Smart devices are critical entry point to IoT ecosystem, IHS Markit Says
But as smart devices face pricing pressure, services are where the money’s at
As smart functionality makes its way into homes and businesses, two devices are gaining a foothold into broader ecosystems to maximize growth and revenue opportunities: smart speakers and smart meters. No longer simply intelligent appliances in the home, these devices are becoming key entry points into the massive Internet of Things (IoT) value chain. According to business information provider IHS Markit (Nasdaq: INFO), by the end of 2021, there will be an installed base of 328 million smart speakers and more than 1.13 billion smart electricity, water and gas meters.
“No matter the type of ‘smart’ device, device makers face the same challenge: keep costs down while increasing functionality,” said Paul Erickson, senior analyst for connected device research at IHS Markit. “The IoT is transformational for connected devices, and vendors large and small are vying to be part of the market. Many, like Google and Amazon, are selling their devices at or below margin because they understand the long-term opportunity lies in the applications and services these devices make possible.”
Smart speakers: growth, growth, growth ahead
Smart speakers, which enable voice-based media playback, smart home control, telephony, messaging, e-commerce and informational queries, use a range of connectivity options to leverage artificial intelligence (AI) and Cloud capabilities to enable an ever-increasing range of IoT devices.
By 2021, smart speaker revenue is expected to reach $11.2 billion, up from $6.3 billion in 2018, IHS Markit says. “While many options are available to device makers to enter the home ecosystem, the cost and convenience advantages of smart speakers will ensure that demand remains strong for years to come,” Erickson said.
“The smart speaker concept is most powerful when it leverages large, established ecosystems where there is broad app and development support across devices and platforms,” Erickson said. “These ecosystems allow the speakers to access diverse information and e-commerce resources and to receive support from other smart home devices.”
Smart meters: bridging the gap between utilities and their customers
Basic utility meters only monitor power usage, limiting the ability of utility companies to interact with end consumers. Smart meters expand the capabilities of utility companies by providing more regular and informative data, allowing better usage analysis, time-of-use rates and subsidies, leakage warnings and more.
“Smart meters are revolutionizing the way utilities and consumers interact, enhancing capabilities beyond the ‘meter to cash’ process,” said David Green, research manager for smart utilities infrastructure at IHS Markit. “Smart meters will be an increasingly critical entry point into utility ecosystems aiming to create more intelligent, efficient and cleaner electricity networks.”
Like smart speakers, smart meters are anticipated to enjoy considerable growth in the years ahead. Over 188 million smart meters will be shipped in 2023, generating $9.5 billion in hardware revenues, IHS Markit says. In 2023, the installation base of smart electricity, water and gas meters will exceed 1.35 billion. “Smart meters form the backbone of the data collection system for utilities, paving the way for entirely new categories of value-added revenue,” Green said.