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Connected Homes December 2020/January 2021 Viewpoints

Technology Analyst: David Strachan-Olson

2020: The Year in Review

Special Edition: Year in Review

This special-edition Year-in-Review Viewpoints is part of a set of analyses that investigate the impact of the covid-19 pandemic on technology commercialization across six consequential technology domains: Advanced Manufacturing and Materials, AI and Automation, Clean Energy, Digital Connectivity and Lifestyles, Health Care, and Sensors and Electronics. The May 2020 Viewpoints identifies key forces that are likely to influence these technology domains. The June 2020 Viewpoints considers the future of the domains across three scenarios.

This special-edition Viewpoints describes developments in the highest-impact forces for Digital Connectivity and Lifestyles in 2020 and outlines likely developments in 2021. In addition, this Viewpoints highlights additional specific developments in the Connected Homes Technology Area during 2020 and areas to watch for in 2021.

Key Forces That Shaped Digital Connectivity and Lifestyles in 2020

The May 2020 Viewpoints identifies key forces across global societies that are likely to have a major influence on the six consequential technology domains. Here, we return to the forces that had the most impact on Digital Connectivity and Lifestyles in 2020.

  • Economic momentum. The coronavirus-disease-2019 (covid-19) pandemic and associated lockdown efforts caused severe economic disruptions, because many companies had to halt or scale back operations in the first and second quarters of 2020. Many regions were able to implement policies to limit the spread of covid-19, which helped economic activity to begin to rebound. However, lingering high unemployment levels and covid-19 case spikes continued to create economic uncertainty in many countries.
  • Remote work and learning. The pandemic provided a huge test of remote work: Many knowledge workers and other office staff worked from home for well more than nine months. Companies had to adopt new technologies, software, and processes quickly to make sure employees could work at home effectively. The rapid rise in remote work provided the opportunity for many companies offering enterprise communication and collaboration tools to succeed. Researchers identified issues with remote work, but overall the practice seemed to work for many companies. By contrast, remote learning for children proved to be a much harder challenge, with school districts, teachers, and parents struggling to engage students on video calls and with digital course work. In addition, some students had no access to suitable devices.
  • Immersive digital communication. In general, people of all ages shifted to slightly more immersive forms of digital communication. For example, friends and family might make use of video calls instead of simple audio calls and text messages. Younger generations also leveraged other types of platforms for social interaction and communication, including burgeoning social platforms such as TikTok, Twitch, and Discord, as well as accessible video games such as Minecraft, Fortnite, Roblox, and Among Us.
  • Digital content. Consumption of digital content increased significantly as the pandemic and shelter-in-place orders took effect. Early on in the pandemic, video-streaming platforms had to limit the quality of video streams in some regions to ease network congestion. Many platforms, including Netflix and Disney+, added tens of millions of subscribers during the pandemic. However, this development did not help all entertainment companies. Quibi, a mobile-centric video-streaming platform, decided to shut down after only six months. The video-game industry performed well as people looked for activities to occupy their time while remaining indoors.
  • E-commerce/delivery society. The pandemic led to a significant shift in the way households buy goods. In 2020, brick-and-mortar retailers had to alter business operations, and many people avoided in-person shopping. Because of these factors, e-commerce companies and delivery services expanded significantly. For example, the US Census Bureau estimated that e-commerce sales in the United States increased 32% from the first quarter of 2020 to the second quarter. At the same time, the pandemic hit specialty retail chains and small businesses especially hard.
  • Big-tech power. Even as many other aspects of the economy faltered because of the pandemic, large technology companies benefited as people increased their use of digital platforms and services. In particular, e-commerce, delivery services, and digital entertainment all saw increases in use. However, major US technology companies also struggled to rise to the needs of the day. Social-media platforms—including Facebook, YouTube, and Twitter—had issues in controlling misinformation about covid-19. Efforts to help limit the spread of covid-19 through automated contact tracing via mobile devices had mixed success, despite cooperation between Google and Apple.

Additional Developments in Connected Homes in 2020

As well as the forces affecting the wider digital-connectivity and lifestyle markets in 2020, multiple developments specific to connected homes are noteworthy.

  • Household disruptions. The pandemic brought significant disruptions to household structure and behaviors. Households had to deal with many changes, including lost family members, lost jobs, lost access to critical services (such as education and childcare), remote work, and the stress of living in isolation for long periods. Changes occurred in household demographics, income, and purchasing behaviors. Disruptions to households will have far-reaching direct and indirect consequences on the connected-home market that will become apparent only once the covid-19 pandemic has ended.
  • Digital divide. The pandemic highlighted the digital divide between households with access to high-speed broadband and those without access—especially in rural areas. Households with limited access to high-speed broadband experienced challenges for adults working remotely and for students learning remotely. Tests of broadband technologies for rural areas, such as SpaceX's Starlink satellite constellations, showed promise as potential solutions.
  • Smart-home subscriptions. Companies continued to express interest in developing and expanding connected-home subscriptions throughout 2020 including for shopping, fitness, video games, news, and digital media streaming. Subscription services that launched in 2020 include Apple One, Walmart+, and Microsoft 365 Family.

Look for These Developments in 2021

What to Watch for in Digital Connectivity and Lifestyles in 2021

  • Economic recovery. Expect economic recovery to happen in starts and stops as regions struggle to contain infection spikes. Optimistic outlooks expect sizable vaccine production and distribution by mid-2021, which should help boost economic conditions. Low interest rates might help accelerate recovery and enable companies to invest in new business endeavors and capital projects.
  • Globalization and trade. Many stakeholders expect the election of Joe Biden to the presidency of the United States to encourage the United States to reengage with the international community in a constructive way, but the situation between the United States and China will remain tense. The global growth of Chinese hardware, software, apps, and digital platforms will remain an important issue in 2021.
  • Normalized remote work. By the time vaccines are available widely, many office and knowledge workers will have been working from home for more than a year. The latter half of 2021 should provide stakeholders with insights about whether remote work will become a common practice for companies. Ongoing remote work could lead to significant shifts in the types of technologies and software that individuals and organizations use.
  • Digital content consumption. A major uncertainty for digital entertainment stakeholders is whether the consumption of digital media will maintain its current pace once a vaccine becomes widely available. People have had to give up hobbies, travel, social gatherings, and much more to help slow the spread of the virus. Once a vaccine sees wide distribution, people might be eager to leave the house and resume other activities, which could lead to a sharp decrease in the consumption of digital content.
  • Postcoronavirus opportunities. As companies recover from the current economic slowdown, they might decide to make significant changes to their strategic direction and the way they operate. Companies might take the chance to close or sell off business units and refocus efforts on emerging opportunities that they identified during the pandemic. For example, the pandemic could have provided the impetus for companies to begin digital transformation in earnest. Companies that saw manufacturing facilities sit idle without workers might be ready to adopt automation technologies.
  • Pressure on Big Tech. The dominance of big-tech platforms during the pandemic will likely increase scrutiny of big-tech companies by government officials and antitrust regulators. Potentially, as the pandemic subsides, governments might begin to take action against these companies. The European Commission's forthcoming Digital Services Act will likely be a prime example of government pushback against the power of large digital platforms.

Additional Items to Watch for in Connected Homes in 2021

  • Continued e-commerce growth. The pandemic will continue on for at least the first half of 2021, and e-commerce retailers will likely continue to increase their market share of retail spending as brick-and-mortar retailers struggle. E-commerce retailers will look to solidify their market expansions and influence over home shopping.
  • Game consoles and televisions. The end of 2020 marked the launch of two next-generation video-game consoles: the PlayStation 5 (PS5) and the Xbox Series X. Availability was limited in 2020, but console shipments will be strong throughout 2021. The game consoles support 4K resolution, high dynamic range, and other HDMI (High Definition Multimedia Interface) 2.1 features, which could encourage households to purchase new televisions that support these features.
  • Amazon Sidewalk. Amazon Sidewalk uses the wireless connectivity of many existing Amazon devices to create mesh networks for residential neighborhoods. Amazon activated Sidewalk at the end of 2020, so stakeholders should be alert to potential impacts in 2021.