Investment Institute
Technology

How we’re living smarter: The rise of home automation

  • 11 August 2021 (5 min read)

The ecosystem that is rapidly enabling an automated lifestyle

Last year, as coronavirus tore through the global economy and bricks-and-mortar businesses fell into a deep paralysis, one sector went from strength to strength: smart devices for the home.

According to a survey conducted by Xiaomi,1  a Hong Kong-listed technology company, more than half of US consumers bought at least one smart device between May and December 2020 as they found themselves spending more time at home than ever before. 

Automation has long been associated with delivering more efficient manufacturing processes and streamlining business-to-business trade. But Covid-19 has rapidly accelerated automation in the domestic environment — and it’s a trend that is driving long-term growth opportunities.

Living smarter

“Smart living has always been about reimagining and optimising physical space to solve problems and adapt to new realities through the use of technology,” said Daniel Desjarlais, Global Product Marketing Manager, Xiaomi. “Connected homes, automated systems and new technology are helping people create ecosystems within their homes to solve new challenges.”

The centrepiece of this new, automated lifestyle is the Internet of Things, the universe of connected devices that is forecast to grow to 43bn units by 2023 — an almost threefold increase compared with 2018.2

  • https://blog.mi.com/en/2021/01/05/new-survey-finds-70-of-consumers-improved-home-during-covid-19-more-than-half-used-smart-devices/
  • https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/growing-opportunities-in-the-internet-of-things

Thanks to the advent of 5G and broadband, voice-recognition technology and the availability of affordable smartphones, the home Internet of Things now includes everything from washing machines and smart utility meters to fridges, televisions and vacuum cleaners.

In the pandemic’s wake, the McKinsey Global Institute (MGI) estimates that more than 20 per cent of the global workforce could work mostly away from the office without losing productivity — a development that is likely to drive even more automation in the home in the coming years as domestic environments adapt. “That is a once-in-several-generations change,” concluded McKinsey in a report this year.3

  • https://www.mckinsey.com/featured-insights/leadership/the-next-normal-arrives-trends-that-will-define-2021-and-beyond

Tom Riley, Head of Global Thematic Strategies and Lead Portfolio Manager of AXA Investment Managers’ (AXA IM) Robotech strategy, argues that at least three sectors that make the home Internet of Things tick could offer huge growth potential in the coming years: communications infrastructure; the semiconductor industry, which makes chips for smart devices; and the software and digital content that feeds the Internet of Things.

“It’s the overall proliferation of communications technology that allows all of this to develop and grow,” he says. “These are the building blocks on which home automation is ultimately constructed.”


The connected ecosystem

There are great opportunities for the companies that create the communication protocols on which automation relies — wireless technologies such as Bluetooth, Zigbee and Z-Wave. “It’s the components manufacturers that are particularly interesting,” says Riley. “All of these devices around the home need to be able to work independently without interfering with each other, and there is a lot of technology that goes into making something like that possible.”

Another area with huge growth potential is semiconductors. NXP, a US-Dutch manufacturer, helps to create secure, connected ecosystems for the home, driving the Internet of Things and smart devices from the cloud to the edge.

It has also supported the development of Alexa, the virtual-assistant, artificial-intelligence technology produced by Amazon, allowing a simpler development path for connecting and integrating Alexa into smart products in the home.4

Silicon Labs, a Texas-based semiconductor manufacturer, provides solutions for smart-home devices, selling a range of companies that have developed products ranging from smart metering, digital door locks, smart lighting and others. The company, which has a long history of developing wireless technology, has already shipped and deployed more than 1bn chips used in the Internet of Things.5

For companies that provide the software and other digital content that uses the Internet of Things, the opportunities are expanding rapidly. During the first months of national lockdowns last year, for example, gaming companies enjoyed a sales boom — and at a time of year when the industry typically has few new product launches.

From gaming to home security

Sales of smartphone games totalled $74.9bn, a 29 per cent increase over the previous year, according to data compiled by gamesindustry.biz6 .

  • First MCU-Based Solution for Alexa Built-in Significantly Lowers Cost and Barriers-to-Entry for Manufacturers, NXP Semiconductors, December 2019
  • Source: Silicon Labs website, as at 31 December 2020
  • https://www.gamesindustry.biz/articles/2020-12-21-gamesindustry-biz-presents-the-year-in-numbers-2020

That number dwarfs even sales for the global film industry, which hit $101bn in 2019.7

Automation in the home has also started to revolutionise home security, with a raft of new technology that could rapidly replace the traditional front door key with digital keypads, fingerprint- and even face-recognition technology using a smartphone.

Companies such as Ring, which Amazon bought in 2018 for $1bn, have taken large chunks of the home-security market at breakneck speed. Meanwhile, incumbents such as ASSA Abloy, the Swedish parent company of Yale locks, have been acquiring their own connected offerings. In 2017, it acquired August, the San Francisco-based smart-lock manufacturer.

The growing speed and uptake of automation in the home is likely to become one of the principal growth engines for the evolving economy for years to come, argues Tom Riley of AXA IM.  “There are more and more businesses whose products sit on top of automation in the home thanks to the increasingly digital or connected world,” he says. “That creates a very open-ended opportunity.”

Investment involves risks, including the loss of capital.

  • https://www.motionpictures.org/press/new-report-2019-global-theatrical-and-home-entertainment-market-surpasses-100-billion-for-first-time-ever/
EVOLVING ECONOMY

Automation

Investing in automation and robotics - How are companies capitalising on robotics – and what does this mean for investors?

Find out more

Related Articles

Technology

Finding long-term growth opportunities for Tech in a volatile market

  • by Jeremy Gleeson
  • 24 March 2022 (5 min read)
Technology

All across the metaverse: What is it and what investment opportunities does it present?

  • by Pauline Llandric
  • 22 March 2022 (5 min read)
Technology

Discovery, decisions, delivery and data: The digital economy’s key long-term drivers

  • by Jeremy Gleeson
  • 03 February 2022 (7 min read)

    Disclaimer

    *All companies or stocks mentioned are for illustrative purposes only and should not be considered as advice or a recommendation for an investment strategy.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. 

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. 
    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. 
    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited. 

    Disclaimer

    This website is published by AXA Investment Managers Asia Limited (“AXA IM HK”), an entity licensed by the Securities and Futures Commission of Hong Kong (“SFC”), for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy, sell or enter into any transactions in respect of any investments, products or services, and should not be considered as solicitation or investment, legal, tax or any other advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities under any applicable law or regulation. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation, investment knowledge or particular needs of any particular person and may be subject to change at any time without notice. Offering may be made only on the basis of the information disclosed in the relevant offering documents. Please consult independent financial or other professional advisers if you are unsure about any information contained herein.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee such opinions, estimates and forecasts made will come to pass. Actual results of operations and achievements may differ materially. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Information herein may be obtained from sources believed to be reliable. AXA IM HK has reasonable belief that such information is accurate, complete and up-to-date. To the maximum extent permitted by law, AXA IM HK, its affiliates, directors, officers or employees take no responsibility for the data provided by third party, including the accuracy of such data. This material does not contain sufficient information to support an investment decision. References to companies (if any) are for illustrative purposes only and should not be viewed as investment recommendations or solicitations.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and that past performance is no guarantee of future returns, investors may not get back the amount originally invested. Investors should not make any investment decision based on this material alone. 

    Some of the services listed on this Website may not be available for offer to retail investors.

    This Website has not been reviewed by the SFC. © 2022 AXA Investment Managers. All rights reserved.