Virtual Assistants A New World Beyond Smartphones and Speakers

The market for virtual assistants (VAs) continues to exhibit strong forward momentum and is now stepping beyond the territories of smart speakers and smartphones. Growing by 20% year-on-year in 2018, to 860 million units shipped worldwide, VAs are on track to exceed 2.3 billion unit shipments by 2023 according to Futuresource Consulting.

APAC is the largest growth region, with Chinese virtual assistant vendors like Alibaba and Baidu gaining traction and winning substantial market share. In contrast, Amazon, Apple, Google and Microsoft have already established strong market share in other regions and must now offer additional language support to positively influence growth. EMEA is a notable case, with populations demanding virtual assistants with a diverse set of language skills and competencies.

Looking to the platforms, in the first half of 2019, Baidu’s DuerOS showed the strongest growth, rising 12% to secure 21% of the market, bringing it alongside Microsoft Cortana, which holds a dominant position on Windows 10 PCs. Apple’s Siri held 32% share, reflecting strong sales in Apple iPhone, iPad and Airpods. Google Assistant and Amazon’s Alexa held 8% and 4% market share respectively, with high penetration across Android devices.

A key decision for vendors is whether they pursue a built-in or works-with strategy. The solution they ultimately choose depends upon the application and whether they can get enough value from the data they harvest from a built-in VA. Most are following a works-with strategy, where their devices can be controlled by voice commands when coupled with a smart speaker. This means they don’t need to embed any native voice technology. Being able to participate in the voice ecosystem without having to invest in AI and cloud technology is enough to persuade many vendors that works-with is the most beneficial route.

Beyond smartphones and smart speakers, automotive and smart home applications are leading the pack. In automotive, Futuresource expects the market for audio systems and headends to continue to achieve strong growth, rising from US$27.8 billion worldwide in 2018 to US$32 billion by 2023. Voice assistants will gain rapid penetration, with noise cancellation the second most adopted feature, as costs of deployment reduce and powertrain design benefits are recognised. As the audio supply ecosystem becomes increasingly more complicated, OEMs are working directly with tech suppliers and using a modular purchasing approach. As a result, audio suppliers will have to navigate an ever more complicated range of partnerships with OEMs, tier one partners and semiconductor providers.

In the smart home category, where 100 million devices shipped globally in 2018, Futuresource expects volumes to reach 137 million in 2019. However, this vigorous growth won’t be sustained. According to Futuresource forecasts, the next few years will see decelerating growth for smart home devices overall. Yet drilling down into the sub-categories reveals a mixed picture. Hubs are experiencing a significant slowdown, but smart power, video doorbells and smart locks show an accelerating growth rate.

Despite the overall slowing of growth, smart home will still outperform most other consumer device segments, achieving a global CAGR of 22% for the period of 2019 to 2023. Mature smart home markets such as North America are expected to grow on average 13% a year, whereas Eastern Europe is expected to see a 30% CAGR, with APAC producing a comparable CAGR to Eastern Europe, despite the Chinese market being forecast to grow slightly below that rate, at 26%.