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Assessment of COVID-19 Impact on the Intelligent Home Market

by William Ablondi | Mar 20, 2020

It became official on Wednesday March 11: COVID-19 was declared a pandemic by the World Health Organization. The outbreak of the coronavirus has spread from Asia to the West and there are more unknowns and questions than facts and answers concerning the virus. Measures to limit the spread of the virus, -social distancing, self-isolation, closing of businesses, schools and limiting travel among other measures - are wreaking havoc on economies around the world.

My colleagues David Watkins, Eric Smith and I prepared a report of our perspectives on the impact COVID-19 will have on the Intelligent Home market. The report outlines three potential impact scenarios on the intelligent home market addressing three key questions:

  1. What will be the impact on the intelligent home market?
  2. Despite rapidly deteriorating business conditions and elevated consumer fears, are there opportunities that can be addressed?
  3. What steps should companies take to mitigate the negative impact on their businesses due to COVID-19?

You can find it on our website here.

WE couched our assessment in the framework of three possible scenarios for how COVID-19 could evolve that were developed by our colleagues in Strategy Analytics’ Enterprise & IoT Group:

  • Positive Case: Community transmission becomes contained by the end of Q2 and the economic impact is relatively short-term
  • Base Case: It takes all of Q2 for community transmission to decline with economies beginning to recover later in Q3 and on into Q4.
  • Negative Case: The entire year is impacted as seasonal changes have little impact on transmission which drives a recession that lasts for most of 2020.

As of this writing, we are expecting a scenario somewhere between the Base Case and the Negative Case. As mentioned, infection rates are declining in countries first affected and all countries and governments are working to limit the spread. In addition, governments are taking measures to support their economies, and medical technology is advancing rapidly to treat those infected and develop a vaccine. However, COVID-19 is currently spreading rapidly around the world, wreaking havoc on all industries, financial systems, and medical facilities. Remote working, social distancing, and self-quarantining are the new norms.

We also polled our contacts in the industry to understand what they were experiencing and shared that in the report. Firms represented included Apple, Dell, HP, Leedarson, Lenovo, Roku and Tuya.

We developed impact statement for the Smart Home, Consumer Electronics and Smart Speaker markets. Some highlights:

Smart Home

  • Spending on security services will be adversely affected as we enter financially challenging times as happened in the 2008 recession.
  • Do-It-Yourself (DIY) solutions are likely to become more popular as consumers prefer not to have technicians entering their homes thereby reducing expenditures on installation services.
  • Spending on smart home solutions will decline7% to 8% in the Base Case and 12% to 18% in the Negative Case in 2020 and 2021.

Consumer Electronics

  • The disruption to the supply chain in China following the closure of factories and reduction in the workforce has had some impact on most global CE device makers.
  • Close to 50% of the world’s LCD panels for TVs, notebooks and monitors are made in China and a number of LCD factories have been closed. This has resulted in tighter lines of supplies, higher panel prices and an inevitable drop in shipments of end devices.
  • In times of financial distress consumers tend to prioritize spending on the necessities rather than on discretionary purchases such as TVs, game consoles and laptops.

Smart Speakers

  • In light of the latest developments Strategy Analytics expects annual growth of just 12% (vs. 23% prior to the crisis), assuming that the virus peaks in the April and life returns to some sense of normality by the summer.
  • On the demand side of things, smart speakers are a lot less expensive than big ticket items such as televisions, tablets and smartphones, and even though many consumers will still see them as an unnecessary purchase, Strategy Analytics expects to see less of a squeeze for these devices compared to pricier items.
  • On the positive side, smart speaker and smart displays with voice and video calling capabilities are increasingly being used for communication purposes and there is the potential for a spike in demand as current owners order products for other family members to use and communicate through. In fact the BBC has recently written about the merits of smart displays for staying in touch virtually with older relatives.

But as I mentioned at the outset, there are more unknowns and questions than facts and answers. Here are some of the questions on our mind:

  1. How is consumer appetite for smart home solutions changing due to the spread of COVID-19 and weakening economic conditions?
  2. What problems are vendors having with their supply chains?
  3. Which use cases will appeal most to consumers in this period?

What questions are on your mind? Let us know.

Previous Post: Connected Home over IP: Smart Home Swiss Army Knife or Hype Machine? | Next Post: COVID-19 UK Survey: As Lockdowns Ease, Visiting Family Comes First, While Travel and Leisure Can Wait

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