Europen Home Aumtion Mrkets December 2010
Disclimer Frost & Sullivn tkes no responsibility for correct formtion supplied us by mnufcturers or users Quntittive mrket formtion is bsed primrily on terviews nd refore, is subject fluctution. Frost & Sullivn Reserch Services re limited publictions contg vluble mrket formtion provided select group cusmers response orders. Our cusmers cknowledge, when orderg, tht Frost & Sullivn Reserch Services re for cusmers ternl use nd not for generl publiction or disclosure third prties. No prt this Reserch Service my be given, lent, resold or disclosed non-cusmers without written permission. Furrmore, no prt my be reproduced, sred retrievl system, or trnsmitted ny form or by ny mens, electronic, mechnicl, phocopyg, recordg or orwise, without permission publisher. For formtion regrdg permission, write : Frost & Sullivn 4 Grosvenor Grdens, London SW1W 0DH United Kgdom 2010 Frost & Sullivn. All rights reserved. This document conts highly confidentil formtion nd is sole property Frost & Sullivn. No prt it my be circulted, quoted, copied or orwise reproduced without written pprovl Frost & Sullivn. 2
Certifiction We hereby certify tht views expressed this Reserch Service ccurtely reflect our views bsed on primry nd secondry reserch with dustry prticipnts, dustry experts, end users, regulry orgniztions, fncil nd vestment community, nd or relted sources. In ddition bove, our robust - house forecst & benchmrkg models long with Frost & Sullivn Decision Support Dtbses hve been strumentl completion nd publishg this reserch service. We lso certify tht no prt our nlyst compenstion ws, is or be, directly or directly, relted specific recommendtions or views expressed this service. 3
11 Executive Summry 4
Mrket Defition nd Segmenttion Home Aumtion Mrket:: Mrket Defition nd Segmenttion (Europe), 2010 Integrted Home Aumtion System Mrket Metrics Lightg Wdow Tretment Home Entertment HVAC Security Domestic Applces Study Period 2005-2015 Bse yer study 2009 Forecst Period 2010 2015 Hisric Period 2006 2008 Revenues nd pricg re terms Euros ( ). Ors Source: Frost & Sullivn. Product Defition Home systems re control systems which when stlled s re cpble providg tegrted control over t lest two household functions, with climte control beg n tegrl prt system. Household functions clude lightg, security, hetg, ventiltion nd ir conditiong (HVAC), udio nd visul. These control systems communicte vi vriety methods which my be eir proprietry or usg stndrd communictions procol. Geogrphic Scope In terms regionl nlysis, this reserch covers tl Europen mrket with overview ech followg regions: Germny, United Kgdom, Frnce, Itly, Sp, Benelux (Belgium, Nerlnds nd Luxemburg), Scndvi (Denmrk, Flnd, Norwy nd Sweden). 5
Mrket Snpshot nd Summry Mrket Mesurements Home Aumtion Mrket: Summry Dshbord Key Mrket Metrics (Europe), 2010 ( 2009 Million, Bse Yer Revenues ( 168.3 Bse Yer Growth Rte, 2009 % -5.9% ( Million Mrket Forecst, 2015 ( 228.7 ( 2009-2015 ) % CAGR 5.1% Mrket Chllenges Reducg Totl System Costs Embrcg New IT Technologies Tpg In Retrit Mrket Key Geogrphic Regions (%) Mrket Segments (%) UK Germny Itly Frnce Luxury Mrket Mss Mrket 29% 27% 11% 9% 37% 63% Competitive Environment Degree Competition Key Competitive Fcrs M&A Activities Price High Ese Instlltion & Progrmmg Geogrphic Coverge Low Refurbishment (%) 4% Key Competirs Crestron, AMX, Control4, Legrnd, Schneider, ABB New Buildgs (%) 96% Note: All figures re rounded; bse yer is 2009. Source: Frost & Sullivn 6
Mrket Outlook Smrt Smrt Home Home Aumtion Aumtion With With rpid rpid technology technology dvncements dvncements djcent djcent dustries dustries pertg pertg smrt smrt buildgs, buildgs, plyers need keep brest with such developments nd collborte with or secrs order mt plyers need keep brest with such developments nd collborte with or secrs order mt ir vlue proposition long term. ir vlue proposition long term. In In future, future, need need cover cover wider wider rnge rnge smrt smrt pplictions pplictions cludg cludg monirg monirg consumption nd genertion from micro-genertion or renewble sources such s Micro CHP nd consumption nd genertion from micro-genertion or renewble sources such s Micro CHP nd solr solr phovoltic phovoltic (PV). (PV). The fct tht concept mngement nd monirg receives gret ttention from hevyweights such The fct tht concept mngement nd monirg receives gret ttention from hevyweights such s s Google, Google, IBM IBM nd nd Cisco, Cisco, ddition ddition lrge lrge number number stwre stwre nd nd networkg networkg plyers plyers mens mens tht tht mrket evolve fster thn its previous pce. These compnies re pyg ttention potentil mrket evolve fster thn its previous pce. These compnies re pyg ttention potentil opportunities for mngement nd monirg residentil secr which certly be furr opportunities for mngement nd monirg residentil secr which certly be furr emphsised emphsised by by rollout rollout smrt smrt meters meters throughout throughout next next decde. decde. A A cse cse pot pot is is Cisco s Cisco s troduction troduction new new controller controller which which is is essentilly essentilly commnd commnd centre centre for for mngement tht cts like hub for ll networked devices, cludg ir conditioners, computers, TVs, mngement tht cts like hub for ll networked devices, cludg ir conditioners, computers, TVs, nd even plug- electric crs. Cisco s device lso cn be connected ny non-networked pplces house nd even plug- electric crs. Cisco s device lso cn be connected ny non-networked pplces house usg usg eir eir two-wy two-wy rmostts rmostts or or smrt smrt plugs plugs tht tht tlk tlk Cisco's Cisco's device device vi vi Zigbee Zigbee wireless wireless procol. procol. Moreover, Moreover, Google Google hs hs troduced troduced n n onle onle pltform pltform clled clled PowerMeter PowerMeter which which is is free free monirg monirg ol ol tht tht helps cusmers sve nd money usg formtion provided by utility smrt meters nd helps cusmers sve nd money usg formtion provided by utility smrt meters nd monirg devices stlled by eir cusmers or utilities house. The new stwre enbles cusmers monirg devices stlled by eir cusmers or utilities house. The new stwre enbles cusmers view view consumption consumption from from nywhere nywhere onle. onle. Therefore Therefore Home Home should should no no longer longer be be nrrowed only controllg cert pplictions house such s lightg, HVAC or security systems but it lso nrrowed only controllg cert pplictions house such s lightg, HVAC or security systems but it lso ought ought extend extend its its scope scope cover cover severl severl modern modern spects spects future future smrt smrt s. s. 7
Convergence Inter-Relted Mrkets Home Aumtion Mrket: Convergence Inter-Relted Mrkets (Europe), 2010 Smrt Meters & Utilities In Displys In Home Disply Unit Smrt Meterg System Home Are Network Wide Are Network ICT & Networkg Home Aumtion + Smrt Applces Micro- Genertion Fire & Sfety Solr technology Climte Control Het pump Security Micro CHP Home Aumtion Ors Biomss Micro-Renewbles Source: Frost & Sullivn. 8
Strtegies Inter-Relted Mrket Plyers Strtegies (Mid Long-term): Reducg crbon emissions, prticiptg supply ch & gg cusmer loylty Utilities Strtegies (Mid-Term): Obtg nd nlysg formtion residentil consumption. Offerg services for long term. Levergg networkg expertise. Strtegies (Current Short-Term): Trgetg wider end user segments Promotg efficiency through control nd system optimistion. Informtion & Communiction Technology Home Aumtion C o m p n y CoC Co mp C o mp Co ny o m ny m m p Co p p mp ny nny nin-home y ydisply Strtegies (Current Short-Term): Estblishg long term reltion with cusmers through services. Utilities prtnership. Inexpensive ferg 9
SWOT Anlysis The Europen Home Aumtion Mrket Strength: Young nd dynmic mrket with high growth levels Incresg competition benefitg product nd price developments Resilient mrket economic downturns (luxury Segment) Opportunities: Opportunity refurbishment mrket High growth emergg mrkets. (Estern Europe) Embeddg ICT Home Aumtion New mrket segment (Mid-rnge products) Opportunities for open nd upgrdeble systems Weknesses: Weknesses: Complex stwre nd progrmmg Limited stlltion know-how Unknown product fetures end users High upfront cost Under developed routes mrket Instllers lck Mrketg, ICT nd mngement skills Threts: Incresgly globlised mrket with more US plyers enterg Mrket Risk overlookg new technologies from djcent secrs Lck synergies between pplictions i.e., lightg, HVAC, Moristion etc. 10
Geogrphic Trends Home Aumtion Mrket: Regionl Snpshot (Europe), 2010 The UK is lrgest mrket for systems Europe, this is due size its luxury mrket segment. In terms revenues mrket for UK ccounts for 29% tl mrket. Note: Size bubbles dictes mrket size. Colour bubbles dictes current growth Scndvi The Germn mrket is second lrgest Europe. Energy efficiency is key driver for Germny where mnufcturers plce strong emphsis on HVAC, lightg nd security pplictions nd less focus on AV (Audio/Video) nd or luxurious fetures such s uch screen user terfce. Opportunity dicr High Low Sp UK Benelux Germny Frnce Itly The Itl mrket for system ccounts for pproximtely 11% tl mrket Europe. Itl end users typiclly plce more emphsis on comfort nd design system nd less focus on efficiency which cn chieve. The Benelux mrket for is one well estblished mrkets with Belgium beg leder terms Home R&D nd stlltion know how. Prior economic nd construction decle Spnish mrket hd been driven by strong nd consistent construction growth levels which were highest mong Europen countries. However followg construction crisis Sp prticulrly sce 2007 mrket hs decled substntilly. Despite Scndvi hvg high stndrd livg nd hs lrge number modern houses, is reltively low compred or Europen countries. The French mrket is significntly smll contrst or Europen countries with similr popultion or housg sck. Source: Frost & Sullivn Overll, sitution t present shows speedy recovery 2010 nd 2011 from current dip growth due revivl construction secr. Estblished mrkets such s Germny, UK nd Itly rem prticulrly importnt. 11
Competitive Lndscpe: Key Prticipnts & Tiers Competition Home Aumtion Mrket: Key Plyers & Mrket Segmenttion (Europe), 2010 Luxury Mrket Segment Crestron, AMX, Control4, Teletsk, Visiomtic, Vntge Mss Mrket Segment Legrnd, Btico, ABB, Siemens, Delt Dore, Schneider Electric, Niko, Jung, Gir, Vimr, Luxom, Ingenium,Mern, Berker, Adpt, Secnt, Cytech, Eln, Hrmony, Mrmitek, Domtel, Elk, HAI, Iuch, Smrt Home Controls, Visonic nd Vity. Source: Frost & Sullivn The mrket is segmented two ctegories, luxury mrket segment nd mss mrket segment. The luxury segment is rr concentrted with p two plyers hold over 50% mrket shre cross Europe. The most significnt plyers this ctegory re Americn mnufcturers cludg Crestron, AMX nd Control4. Europen mnufcturers such s Teletsk, Visiomtic nd Vntge lso operte this segment lthough with less significnt mrket shres nd ten with smller geogrphic coverge. The mss mrket segment on or hnd is very frgmented with lrge number mrket plyers comg form vrious dustry bckgrounds such electricl distribution nd buildg. Plyers mss segment mrket cn be lrge terntionl plyers such s Siemens, ABB nd Schneider Electric or smller regionl plyers with smller geogrphic coverge such s such s Delt Dore nd Luxom. In ddition, some mnufcturers operte both luxury nd mss mrkets. 12
Supply Ch nd Distribution Network Anlysis The supply ch for system vries gret del from one country nor with Europe. Home systems re typiclly cusmisble nd require specilised design, stlltion nd progrmmg. This mens sophisticted system needs higher thn verge knowledge networkg nd technicl stlltion, nd such knowledge is not eqully vilble every sgle country Europe. Therefore mnufcturers ten estblish prtnerships with dedicted distriburs who ct s prtners or sole distriburs for country or region. These specilist distriburs del with network system tegrrs or stllers who re normlly dependent busesses nd ct s key terfce with end users. Due complexity stlltion nd progrmmg, mnufcturers ten fer trg nd technicl support both distriburs nd stllers. Electric Distriburs HVAC Security AV Lightg Ors Home Aumtion Mrket: Vlue Ch (Europe), 2010 Home Aumtion System mnufcturers Specilised Aumtion Distriburs Electricl Contrcr End-User / Cusmer Cusm System Integrrs Property Developers Source: Frost & Sullivn 13
Strtegic Conclusion 1 Considerg tht by 2020 smrt meters be stlled most Europen s, suppliers receive Considerg tht by 2020 smrt meters be stlled most Europen s, suppliers receive dt dt from from millions millions households households nd nd be be ble ble better better control control ir ir power power sttions. sttions. Menwhile, Menwhile, end end users users lso lso demnd demnd more more clrity clrity nd nd understndg understndg different different prices prices throughout throughout dy dy order order optimise optimise consumption. Informtion such s how much electricity solr pnels on ro feeds net, or consumption. Informtion such s how much electricity solr pnels on ro feeds net, or prices prices when when lundry lundry is is wshed wshed be be expected expected s s prt prt system. system. 2 Home Home Aumtion Aumtion distriburs distriburs currently currently ply ply mjor mjor role role supply supply ch. ch. They They provide provide system system tegrrs tegrrs nd cusm stllers with product knowledge nd ten ct s eductg nd trg providers on behve nd cusm stllers with product knowledge nd ten ct s eductg nd trg providers on behve mnufcturers. This however is grdully chngg s more stllers nd system tegrrs re becomg mnufcturers. This however is grdully chngg s more stllers nd system tegrrs re becomg cquted cquted with with stlltion stlltion nd nd tend tend del del directly directly with with mnufcturers. mnufcturers. In In long long term, term, s s stlltion know-how is becomg more vilble, dded vlue tht distriburs fer stlltion know-how is becomg more vilble, dded vlue tht distriburs fer be be less less significnt significnt gog gog forwrd. forwrd. 3 The troduction tblet computers - prticulrly Apple s ipd - is hvg huge impct on luxury segment The troduction tblet computers - prticulrly Apple s ipd - is hvg huge impct on luxury segment mrket. Usg uch screen tblet computer s user terfce cn sve up 50% mrket. Usg uch screen tblet computer s user terfce cn sve up 50% system system price. price. Home Home mnufcturers mnufcturers should should refore refore shift shift ir ir R&D R&D focus focus from hrdwre user terfces stwre pplictions nd embrce new technology. from hrdwre user terfces stwre pplictions nd embrce new technology. Despite Despite negtive negtive impct impct on on revenues revenues luxury luxury system system mnufcturers mnufcturers short short term, term, mrket mrket surely surely benefit benefit from from new new technology. technology. In In fct, fct, become become more more ffordble wider end user segment. ffordble wider end user segment. 14
Strtegic Conclusion (Contd ) 4 Mnufcturers systems such s security, HVAC or lightg ten work silos when it comes chievg Mnufcturers systems such s security, HVAC or lightg ten work silos when it comes chievg efficiency efficiency mesures. mesures. No No synergies synergies between between such such mnufcturers mnufcturers hve hve been been sought sought on on wide wide scle. scle. Therefore Therefore mnufcturers mnufcturers should should collectively collectively work work with with such such plyers plyers nd nd encourge encourge relistion efficiency through optimistion entire system. This wy plyers relistion efficiency through optimistion entire system. This wy plyers be be ble ble promote promote both both mselves mselves nd nd t t lower lower level level supply supply ch. ch. 5 Currently Currently lmost lmost 95% 95% stlltions stlltions Europe Europe tke tke plce plce mly mly new new buildgs. buildgs. Retrits ccount for smll percentge overll mrket. Therefore dvncements wireless Retrits ccount for smll percentge overll mrket. Therefore dvncements wireless technologies technologies ply ply significnt significnt role role chngg chngg this this rtio. rtio. However, However, wireless wireless technology technology still still fces fces severl severl chllenges. chllenges. In In ddition ddition relibility relibility issues, issues, products products or or pplces pplces controlled controlled by by system system still still require power. require power. 6 Tblet computers surely nrrow gp between luxury systems nd mss mrket systems. Mss Tblet computers surely nrrow gp between luxury systems nd mss mrket systems. Mss mrket mrket mnufcturers mnufcturers re re developg developg stwre stwre pplictions pplictions designed designed for for tblet tblet computers. computers. Therefore, terestg user terfces which used be exclusive ffluent cusmers re now ffordble Therefore, terestg user terfces which used be exclusive ffluent cusmers re now ffordble mss mrket cusmers. Some mnufcturers nd system tegrrs lredy clude such technology mss mrket cusmers. Some mnufcturers nd system tegrrs lredy clude such technology (e.g. (e.g. ipd ipd or or itouch) itouch) s s prt prt ir ir system system ferg. ferg. 15
10 10 About About Frost Frost & Sullivn 16
About Frost & Sullivn The Growth Consultg Compny Founded 1961, Frost & Sullivn hs over 45 yers ssistg clients with ir decision-mkg nd growth issues. Over 1,700 Growth Consultnts nd Industry Anlysts cross 32 globl loctions Over 10,000 clients worldwide - emergg compnies, globl 1000 nd vestment community Developers Growth Excellence Mtrix dustry ledg growth positiong ol for corporte executives Developers T.E.A.M. Methodology, proprietry process ensure tht clients receive 360 o perspective technology, mrkets nd growth opportunities Three core services: Growth Prtnership Services, Growth Consultg nd Creer Best Prctices 17
Wht Mkes Us Unique Exclusively Focused on Growth Globl thought leder exclusively focused on ddressg client growth strtegies nd plns Tem ctively engged reserchg nd developg growth models tht enble clients chieve ggressive growth objectives. Industry Bredth Cover brod spectrum dustries nd technologies provide clients with bility look outside box nd discover new nd novtive ides. Globl Perspective 32 globl fices ensure tht clients receive globl coverge/perspective bsed on regionl expertise. 360 o Perspective Proprietry T.E.A.M. TM Methodology tegrtes ll 6 criticl reserch methodologies significntly enhnce ccurcy decision mkg nd lower risk implementg growth strtegies. Growth Monirg Contuously monir chngg technology, mrkets nd economics nd proctively ddress clients growth ititives nd position. Trusted Prtner Workg closely with client Growth Tems helpg m generte new growth ititives nd leverge ll Frost & Sullivn ssets ccelerte ir growth. 18
T.E.A.M. Methodology Frost & Sullivn s proprietry T.E.A.M. methodology, ensures tht clients hve complete 360 Degree Perspective from which drive decision-mkg. Technicl, Econometric, Appliction, nd Mrket formtion ensures tht clients hve comprehensive view dustries, mrkets nd technology. Technicl Econometric Appliction Rel-time telligence on technology, cludg emergg technologies, new R&D brekthroughs, technology forecstg, impct nlysis, groundbrekg reserch, nd licensg opportunities. In-depth qulittive nd quntittive reserch focused on timely nd criticl globl, regionl, nd country specific trends, cludg politicl, demogrphic, nd socioeconomic lndscpes. Insightful strtegies, networkg opportunities, nd best prctices tht cn be pplied for enhnced mrket growth; terctions between client, peers, nd Frost & Sullivn representtives tht result dded vlue nd effectiveness. Mrket Globl nd regionl mrket nlysis, cludg drivers nd restrts, mrket trends, regulry chnges, competitive sights, growth forecsts, dustry chllenges, strtegic recommendtions, nd end-user perspectives. 19
Globl Perspective 1,700 stff cross every mjor mrket worldwide Over 10,000 clients worldwide from emergg globl 1000 compnies 20