The smart speaker installed base is expected to more than double by the end of this year, nearing the 100 million mark as Amazon.com Inc. (AMZN) and Alphabet’s (GOOG) Google dominate the marketplace in the U.S.
According to market research firm Canalys, the smart speaker market is poised to end the year 2.5 times larger than at the end of last year and is projected to reach 225 million installed devices by 2020. Amazon with its line of Alexa enabled Echo speakers is projected to maintain its leadership position, commanding 50% of all the installed devices this year, while Google’s Home voice-activated assistant is expected to account for 30% of the market. Apple Inc.’s (AAPL) HomePod device is projected to represent just 4% of all the installed devices this year. While Amazon and Google have focused on the voice interactions with their devices, Apple paid more attention to the sound quality, churning out a high-end speaker that appears to be too pricey for the masses. (See more: Apple Could Launch Lower Priced HomePod.)
“The U.S. is the world leader in smart speaker adoption,” said Canalys Research Analyst Vincent Thielke. “Amazon and Google know the power of an ecosystem lock-in and have been engaged in a fierce price war to try and build the largest installed base. As Amazon’s Prime Day looms, customers expect discounts, and the company is set for a rush of shipments.” (See more: Amazon Prime Day 2018: Whole Foods, 36 Hours, More Countries.)
Alexa, Google Home Everywhere
What is expected to drive the future growth is a push by Amazon and Google to take their devices beyond the smart home and roll them out in new use cases. Last month Amazon announced Alexa for Hospitality, which is a version of its Echo device that can be used in hotels. In March it inked a deal with JPMorgan Chase & Co. (JPM) in which the Wall Street firm’s investing clients will be able to access research on publicly traded companies by asking Alexa. According to Canalys, the business teams at Amazon and Google are targeting all sorts of commercial opportunities for their voice-activated digital assistants including in offices, gyms, hotels and airports, which should drive more growth.
China A 'Sleeping Giant'
As for China, home to a growing middle class, Canalys said it remains a “sleeping giant,” with local players including Alibaba (BABA) and Xiaomi investing heavily in the second half of this year. Canalys research analyst Hattie He said in the same report that sales promotion during the country’s two shopping events later in 2018 will be an important driver of growth.
“China is still a nascent market for smart speakers, but it is a sleeping giant,” said He. “As competition intensifies, Chinese vendors will expand their product portfolios to hit more price points and offer a greater range of capabilities. But for long-term growth in China, a more complete voice service and better user engagement are just as important. China has massive potential, with more than 450 million households, over three times the number in the US.”