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Connected Homes December 2021/January 2022 Viewpoints

Technology Analyst: David Strachan-Olson

2021: The Year in Review

Overview

The ongoing covid‑19 pandemic remained a strong shaping force on the connected-home industry throughout 2021. Many companies continued to let office employees work from home, solidifying patterns of remote work and collaboration, which created new demands for connected-home products and services. The use of e‑commerce and delivery services continued to increase throughout 2021 as a way to avoid in-person shopping. The ongoing chip shortage and supply-chain constraints affected the availability of a number of connected-home products. Sales of at-home fitness products and services remained strong in the beginning of the year but slowed as in-person gyms began to reopen. At-home telehealth services continued to see sizable use throughout 2021 after a rapid expansion in 2020. Finally, corporate interest in virtual worlds and the (or a) "metaverse" expanded significantly in 2021, although such projects will take years to come to fruition.

Looking forward to 2022, Strategic Business Insights (SBI) has identified a number of key areas for stakeholders to monitor that will shape the connected-home industry over the coming year. As concerns over Omicron and other covid variants emerge, many companies are likely to continue with remote work, and remote and hybrid work may be the standard practice for many in 2022. Companies and employees will likely invest in products and services that improve the experience of remote work and collaboration. Similarly, interest in metaverse concepts is likely to expand during 2022 as companies look for new ways for people to socialize and work together remotely. Stakeholders should monitor early metaverse projects from various companies and look for those that stand out. Stakeholders should also expect announcements about new telehealth and at-home health-care products and services after early technologies and platforms proved themselves during the pandemic. Finally, the power of big-tech companies will continue to invite attention and investigations from governments around the world, potentially leading to new regulations or lawsuits.

Key Developments Identified by SBI in 2021

  • E-Commerce's Continued Rise. E‑commerce saw a significant jump in 2020 and remained strong in 2021. The increasing number of purchases made from within the home presents new opportunities for connected-home companies.
  • The Ongoing Chip Shortage. A shortage of semiconductor chips hampered many industries, including the smart-home industry, in 2021. Shortages of key components limited the sales of video-game consoles, high-end computers, and other devices.
  • Telehealth's Growing Importance. Access to telehealth services continued to expand in many regions in 2021 as health-care systems needed to limit exposure between patients and health-care providers. The video calls and digital messages that represented a majority of telehealth adoption could give way to other innovations in the coming years.
  • Strong PC Sales. After years of stagnation, the PC industry saw strong growth in 2021 as the covid‑19 pandemic continued to push individuals to purchase PCs for work, learning, and entertainment.
  • Home Energy Management. Amazon's introduction of an energy dashboard feature in the Alexa app signals large tech companies' growing interest in developing solutions for home-energy management.
  • Significant Increase in Residential Broadband Usage. Residential broadband customers' data use has surged during the covid‑19 pandemic because of the rise of remote work, remote education, and digital entertainment. In the United States, median data use was up 50% between 2019 and 2020, and 14% of subscribers now use more than 1 TB of data per month.
  • 5G-Based Wireless Broadband's Expansion. Numerous cellular companies are developing wireless home broadband services that use LTE and 5G cellular infrastructure. Both T‑Mobile and Verizon plan to increase the availability of their services significantly. Wireless-broadband deployments will increase competition among internet-service providers and potentially help bring broadband internet access to rural areas.
  • AI Vision Technologies. Cloud-connected video doorbells and in-home cameras are increasing in both popularity and capability. AI features such as face recognition and advanced motion detection are already available. Plausibly, as cameras and AI improve, homeowners and service providers will be able to add new and varied camera-enabled services to enhance automation, safety, health, and leisure.
  • Smart-TV Access and Control. Approximately 75% of US households have a smart TV or a streaming box or stick, and these devices have significant postpurchase monetization potential through targeted ads and contracts with streaming services. The battle to control this market is intensifying tensions between various players—most recently Google and Roku. If companies cannot come to agreements, users might be caught in the cross fire.
  • Amazon's Continued Improvement of the Alexa Platform. Alexa continues to be a key component of Amazon's strategy in the connected home. A host of new features will give Alexa platform developers new opportunities to attract users and monetize their creations. Amazon is set on expanding the capabilities of the Alexa platform in an effort to transform it from a virtual assistant into an "ambient intelligence system."
  • The Metaverse. The concept of a metaverse has been the subject and backdrop of many popular science-fiction stories during the past 40 years. The rapid adoption of digital technologies for remote work, socialization, and recreation during the covid‑19 pandemic is spurring interest in the creation of a metaverse. The structure of a metaverse (or metaverses) is still far from defined, but a metaverse could enable many new opportunities for companies.
  • China's Tech Crackdown. The Chinese government is taking action to regulate the power of China's tech companies and rein in what it sees as excess consumerism and emerging social problems, including video-game addiction and high-cost child tutoring with a focus on technology. The crackdown could have ripple effects that affect consumer-tech products, services, and platforms worldwide.
  • Home Robots. Amazon is introducing two domestic robot models: the Ring Always Home Cam, which is a flying indoor security drone, and Astro, which is a domestic social robot. The two robots' use cases are very different, and they have significantly different price tags. The robots highlight Amazon's growing interest in developing robots for future connected homes.

Areas to Monitor Highlighted by SBI in 2021

Macro/Dynamic Issues (Frequently Featured)

  • Remote Working

    The covid‑19 pandemic proved to many companies that they can operate with large portions of their employees working remotely. Long-term adoption of remote-working schemes could have significant impacts on peoples' daily lives, on how companies operate, and on connected-home technologies' importance.

  • Big Tech Power

    Big Tech companies wield immense power through the massive scale of their digital platforms and their ability to centralize and leverage data. Because of their influence, Big Tech companies can create massive disruptions when they enter new markets, and they can dictate pseudo industry standards.

  • The Metaverse

    Sci-fi stories popularized the idea of a metaverse, which merges physical and virtual realms into a shared persistent connected space. The development of a metaverse akin to the World Wide Web is far from certain, but even limited company-controlled metaverses could have a significant impact on how people experience social and workplace interactions.

  • At-Home Health Care

    The development of telemedicine, low-cost health-monitoring devices, and disposable diagnostic tests could revolutionize health care by incorporating health care into daily life and people's homes. The covid‑19 pandemic spurred many companies to renew their interest in the development of at-home health care, but success is uncertain.

Micro/Semi-Stable Issues (Sometimes Featured)

  • Rise of Chinese Big Tech

    China already has major tech firms that serve its domestic market. A high-impact uncertainty for the tech industry in the next decade is the degree to which these firms will go global and compete with US big tech or the degree to which the firms will remain focused on domestic and non-US-based opportunities.

  • Digital Regulation

    Regulators wield significant power over digital markets. Following Europe's lead, several countries have toughened data-protection laws during recent years. Regulators are now considering a variety of other impactful measures to address fair competition, misinformation, national security, and emerging technologies.

  • Strategic Strongholds

    Companies often seek to create and leverage strategic strongholds through supply chains, value networks, content libraries, and user touch points to maintain business advantages and expand their reach. However, the value of strategic strongholds is always shifting as new technologies emerge and customers' needs change.

  • Postpurchase Monetization

    The initial sale of a smart device is not the end of potential revenue. For instance, smart TVs make money from serving targeted ads, and internet-protocol cameras often come with cloud subscriptions. Understanding how to provide a competitive product and generate postpurchase revenue is in increasingly popular business model for various device manufacturers.

  • Broadband Evolutions

    Emerging technologies such as 5G, TV-white-space communications, and satellite constellations may offer new options for accessing broadband services. Continued evolution in broadband tech could disrupt internet-service providers that currently operate as regional monopolies or duopolies because of access to utility infrastructure.

  • Home Robots

    A robot that performs chores has been a dream of households for decades. However, today's home robots fall into two categories: robots that perform particular tasks (vacuuming, lawn mowing, etc.) and robots that entertain and socialize with owners. Advances in sensing and AI could eventually make multipurpose home robots a reality.

Look for These Developments in 2022

  • Remote work uncertainty. Many companies will delay goals of returning to the office beyond January 2022. Expect interesting dynamics between companies and employees as they attempt to find a balance between remote and in-office work. Many analysts expect hybrid work to become the new standard, which could encourage employees to invest in permanent work-from-home spaces and setups.
  • E-commerce's stability. Even if the threat of the covid‑19 virus declines, expect many people to keep their habits of e‑commerce shopping and grocery delivery. Although labor issues might increase the costs of some services, customers who grew accustomed to these services during the pandemic are unlikely to give them up.
  • Matter for coordinating the smart home. The Connectivity Standards Alliance behind the Matter smart home standard, which aims to unify standards from Amazon, Apple, Google, and more, delayed the deployment of Matter until 2022. With successful implementation, Matter could simplify the development of connected-home devices.
  • Increasing regulation. The regulatory environment will continue to toughen, with recent or upcoming data protection laws affecting the big-data market in China, Japan, India, Australia, and elsewhere. Similarly, antitrust investigations in many countries will push back on the power of big tech companies.
  • Content competition. During the pandemic, most content companies performed well as customers had ample time to enjoy various content including TV shows, movies, and video games. However, if (as seems increasingly unlikely) the pandemic subsides, content consumption may diminish if people return to in-person activities, social functions, live entertainment, and travel.
  • At-home fitness technology in limbo. At-home fitness tech companies, such as Peloton, had great results in 2021 but experienced struggles when gyms reopened. Expect more competition between such companies in 2022 as they struggle to reach new users and keep existing ones.
  • Wireless broadband alternatives. Companies deploying wireless broadband, such as 5G home broadband and satellite constellations, will continue to make progress in 2022. Although such services are unlikely to take significant market share from existing internet service providers in 2022, the companies are laying the foundation for competition in the coming years.