Growth through partnerships with companies in various fields, including home appliances, platforms, communications, and terminals.

As China's Internet of Things market grows at an annual rate of over 30%, the smart home market is also growing rapidly.

Last year, the Chinese smart home market was worth 60 billion yuan (10.2 trillion won), and it is expected to grow by about 80% annually to reach about 235 billion yuan (40 trillion won) in 2020.

Lee Byeong-in, director of the Korea-China System IC Cooperation Research Institute, explained that the limited market centered on security products, valued at 10 billion yuan (1.7 trillion won) in 2013, has rapidly grown in 2017, primarily driven by home and complex-level intelligence. This growth is driven by five key factors: policy, economy, population, environment, and social change.

While the smart home industry is still developing around device supply, it is expected that ‘platforms’ will drive device growth starting in 2019. The director predicted, “After the system that controls each unit and each house is introduced, the market for profit through operation will be larger than the market for IoT devices used in smart homes,” and “The inflection point when the size of the service market overturns the size of the device market will be in 2019-2020.”

In particular, the structure of China's smart home industry is structured into five layers, each organically linked to platforms, cloud, devices, and connectivity application services. Therefore, rather than a single company dominating the entire sector, each company is pursuing a partnership strategy, leveraging its respective strengths.

The industry has evolved under the leadership of companies across various sectors, including home appliances, platforms, telecommunications, and terminals, such as Haier, Midea, Baidu, Xiaomi, Huawei, and Alibaba. When a major player takes the lead, numerous service and manufacturing companies follow suit. Currently, Huawei, with its dominant fixed-line network, is leading the way. However, after 2019, the influence of service platforms is expected to strengthen, making Baidu, Alibaba, and Tencent worthy of attention.

As the smart home market grows, shipments of connectivity modules and gateway products required for construction are also continuously increasing. He explained that connectivity is dominated by Wi-Fi, 5GHz usage is still low, and many home 2.4GHz/433MHz dual-band modules that can be used locally without the Wi-Fi protocol are being used.
Wi-Fi modules, which were priced at 50 yuan (8,500 won) per unit in 2013, have now fallen to around 15 yuan (2,500 won). While penetration is steadily increasing, market size growth is slowing. The market, which was once a red ocean due to the saturation of the existing Wi-Fi card market and declining unit prices, is now being overcome by onboard Wi-Fi modules with pre-installed operating systems and protocol stacks, which are expanding their application range beyond smart homes to the IoT. Solutions that have overcome this red ocean are being distributed in large quantities to global manufacturers, generating steady sales.

Smart home interconnectivity and UI/UX are expected to be centered around AI speakers. Although most of the products of the five domestic companies are manufactured in China and major service providers are pursuing expansion strategies centered on the Chinese market, domestic sales growth is still in its early stages, reaching around 1 million units in 2017.

Although China's smart home appliance sector has yet to reach the level of global leaders, a variety of applications are emerging in the areas of lifestyle IoT products such as lighting, intelligent metering, and healthcare, as well as home security, such as IP cameras and smart door locks.

A strategy is needed to enter the Chinese smart home market.

The director pointed out that several strategies are necessary for Korean companies to enter the Chinese smart home market. "First, with the increasing intelligence of cities and rising average incomes, we need to diversify our product offerings to suit different income levels," he emphasized. Furthermore, he predicted opportunities for businesses combining biotechnology and IT, as education and health become more important and modernized collective housing increases.

He explained that with the widespread adoption of Wi-Fi, low-power Bluetooth, and ZigBee, the commercialization of NB-LTE and 5G, and the expansion of sensor applications, fabless companies and module businesses are experiencing opportunities. He also mentioned that with platform companies leading the way in services and integrating with government-led smart cities, it's crucial to consider the Chinese ecosystem and platform companies in seeking business opportunities. Finally, he emphasized that cost competition will inevitably arise due to China's semiconductor boom, and that attention should be paid to low-capacity, low-power products.