The European home security market is poised for growth after several years of development. Although it is still a niche market, customer awareness is growing and the industry is developing its supply chain to expand this market.
The home security market in the U.S. is heating up, but can the same be said for the European market? After more than 10 years of continuous development, Europe's smart home market is beginning to see an upward trend in market size, although it is still a niche market, according to a study by the British building environment market intelligence provider, BSRIA.
The awareness of smart home products and systems amongst consumers had initially been low, but the growing interest in energy conservation in recent years is driving the smart home market. In 2010, Europe's smart home market, including products along with system integration (design, installation, wiring, customized programming, etc.) and installation labor, was valued at US$695.7 million. This was an 18 percent increase from $588.8 million in 2008, according to BSRIA.
Market Breakdown
The largest market segment for smart home products is luxury villas, typically with a value of more than $1.3 million. This suggests a niche market that still has potential to commercialize to mid- and lower market segments. The BSRIA figures suggest that the largest market segment is luxury villas at 34 percent ($166.2 million), followed by luxury apartments at 12 percent ($56.1 million), mid-range houses at 11 percent ($55.2 million). Commercial buildings represent 34 percent ($166.2 million) in total, of which hotels account for 10 percent ($47.3 million).
Geographically, Germany is the largest market, with 47 percent, followed by France 10 percent, the U.K. 6 percent, and Switzerland and Spain both 5 percent each. According to Strategy Analytics' 2012 forecast on smart homes and systems, the market for smart home systems and services in Germany is poised for growth and is set to become a major market opportunity for technology and service providers over the next five years. Revenues from smart home-related hardware, services, and installation fees will exceed $1.6 billion in 2013 and grow at 18 percent CAGR to over $3.2 billion by 2018. It further estimated that 25 percent of German homes will have at least one type of smart system installed by 2018.
The markets in France and the U.K. also carry opportunities, according to Strategy Analytics. In 2012, 3 percent of homes in France and 2 percent in the U.K. can be classified as smart. The revenues are estimated to grow at 25 percent CAGR in both countries, to reach $1.6 billion in France and $1.5 billion in the U.K. by 2017.
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Eastern Europe is also a potential market for growth. “There are a lot of differences between the markets. The Eastern European countries are growing, even if the rhythm is slow,” remarked Elena Ravello, Brand Manager at Fermax.
In the Netherlands, the assisted living home is also an important vertical, although it only accounts for 3 percent of the total European market. In the Netherlands, the government intiative to provide financial support to the installation of smart home applications for assisted living homes as part of their social welfare program is driving the demand.
Product wise, field devices such as sensors for motion, light and temperature, and actuators for blinds, curtains, windows, doors, and water valves take up the largest market share at $229.7 million.This is followed by user interface with LED touch panels that functions as a central control panel being the most common. Other user interfaces include smaller LED with simple push buttons. Together, they represent a share of $119.3 million. LEDs are extremely flexible and their popularity will only increase as their costs fall.
Home Energy Management Systems
The market is still at an early development stage, even in countries such as Italy, Sweden, and Finland, where smart metering has been or is being fully implemented. According to BRSIA's 2012 report, a Home Energy Management System (HEMS) market does not exist yet, although a market appears to be establishing in Germany and the U.K., with Germany having the largest share of the 2010 total market of $40.1 million. On the other hand, in countries such as Switzerland, the Netherlands, Sweden, and Norway, HEMS still has a very low profile.
Although only roughly 10 percent of houses in Europe currently have smart meters installed, the market outlook is positive. It is forecasted to remain at a developing stage until 2014/15 when a well-defined supply chain and product standards should become established. In 2013, it is forecasted to reach $152 million.
Protocols
Regional infrastructure plays a role in determining protocols. "The home security/automation market in Europe is different to the U.S., where houses are generally made of wood and easier to wire, comparatively. In Germany, you would require more radio technology. The overall market is still substantial,” said Florian Lasch, Head of Product Management and Procurement at Abus Security-Center.
In Europe, KNX is the most popular protocol for the samt home market, with 68 percent market share, while ZigBee has more presence in the HEMS market. As the HEMS market grows, ZigBee will also gain popularity. Therefore, many companies developing HEMS products are already developing their products based on ZigBee technology.
Industry Heating Up
The smart home market is still developing in Europe. The interest is there and awareness amongst consumers is growing. Currently, the product market is dominated by German companies with a 65-percent share. French companies mostly focus on their domestic market. Several Spanish companies are developing their own systems, and there are some Italian-based companies which are quite active outside Italy.
The recent merger of Italian companies Vimar, a switch provider, and Elvox, a video provider, led to the birth of the Vimar Group so that they are more equipped to serve the home automation market. The merger meant that the two companies can now count on a unified sales network that is able to supply the market with a complete and integrated package of solutions for indoors and outdoors, dedicated to the residential and contract sectors. It would be interesting to see where they go from here as this merger is part of the supply chain development for this market.