SMARTHOME Forum's message boards buzz with technical questions, observations and helpful hints about home automation. Gabbing away are hobbyists and builders, home automation's tried and true constituency.
Home automation is searching for the killer app that will vastly expand its heretofore niche market. Home automation (or home control, as it's also called) is more than glorified light-dimming via remote control, promising to integrate control of security, lighting, HVAC, energy, entertainment and appliances. For instance, controllers can automatically raise or lower blinds depending on the temperature or turn off the lights in a vacation home from a thousand miles away.
“[Home control technology] can open your garage door and send a message to your PDA that the kids are home. We think that will be a killer app", said Mike Einstein, Vice President of Corporate Innovation at Energy Control Concern Intermatic in the US. "I have a second home in Florida and can go to any computer to shut off the lights left on by my son, who's living there."
The technology, while becoming simpler to use, still can befuddle anyone whose electronic competency begins and ends with plugging in a toaster. And convincing proof that it cuts energy usage doesn't exist yet. Are the masses ready for home automation? Home Depot and Lowe's think so because each stocks home automation products based on competing technologies. There again, Home Depot and Lowe's cater to do-it-yourselfers.
“The high end—$10,000 and up—is done by builders, and then the low end is more hobbyist. Then there is this great middle of people who have problems to solve and don't have an easy way to do it”, said George West, senior analyst at West Technology Research Solutions. The vast middle is what home automation companies want to penetrate, but no "smoking gun app is compelling enough yet to deliver it”, he added.
Sales of home system controllers, according to West, will grow from US$2.5 billion this year to US$3.2 billion in 2009. Frost & Sullivan forecasts 9.8% CAGR between now and 2012, when revenues will double to US$2.44 billion from US$1.27 billion last year. Privately held Smarthome, a pioneer in the field, has enjoyed 100% revenue growth in the past three years, according to CEO Joe Dada.
Few doubt the market is growing, but home automation is falling well short of its vast potential. After all, the total market is 120 million homes in America. Nearly 2 million new ones are built every year, with 1.3 million of those being home automation's sweet spot-single-family homes, according to West.
Two leaders
The two home control technology leaders are Smarthome, with its Insteon power-line/wireless technology, and Zensys, whose Z-Wave wireless mesh technology has the backing of 125 companies, including Intel and Intermatic. Zigbee wireless could also be a player, but it is currently focused more broadly on industrial and commercial building control. Countless other home networking technologies, such as WiMAX, UWB, Wireless USB, HomePlug and even Bluetooth, sit on the edges of home control.
Smarthome is the granddaddy, starting out in 1992 selling dimmers and switches based on the 31-year-old X10 power-line signalling and control standard, which gave home automation both its beginnings and somewhat of a bad rap. X10 was hard to install and unreliable. Enter Insteon power-line and wireless signalling technology, promising lower cost, reliability and backward compatibility with the millions of X10 devices already installed.
“A lot of builders bought X10 products, but they did not work reliably enough. We have solved the problem better than anyone else”, said Dada. “Home automation has a stigma attached to it, [so we] call it electronic home improvement.” Insteon boasts 500 concerns developing for it to one degree or another.
That Smarthome sells Z-Wave devices in addition to Insteon products demonstrates that Dada, for now, doesn't know which technology will win out. “We're simpler and cheaper, and it's a rising tide right now, which is good for the industry”, said Dada.
Per Nathanaelson, chairman of Zensys, which developed Z-Wave MCU/transceiver chips embedded with Z-Wave, sees only dominance for his company's technology. With powerful financial backing from the deep pockets of Cisco Systems, Intel and several venture capital firms, along with support from major electrical and electronics appliance makers such as Leviton, Logitec and Intermatic, Z-Wave has clout and market presence.
Competing with partners
“Z-Wave will win out over the others”, he claimed, explaining that Zensys, as a fabless silicon designer (TSMC makes the chips), is a unique part of the home automation ecosystem. Smarthome, on the other hand, builds products and ends up competing with its own Insteon developers. “If you are pure technology, you don't compete with those building system solutions”, Nathanaelson said.
Indeed, Smarthome is owned by SmartLabs Inc., which is divided into three companies: Smarthome Direct, which is Smarthome.com; SmartLabs Design, which develops home control products; and SmartLabs Technology, the developer of Insteon.
Regardless, Insteon has been around longer and can capitalize on the 7 million to 10 million homes where X10 devices are already installed, according to analyst West. “I like Insteon because it is focused on reliability and is both wired and wireless. The three features they talk about are reliability, low cost and ease of use”, he said.
In fact, Smarthome, according to Dada, is developing its own Insteon chip and will stop relying on logic from outside providers like MicroChip. “We're at US$1.60 [for Insteon logic], and we're going to get to a fraction of that,” he said.
The price sweet spot for consumers starting out, Dada said, is US$20 for a dimmer. Intermatic's Einstein acknowledges that the Z-Wave dimmer costs double that of Smarthome's unit, but he claimed that the premium doesn't make much difference.
He may be right. Price is important, but increased awareness coupled with greater sales of home entertainment systems, energy conservation, younger home buyers and new construction activity are the factors growing the market, according to Frost & Sullivan analyst R. Srivatsan.
“There are several companies which cater to the middle and lower segment of the market", Srivatsan said. "One of the main areas of focus for market participants is to increase the penetration in the middle-range housing segment, which presents a huge potential.”
But talk about home automation's potential has been nothing more than that. With Z-Wave, Insteon and now Zigbee backed by heavyweights such as Freescale, there may be enough heft to propel the market. Ultimately, it's up to consumers.