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China: A Hotbed of Smart Speaker Activity
A trip to China last week, which involved numerous meetings with audio ODMs, brands and technology partners, culminated in Futuresource making a presentation at the Alexa summit in Shenzhen on the outlook for smart speakers and voice assistants. China is an appropriate location for such events because the smart speaker market there has ballooned in the past six months. It is clear that Chinese AI platforms have been striving to replicate Amazon Alexa’s success (in the US) in their domestic market. Smart speakers made their debut in China in 2016 and recent acceleration of activity has led Futuresource to raise its forecast to 10 million units for 2018, equivalent to 20% of worldwide demand.
Who has been driving this growth and why are these devices so popular? Online retail giant JD.com, in partnership with voice platform iFlyTek, was first to market with DingDong in 2016, but awareness and uptake remained relatively low in the first year. However, the debut of e-commerce giant Alibaba’s Tmall Genie product, competitively priced at RMB 499 ($75), has taken the market to a new level. The product was heavily discounted during Single’s Day promotions and Futuresource’s quarterly analysis shows it clocked up sales of c.1 million units in its first quarter of launch. Similar to Amazon, Alibaba can sell its speaker direct to consumers, backed by AliPay and the Taobao ecosystem.
In addition, Xiaomi in Q4 2017 launched a speaker priced at RMB199 ($30), much cheaper than its competitors. The hardware and services company, which also offers PCs, Laptops and Smartphones, is rolling out a smart home and entertainment control ecosystem that will benefit greatly from a widespread adoption of the speaker.
The buzz around smart speakers continued in Q1 2018, when the category sold over 1.5 million units. CE retail chain Suning and a range of smaller Chinese brands and third-party players weighed in with devices. Baidu, the biggest search engine in China has also been closely watching this space. It introduced a smart speaker with a screen (called Little Fish) at CES earlier this year, priced at RMB 599 ($95). Baidu has also partnered with other speaker vendors, similar to LingLong’s strategy, to expand its ecosystem in consumer homes.
Whilst the music listening population is huge in China, most consumers stream for free and listen on the go (using headphones). The concept of sharing music and in-home listening has not traditionally been popular, which has translated into low penetration of home audio devices historically. With smart speakers, initial feedback suggests that growth is driven by high levels of curiosity and non-audio features at least as much as audio/music, in contrast to the US and Europe. Whilst demand for smart speakers in China is clearly triggered by a wide range of functionality, their rapid adoption might also positively impact in-home music listening.
Chinese brands are keen to explore the potential of the domestic market where they have expertise, ecosystems and local language skills. Whilst we were in China, it was evident even on the streets that pedestrians and drivers were giving voice commands to their devices, often for navigation services. Some said they used the Baidu platform, whilst others mentioned a variety of other local services. The growing use of voice-based services puts Chinese AI platforms at a significant advantage in terms of sheer volume of users; close to a billion across mobiles and other hardware. This scale of use will ensure the platforms quickly become far more sophisticated and extend beyond smart speakers to penetrate the home, car, mobile and B2B ecosystem.
Voice integration beyond speakers has been slow as there are challenges with adding mic arrays in a TV set or voice pick-up when the home theatre system is on full sound. Practical issues around installing these systems, who trains the consumers to use them, costs associated with installations and maintenance are also key factors that have hindered rapid integration in other hardware. Technology companies are reviewing solutions to overcome these issues but as with any new tech, these are teething issues for which solutions are being sought out and tested.
Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.