China Outpaces U.S. in Smart Speaker Market: BABA & BIDU Gain

Aniruddha Ganguly

China outpaced the United States in becoming the largest smart speaker market in first-quarter 2019. Per the latest data from Canalys, China grabbed 51% of the global market share, while the U.S. market share dropped to 24% from 44% recorded in fourth-quarter 2018.

China’s smart speaker market hit 10.6 million units, marking a year-over-year surge of almost 500% and 23% sequentially. In comparison, 5 million smart speakers were shipped in the United States during the same time frame.

Overall, the global smart speaker market soared 131% to hit 20.7 million.



 

AMZN Sustained Global Dominance, BIDU Tops China Market

Amazon AMZN continued its global dominance with a market share of 22.1%, trailed by Alphabet GOOGL division’s Google with a 16.8% market share. Baidu BIDU followed with a 16% market share in the quarter.

Market research firm Strategy Analytics also ranked Amazon at the top, with a market share of 21.7%. Google trailed with a market share of 18%, followed by Baidu’s with 15.8%.

Solid demand for smart speakers in China, where Amazon and Google do not have a presence, benefited Baidu, Alibaba BABA and Xiaomi.

Baidu shipped 3.3 million smart speakers in the quarter. This Zacks Rank #5 (Strong Sell) stock entered the smart speaker market with its Xiaodu branded devices in second-quarter 2018. Notably, Baidu sold 3.6 million smart speakers in 2018.

Alibaba, which carries a Zacks Rank #3 (Hold), sold 3.2 million smart speakers and grabbed a market share of 15.5%. Unit shipment soared 204.3% year over year.

Year-to-Date Performance


 

Moreover, Xiaomi shipped 3.2 million smart speakers, reflecting year-over-year growth of a massive 411.4% and a market share of 15.4%.

Amazon, another Zacks Rank #3 stock, shipped 4.6 million smart speakers, reflecting year-over-year growth of 84.7%. Google shipped 3.5 million devices, growing at a much slower pace of 7%.

Although Canalys data didn’t mention Apple AAPL, the iPhone-maker shipped 1.1 million smart speakers in the quarter, per data from Strategy Analytics. Unit shipment reflected year-over-year growth of 105% better than Amazon’s growth of 50% and Google’s growth of 92%.

However, Apple’s growth prospects are quite dim due to comparatively higher prices of its HomePod and the negative impact of the ongoing trade-war between China and the United States. Apple also has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Smart Speaker: Competition Intensifying

The growth projections are bullish as Canalys projects the worldwide smart speaker installed base to increase from 114 million units in 2018 to 207.9 million in 2019, suggesting stellar growth of 82.4%.

IDC’s growth estimates are a bit modest compared to Canalys. Smart speaker shipments are expected to hit 144.3 million in 2019. Moreover, it is anticipated to witness CAGR of 13.6% over the 2019-2023 time frame and hit 240.1 million shipments by 2023. IDC considers smart speakers as part of smart home devices.

Per Canalys, China is expected to witness whopping growth of 166% in year-over-year unit shipment of smart speakers in the current year. South Korea and Japan follow with growth estimates of 132% and 131%, respectively. In comparison, the United States is expected to be up 46% year over year.

Expanding linguistic features, including addition of support for languages like Chinese (Mandarin or Cantonese), Japanese, and improvement in speech recognition accuracy, are major growth drivers.

Moreover, per Deloitte, declining complexity and manufacturing costs, partly due to technological advancement, which has lowered the requirement of number of microphones per device is a key catalyst.

These factors are fueling strong demand for smart speakers in China and Asia-Pacific, which bodes well for Baidu, Alibaba and Xiaomi. The low cost smart speaker devices from these companies are anticipated to provide significant competition to Amazon and Google this year.
 

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