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Market Research: 'No-New-Wires' Technologies to Drive Home Automation Market (4/7/2011)

By Sam Lucero, ABI Research

The home automation market is at an inflection point. Since the mid-1970s, home automation products and services have mostly been relegated to two niche segments: a relatively low-end, do-it-yourself market, and a very high-end, luxury-oriented, custom-installed market.

The DIY segment has largely been the domain of technophile hobbyists, cobbling together systems to control a few lights or electrical appliances with devices, such as those based on X-10 technology, purchased off-the-shelf from electronics stores.

At the other end of the spectrum, the luxury home automation systems have been characterised by very expensive deployments, with professional custom dealers installing systems capable of controlling multiple sub-systems throughout a home, such as lighting, climate, media, access, and appliances.

What has been very noticeably missing for much of the past four decades is the vast potential market of mainstream consumers who are neither interested in experimenting with DIY gadgets nor have a desire (or ability) to spend US$60,000 or more on a traditional luxury home automation system.

The challenges that have traditionally faced the development of a mainstream market are shown in the figure below.

The mainstream consumer gap in home automation (source: ABI Research).

We are now starting to see real potential for this large mainstream consumer base to begin adopting home automation technology and services. A key factor driving this inflection point is the development of inexpensive, mostly standards-based, 'no-new-wires'-based connectivity technologies, such as ZigBee, Z-Wave, HomePlug, and others, that enable easy retrofitting of homes.

The home automation value chain

The inflection point to date, has largely been occurring within the home automation value chain itself, rather than consumers - although we expect this to change as part of this inflection process. This is evidenced by the launch of 'home-automation-as-a-service' offerings from telco, cable operator, and home security alarm service providers, sensing the nascent opportunity for a large-scale home automation market, as well as by the entry of large, multi-national technology firms to supply them.

Whereas the value chain previously had been dominated largely by smaller, closely-held home automation specialist firms, over the past year the US has seen acquisitions, consolidation, investments, and partnerships that have resulted in, for example, iControl and uControl merging under the iControl brand, Xanboo being acquired by AT&T, 4Home be acquired by Motorola Mobility, and Control4 seeing a significant investment and technology partnership from Cisco Systems.

Much of this activity has been influenced by home automation service launches and announcements, such as: Comcast's Xfinity Home Security (with control capabilities), Verizon Wireless' Home Monitoring and Control, ADT's Pulse, and the re-positioning of Vivint as primarily a home automation solutions provider.

The advantages of no-new-wires technologies

No-new-wires connectivity technologies benefit the home automation market by enabling faster, less complex, and lower-cost retrofitting of existing homes, as well as enabling the development of ecosystems of interoperable 'best-of-breed' system and device vendors to coalesce, providing greater consumer choice, more and faster innovation, and typically less expensive overall deployments. These are key factors that seem to have finally convinced major service providers, and technology vendors, to enter the market, which can only benefit overall market development through these companies' abilities to package and market home automation systems and services to mainstream consumers, and educate these consumers, with many of whom the service providers have an existing subscription relationship, as to the benefits and usage of home automation technology.

The impact of ZigBee and Z-Wave

ABI Research believes that the two no-new-wires technologies having the most impact on the home automation market at present are ZigBee and Z-Wave, both of which are low-power, low-data rate wireless sensor networking (i.e. RF mesh) technologies that enable devices in the home to transmit monitoring and control messages among themselves and a controller.

Of these two, ZigBee has been the more aggressive and successful in developing varying application profile layers to enable different sub-applications within the overall home automation market. For example, in addition to the basic ZigBee Home Automation profile, the ZigBee standard now encompasses application profiles for: commercial building automation, smart energy, advanced remote controls, health care, input devices, retail services, telecom services, and 3D viewing experience.

As part of this process the ZigBee Alliance has forged close ties with industry groups and standards development organisations in these related areas. For instance, in close cooperation with the utility industry, the ZigBee Alliance has evolved the proposed ZigBee Smart Energy 2.0 profile to include an IP-based networking layer. Likewise, the ZigBee Alliance has worked closely with the Continua Healthcare Alliance to encourage adoption of ZigBee as one standard for remote healthcare connectivity. These actions help to make ZigBee a useful technology for an expanding list of applications related to the core home automation market.

The ZigBee Alliance has forged close ties with industry groups and standards development organisations.

ZigBee has also benefitted by incorporating at the physical layer IEEE 802.15.4 standard chipsets, which are available from multiple semiconductor suppliers, such as Freescale, Ember, and Texas Instruments. Some industries, such as utilities, balk at 'single-source' supply relationships, which are perceived as potentially risky and less optimal from a pricing perspective due to less competition among vendors.

ABI Research forecasts that the market for ZigBee-enabled IEEE 802.15.4 ICs will grow from about 18 million shipped worldwide in 2010 to nearly 475 million by 2016.

Until recently, Z-Wave was largely disadvantaged by its single-source chipset supply status - all Z-Wave chipsets were produced first by Zensys, and then by Sigma Designs after its acquisition of Zensys in 2008. This has now changed with the announcement in May 2011 that Sigma Designs had selected Mitsumi to be a second source of supply.

One beneficial aspect of Sigma Designs' tight control, however, has been the perception, at least, of more robust interoperability for Z-Wave products. Whereas ZigBee products do not necessarily share a public application profile layer, and therefore might not be interoperable at the application layer, Z-Wave products have been known for seamless interoperability and this has led some developers to opt for Z-Wave even in the face of a single-source supply concern.

Z-Wave products have been known for seamless interoperability.

Other no-new-wires technologies

ZigBee and Z-Wave are certainly not the only two no-new-wires technologies having an impact in the home automation market, however. Others include (but are not limited to) HomePlug GP and KNX (mostly in the European Union), with increasing interest in low-power embedded Wi-Fi, and renewed traction for INSTEON, with its recent announcement with Sprint for a managed home automation service.

KNX is approved as an international standard (ISO/IEC 14543-3) as well as a European Standard (CENELEC EN 50090 and CEN EN 13321-1) and Chinese Standard (GB/Z 20965).

Conclusion

The home automation market is poised to grow rapidly over the next five years. In Europe, for example, ABI Research projects that the number of home automation systems shipped in the region will rise from approximately 115,000 in 2010 to roughly 2.5 million shipped in 2016.

Nevertheless, for this growth to materialise, it will not be enough for technologies such as ZigBee and Z-Wave to facilitate retrofits, or for big technology vendors to enter the market: consumers themselves will have to be educated about the benefits and uses of home automation technology, and not simply regard it (if they are aware of it at all) as some sort of 'Jetsons' technology with little potential bearing on their lives. We believe this transition will happen, but only time will tell.

Sam Lucero is the Practice Director, M2M Connectivity for ABI Research. ABI Research is a market intelligence company specialising in global connectivity and emerging technologies, headquartered in New York, with regional headquarters in London and Singapore. For more information on the developing home automation market, please refer to ABI Research's Home Automation Systems Research Service.

www.abiresearch.com