Smart Home

IDC Analyst: How Matter will help Chinese smart home makers accelerate global expansion

Ward Zhou

posted on April 21, 2023 10:58 amEditor : Wang Boyuan

In a wave of Matter-compatible devices showing up, Chinese smart-home firms are among the biggest adopters. 

Matter is a new smart home standard that has brought together big rivals like Google and Apple as they seek to address incompatibility among IoT products from different brands and vows consumer adoption. Like the popular IoT standard Zigbee, the open-source Matter was also backed by Connectivity Standards Alliance (CSA), formerly the Zigbee Alliance. Supported by a group of firms, the alliance publishes and promotes IoT standards.

There are 29 promoters and 261 participants in the standard so far. And over 1,000 products, systems, or platforms were Matter-certified,  according to CSA’s website.

In an interview with Sophie Pan at an IDC Tuesday’s event held in Shenzhen, we explore how Chinese smart home firms like Aqara bet on Matter and the challenges they could counter. Pan is a director at IDC China and she tracks and analyzes the quarterly and monthly sales of wearable devices and smart home products at IDC. Her research covers product positioning changes, sales channel selection, and prediction of trends.

Sophie Pan
Sophie Pan

The text is translated from Chinese and condensed for clarity.

PW: regarding to Matter's implementation, what stage are we on at this point?

Matter was primarily backed by the three tech giants – Apple, Google, and Amazon. Their platforms are estimated to cover a majority of potential users overseas [in the smart home market]. And they have rallied together to expand the entire home market and resolve critical issues which result from fragmented ecosystems.

Regarding implementation overseas, Matter is expected to land and advance more quickly. However, it seems that Matter has not fully landed in the domestic market. 

Chinese local associations are also trying to promote similar universal standards, a Chinese version of Matter, which needs support from domestic vendors. 

Some leading ones have expressed willingness to join such ecosystems, including Matter, but the overall progress and implementation are still relatively slow.

This is related to the current state of the domestic ecosystem and the major players within it. Compared to overseas markets, domestic smart home ecosystems are more decentralized.

During the mobile internet era, we didn't just have Android and Apple - every mobile phone manufacturer had their Android-based platforms. Other tech unicorns like Baidu and Alibaba also saw efforts to build up their ecosystems.

Such decentralization in China leads to difficulties and slows the progress of Matter implementation.

The three overseas companies not only excel in hardware but also present powerful software capabilities. Their success is not solely dependent on hardware to gain market or attract users but rather relies heavily on their software.

While at home, most [smart home] manufacturers are still relying on hardware to drive their businesses. This is because most software is tailored to specific hardware.

It may lead to a weaker desire for platforms like Matter to be implemented in China than the three giants overseas because it could have a greater impact on their user base secured by their hardware.

From the perspective of upstream or third-party associations, there is a strong promotion for Matter or similar standards to land in China. 

However, progress may be slower overall than overseas due to the aforementioned challenges in relying on hardware.

PW: How could Matter shuffle Chinese firms?

Matter could help domestic [smart home] vendors expand globally by providing a unified system. It allows them to connect with various platforms easily. And Matter eliminates the need for separate negotiations with each firm. 

Taking Aqara and Xiaomi as examples, they are actually two completely different types of products. Aqara has many HomeKit-enabled products, making it a perfect fit for domestic and global integration with Matter. 

Xiaomi may have different considerations and might not prioritize Matter integration as much as Aqara.

For small and medium-sized firms, joining Matter is preferred, especially in the vertical industry of whole-home solution manufacturers such as Aqara and ORVIBO.

Some smaller manufacturers in China could be more willing to promote Matter. With Matter, they hope to bridge the gap between themselves and rivals.

PW: What challenges and opportunities could Matter introduce?

Those local firms planning to explore overseas markets could counter difficulties or obstacles when implementing the Matter standard.

Matter is a cost-effective option compared to other standards, although the overall expenses depend on hardware expenditures. In terms of software, it entails integrating the application and protocol layers, with the additional cost potentially affected by interface preparation during the design phase.

If there is no reservation for new implementations in the agreement beforehand, this could potentially cause obstacles or repetitions in the entire product development, resulting in a higher cost.

Hardware implementations may also require more research and development work related to component and connection interfaces. It may even require product redesign in SKU (Stock Keeping Unit).

The retail channel is also a major concern as many local firms rely on online channels [to market and ship] their products when operating abroad. Expanding into offline-dominated markets overseas presents a significant challenge for them to unlock more retail channels.

However, China has unique advantages in supplements compared to the global market, primarily due to its maturity in tech and volume in distribution. If Chinese firms are confident in their local supply chain, competitors may find it challenging to outperform them.

PW: What else is trending on the smart home market?

Firstly, there is a convergence in the form of smart home products. Whether it is in the field of entertainment or switch control systems, we observe an increasingly interwoven exchange between various products. 

For instance, switches may now be integrated into displays, evolving centralized control consoles, or embedded in small home suppliances like lamps, night lights or even alarm clocks, featuring home automation and playback control. Such a new and merged product form will continue to emerge.

Additionally, connectivity is another crucial focus. Many manufacturers and platforms emphasize the connectivity experience, ensuring its convenience, accessibility, and stability.