Driven by the rapidly growing adoption of smart speakers, the installed base of smart home devices in the U.S. will reach 244 million in 2022, up from 24 million in 2016, according to a new Forrester Research forecast. Amazon sold over 11 million Amazon Echo devices in 2016, and Forrester expects this number to double in 2017. Smart speakers, including Amazon Echo, will account for 50% of the total installed base of smart home devices in 2017 and will reach 68% by 2022.
Amazon Prime subscriptions are a key driver of Amazon Echo’s success. Forrester estimates that there are around 48 million Amazon Prime members in the U.S. today. They expect the penetration of smart speakers among Amazon Prime members to grow from 28% in 2017 to 61% in 2022. At the household level, Forrester expects 50% of U.S. households or 66.3 million to have at least one smart speaker by 2022. The total installed base of smart speakers in the U.S. will reach 166.2 million in 2022, up from 21.3 in 2017.
Excluding smart speakers, Forrester expects that 20% of U.S. households or 27 million will be using at least one smart home device by 2022, up from 7.3 million in 2016. The overall market for smart home devices, in terms of installed base, will grow at 42% compound annual growth rate (CAGR) from 2017 to 2022.
Smart speakers lead in household penetration, followed by connected speakers and smart bulbs and lightning. Smart home categories like smart bulbs and lighting and smart thermostats, which can be controlled or operated by smart speakers, will grow faster than other categories such as dependent care monitoring.
Slowing down smart home adoption at present are high monthly service cost and concerns about privacy and initial setup costs, according to a recent Forrester survey. Consumers say that they would trust Amazon and home improvement stores the most to provide smart home technology, followed by electronics retailers, home appliance makers, and Google.
Forrester expects the adoption of smart home devices to accelerate with the next generation of smart speakers that will be combined with emerging home cam systems, providing climate monitoring, air-quality sensors, night vision, and a siren. Other potential accelerators will be expanding the range of activities consumers actually engage in with smart speakers (beyond music, news, and kitchen timers) and the incorporation of digital assistants into other type of products, in addition to smart speakers.
Juniper Research estimates that worldwide annual spending on smart home hardware and services will reach $195 billion in 2021 with North America accounting for 38%of the market. Juniper defines smart home as one that is “designed to deliver or distribute a number of digital services inside and outside the home, through a range of networked devices.” This includes smart entertainment, home automation and smart appliances, and smart metering.
A potentially much larger market will be the “smart enterprise” market or the “voice-driven enterprise” market. Amazon recently launched Alexa Voice Service Device SDK toolset, making it available on more third-party devices, and had a joint announcement with Microsoft promising that Alexa and Cortana “will begin talking to each other later this year.” Combining their respective strengths in the consumer and enterprise markets, Amazon and Microsoft will provide their customers with an AI voice assistant that will deliver both the best online shopping experience and access to work email and calendar.