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Domestically-Manufactured Smart Speakers Set to Conquer Mainland

While Google Home and Amazon's Alexa failed to go sufficiently native to woo Chinese consumers, a new generation of locally-produced smart speakers are proving a pronounced success in many of the mainland's intelligent residences.

Photo: The smart speaker: An essential cyber-concierge or a digital dead-end? (Shutterstock.com)
The smart speaker: An essential cyber-concierge or a digital dead-end?
Photo: The smart speaker: An essential cyber-concierge or a digital dead-end? (Shutterstock.com)
The smart speaker: An essential cyber-concierge or a digital dead-end?

It was 2017 – relatively late in global terms – when China first really began to embrace the smart speaker phenomenon. According to data from GfK, the Nuremberg-headquartered market research group, 1.65 million smart speakers were sold across the mainland in that 12-month period, compared to just 60,000 the year before. Based on those findings, the company is estimating that the final figure for 2018 smart speaker sales will be about 5.88 million units.

This surge has been driven by the many consumers who are now dumping their Bluetooth speakers in favour of a smarter upgrade. As a consequence, there has been intense competition between many electronics manufacturers, as well as China's digital giants, to build market share in this rapidly expanding – and hugely lucrative – sector.

Battling Brands

Currently, the mainland's smart speaker market is not only served by such industry giants as Alibaba, JD, Xiaomi and Legend, but has also attracted the attention of several smart hardware companies, most notably Rokid, a Hangzhou-based AI specialist, and Mobvoi, a Beijing-headquartered leader in the smart voice search sector. On top of that, a number of content providers – including Kugou, Tencent's music streaming service, and Ximalaya, China's largest online audio platform – are also said to have a keen interest in pushing the growth of the smart speaker sector, largely on account of the key role such systems will play in driving demand for their services.

In terms of particular success stories, the 2017 Singles Day shopping festival – China's biggest online sales event – saw Alibaba sell more than a million of its Tmall Genie X1 smart speaker model. Although its price had been cut from RMB499 (US$72.50) to RMB99 for the occasion, the ecommerce giant had only anticipated selling 500,000 units, with the surplus demand seeing it struggle to fulfil all orders.

Looking to capitalise on this, the following year the company considerably extended its Tmall smart speaker range, launching in quick succession the Genie Sugar Cube, Genie Cookie, and Genie Magic Box. Although officially priced at RMB199, the Sugarcube launched with a price tag of just RMB89 as a special introductory offer.

Not to be outdone, JD, a rival ecommerce operator based in Beijing, launched eight different variants of its DingDong range, with each of the models targeted along a spectrum that ran from very low-end users to their high-end counterparts. Again looking to woo entry-level users, the DingDong Mini2 was launched at just RMB79, before later reverting to its official list price of RMB299. Similarly, the Xiao AI mini-Bluetooth speaker, as produced by Xiaomi, the Beijing-headquartered consumer electronics manufacturer, was offered for RMB99 (RRP RMB169), during the Mi Fan (Fans of Xiaomi) festival.

Turning back to Alibaba, its focus is believed to be on offering increasingly compact, highly-affordable smart speaker systems, while also extending the available content / services. To this end, it has partnered with content / service providers across a wide range of sectors, including education, daily necessities, music, audio communications, elderly care, leisure interests and the internet-of-things (IoT).

More specifically, its smart speakers can be used in conjunction with 117 educational books, all designed to help children between three and eight-years-old expand their vocabularies and enhance their reading levels. In the healthcare sector, it is working with a sister company – AliHealth – on refining a pharmaceutical identification system that can ensure patients receive the appropriate medicine. Meanwhile. it has also partnered with Volvo, BMW and Mercedes Benz to help pioneer a reliable smart speaker / automobile control interface.

Even without many of these add-ons, however, many smart speaker systems are already operating at close to maximum capacity. According to one study, for instance, JD's range of DingDong smart speakers maintain a usage level of above 90%.

This high utility level is down to the fact that many consumers are already heavily-reliant on their smart speakers as music players, providers of audio news / information content, alarm / scheduling systems and for daily interaction action with their immediate environment, including weather forecasting and food / entertainment ordering.

In total, the DingDong speakers are said to offer more than 2,000 different services, including online shopping, travel management and the provision of audio-visual content. They can also operate / monitor 20,000 smart home devices across 81 brands, 50 product categories and 10 smart-home platforms.

Personalisation and Interactivity

In terms of the current level of consumer usage and expectations, 'Ms Chen' – who bought a Tmall Genie for RMB99 during the 2017 Singles Day shopping period – is fairly typical. After purchasing the product, she soon found herself using it to play music, wake her up in the morning and to stay in regular contact with family and friends. To date, she is still finding new uses for it on a regular basis.

Photo: High-tech, high-stakes: Brands battle for peak speaker penetration. (Xinhua News Agency)
High-tech, high-stakes: Brands battle for peak speaker penetration.
Photo: High-tech, high-stakes: Brands battle for peak speaker penetration. (Xinhua News Agency)
High-tech, high-stakes: Brands battle for peak speaker penetration.

While Chen represents a typical early adopting consumer – curious and open to trying new things – there are now signs that the market is moving into a more mature phase. Rather than merely satisfying the need for new sensations, it is now seen as important for the next generation of smart speakers to clearly meet the changing needs of tech-savvy consumers. Two niches that are already being exploited in this regard relate to children and the elderly, with both demographics said to have been wooed by the apparent "companionship" AI-enabled devices offer.

Indeed, it is both AI technology and wider usage that are already shaping the future of the sector. Expanding upon this, one senior Alibaba staff member said: "In order to generate the level of Big Data required to refine these systems, they need to be AI-enabled and in use in a wide variety of locations and environments. We are already seeing the fruits of this in that many newer models are better able to recognise less-common accents and to interact with different dialect groups."

For many, it was their failure to adapt to the peculiarities of the mainland market and to interpret the non-standard speech patterns of many Chinese citizens that saw such apparently global devices as the Amazon Echo and Google Home fail to gain any traction in China. The upside of this is that it has left the market open for domestic manufacturers.

This failure of first-generation western smart speakers in China may also partly explain why the local smart home sector is still in its infancy, certainly when compared to the relatively sophisticated markets of the US or Europe. With mainland consumers now increasingly attuned to the desirability of smart home living, however, it is highly likely that demand will continue to grow for smart speakers, integral components of any intelligent residence. Indeed, given the recent surge in the sector, it is now anticipated that mainland smart home development will not lag behind the international norm for long.

With the market undoubtedly huge – and its potential barely tapped – it is expected that both the smart speaker sector and the wider world of smart home development will enjoy unprecedented growth in the coming years, with competition for market share sure to intensify. Given that, it seems certain that this period of sales expansion will be matched by increased innovation on the part of manufacturers, with the need to provide something unique and offering high utility, undoubtedly, the only guarantee of success.

Li Nan, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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