Do Chinese-made smart speakers have a bright future?

Smart speakers are common in our daily lives: most of us are familiar with Amazon’s Echo, Google Home, as well as the products of some Chinese brands, including Alibaba’s TmallGenie, Xiaomi’s AI smart speaker, and others. Smart speakers, thanks to their new ways of interacting with people, convenience, and business potential, have become a hot area that has attracted tech giants’ attention the world over.

In this industry, apart from the famous brands, there are many unknown enterprises located in the middle and lower reaches of the industrial chain that make profits via cheaper labor costs rather than technological advantages. These enterprises, mostly located in Shenzhen, provide smart speaker brands with chips, modules, components, manufacturing schemes, as well as technical solutions and manufacturing services.

Shenzhen has became the main production site of the these popular sound boxes. More than 80% of the world’s smart speakers are produced in Shenzhen and then exported abroad. These enterprises, however, operate in the shadows of the well known smart speaker brands and are not known to the world.

First, let’s have a look at the development status of smart speakers in China so that we can try to figure out what the businesses in Shenzhen are doing to secure growth opportunities in the smart speaker space.

The development status of smart speakers

Referring to the smart speaker industry, we can never neglect the emergence of Wi-Fi speakers, which became popular between 2012 and 2013. These speakers enable users to connect to the Internet and stream music. There were dozens of enterprises in Shenzhen that specialized in making Wi-Fi speakers during that time, including for international brands such as B&O, Sonos, Bose, and others.

In 2015, however, sales of Wi-Fi speakers abruptly dropped off, and the Shenzhen enterprises ceased producing Wi-Fi speakers, which helped pave the way for the rise of bluetooth speakers. As users realized that bluetooth speakers could connect to smartphones, it became clear that people could still enjoy streaming and playing music music through them. Additionally, bluetooth speakers were generally cheaper than Wi-Fi-equipped speakers.

Smart speakers debuted in 2016, as Amazon launched Echo, which quickly became popular, as well as Alexa, its smart voice interaction platform.

Around that time In China, two different types of enterprises sprang up: the first began developing voice interaction systems for use in smart speakers, and the second relied on foreign trade, producing smart speakers for export overseas.

Photo from Baidu Images.

The survival of enterprises in Shenzhen

As the popularity of smart speakers continues to grow, Chinese tech giants like Alibaba, Tencent, Xiaomi, as well as Google in the US, have also joined the speaker rush. Thanks to breakthroughs in technology, such as big data, machine learning, as well as voice interaction optimization, more and more startups are seeking innovative products and services in the speaker sector.

Every January, the CES (Consumer Electronics Show) acts as the industry’s global barometer, where large companies like Apple, Google, SONY, Samsung and others reveal plans for future electronics. Enterprises in Shenzhen try to produce the products that they see at the CES. Due to their rapid research and development capabilities, these companies can make the products by the middle of that year, and the items then appear on the market by September, which is a big shopping season in the U.S.

Manufacturers in Shenzhen quickly export their products overseas, and, if the products are popular, they can ramp up production for Black Friday and December’s holiday season, another massive shopping period in the U.S. Then the next CES is held during the coming January, and the whole process starts again.

Amazon announced its plans to develop and sell its Alexa platform during last year’s CES, and this made various startups and firms join the battle to innovate smart speakers. Shenzhen-based enterprises first started a price war, due to the low labor costs in the city, so that they could produce and sell smart speakers built with Amazon’s Alexa platform for a lower price than Amazon was offering.

The development of the smart speaker industry in China is still in the early stages. Though so many enterprises in Shenzhen can survive and compete in the global speaker market, there is still a high technical barrier to enter this industry, as well as difficulties creating value-adding developments. With more and more Chinese and foreign tech giants launching smart speakers using their advantages in technology, big data, user base, web traffic, and so on, it is still difficult for small enterprises to compete with these giants for market share.

Shenzhen has formed an unique manufacturing and marketing ecosystem based on its massive development and production capabilities. Though most enterprises stand behind famous smart speaker brands, they are not unimportant. While some of them have been eliminated, and some of them will be eliminated in the future, there will be new opportunities.

These enterprises are good at appraising the market for trendy products through trial and error, adept at following market trends with their unique methods, can change quickly, and can survive in the competitive market with so many tech giants. These enterprises earn revenue via their innovation and technical advantages. Shenzhen has always been recognized as the Silicon Valley of China, due to its advantages in development and manufacturing, and we can expect enterprises in Shenzhen to create new ways to further their development, especially in the smart speaker space.

(Top photo from Baidu Images.)

Kaikai Shi

Kaikai Shi writes for us. He holds a bachelor's degree in Biotechnology at Zhejiang University. His interests are in new technology and reading. Kai believes that new technology will change the world we live in, and is trying to engage himself in this process.

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