China Smart Speaker Adoption Growth – Canalys – FI

China is Driving Half of Global Smart Speaker Growth

  • Canalys says that 52% of Q2 2018 smart speaker sales volume growth (i.e. not total sales, but growth) came from China.
  • Alibaba and Xiaomi accounted for about 90% of smart speaker sales in China during the quarter and 30% of global unit volume.
  • Canalys also says sales volume growth shows smart speaker adoption in China is following a similar pattern as the U.S.

Canalys, a U.K.-based market research firm published a new report on global smart speaker sales today that estimates second quarter year-over-year growth reached 187%. More than half of that growth came from a single country, China. Google and Amazon took the top two spots in Q2 2018 global smart speaker shipments but Alibaba and Xiaomi which sell exclusively in China today came in at third and fourth respectively. The combined market share for the two Chinese companies was 30% of global smart speaker unit volume.

What is particularly impressive is that both companies had zero market share in Q2 2017. Alibaba and Xiaomi introduced their first smart speakers in Q3 2017 (Alibaba Tmall Genie; Xiaomi Mi AI) and Xiaomi brought out a Microsoft Cortana-powered device in December for a list price equivalent of US$29. Each company is focused on low-priced, high volume devices and they have been rewarded with 17.7% and 12.2% global sales market share respectively for Alibaba and Xiaomi according to Canalys. Alibaba sales of nearly 3 million devices in the quarter represented a growth of 180% over Q1 2018. Xiaomi grew even faster on a relative basis by notching 2 million in unit shipments for 240% growth over the previous quarter.

Baidu Still Has Work to Do in Smart Speaker Market

By contrast, a new Baidu smart speaker launched in late June sold out, but only 10,000 units were available. Production of Baidu’s Raven H premium smart speaker was reportedly halted after only 10,000 units as well. Baidu DuerOS is likely to be a big player in the market, but it is not anywhere near the volume of Alibaba and Xiaomi today. Where Baidu and DuerOS are strong is in mobile and other appliances. The company recently announced that over 100 million devices include the DuerOS voice assistant.

China Following U.S. Smart Speaker Adoption Pattern

Canalys analysts pointed out that smart speaker adoption in China is following a pattern similar to the U.S. About one million units shipments in Q4 2017 was followed by a 60% rise in Q1 2018 followed by about 200% growth in Q2 2018. That rapid adoption by Chinese consumers vaulted China to about 30% of global smart speaker unit sales in Q2 2018 up from nearly zero three quarters earlier.

While Alibaba maintained market share over 50% in China for the second quarter, the Canalys announcement says, “Xiaomi has been scaling up quickly with the release of its Xiaoai Mini AI smart speaker…[and] the top two together accounted for nearly 90% of the market.” Hattie He, Canalys research analyst commented:

“China’s smart speaker market has quickly become a battlefield for only the big names, and it will be hard for the smaller players to catch up in terms of market share. Alibaba and Xiaomi have both relied on aggressive price cuts to create demand. Both companies have the financial backing to spend on marketing and hardware subsidies in a bid to quickly build their user bases. Although the real level of user demand for speaker products is currently unproven, China is on its way to overtake the US in the near term.”

Aggressive pricing was also a tactic employed by Amazon and Google in building their dominant market share positions in the U.S. and Europe. The sub-US$50 Amazon Echo Dot and Google Home Mini, both of which are regularly discounted to US$29-$39 virtually eliminated price as a barrier to adoption. Baidu’s most recent smart speaker appears designed to compete directly with the low-priced offerings of Alibaba and Xiaomi so we might just see a three-horse race in China after all. You can read today’s announcement here.

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