact the ability of smart home services to deliver long-term recurring revenues. The ability to underwrite smart home offerings from Google and Amazon in return for data value has impacted the ability of smart home-dedicated players to survive with similar no-subscription models (see this ABI Insight). Even in the unlikely event that regulation and consumer concern limit the smart home engagement of players such as Google and Amazon, 2020 may have moved the industry past the point where it would be its death knell. Above all else, 2020 may also be the year where smart home reached a level of maturity that pushes it past dependence on the largest players to drive investment and consumer engagement. It may yet be the year that sends smart home in the direction of greater consumer data privacy and control.