1 Way Samsung Plans to Take Down Apple

As if the home automation space wasn't already about to take off with Apple's (NASDAQ: AAPL  ) launch of HomeKit next month, Samsung (NASDAQOTH: SSNLF  ) went and bought home automation company SmartThings last week.

The move places Samsung firmly in the connected home space, and pits it squarely against Apple's forthcoming platform.

Source: SmartThings.

Opening up automation
Neither Samsung nor SmartThings released details of the purchase, though it is estimated Samsung paid about $200 million for the home automation start-up. SmartThings will remain independently operated, though CEO Alex Hawkinson and the company's employees will move to Samsung's Open Innovation Center in Palo Alto, CA.

Earlier this year Samsung released its own home automation platform, called Smart Home, but the SmartThings purchase put the company quickly into the homes of existing customers.  

SmartThings app on iOS. Source: SmartThings.

SmartThings sells home automation kits, sensors, alarms, automated light switches, and a central hub to connect devices. But the most important aspect of SmartThings, and why it's so valuable to Samsung, is the company's open platform.

SmartThings currently connects up to 1,000 third-party devices, featuring 8,000 apps created by 5,000 developers.

Why does that matter?

Because just like other home products, home automation devices aren't made by just one company. Many of the lamps, door locks, light bulbs, thermostats, etc., in your home are made by a variety of companies. The angle then for Samsung -- and Apple -- is to try controlling the platform of future connected devices, rather than selling their own devices.

Though SmartThings is now under Samsung, the company said it is committed to open development for both Android and iOS devices. In comments after a blog post announcing the deal, Hawkinson said "we are 100% open and there will be no slowdown in support for iOS, our plans for HomeKit, and so much more.."

So while Samsung's mobile devices live on Android, SmartThings devices and its platform will continue to work with the company's iOS app and apparently even pair to Apple's HomeKit platform.

That's a bit of a different strategy than seen for HomeKit, which will only work on iOS. Keeping SmartThings open to both operating systems may be Samsung's way of wooing both iOS and Android users, but it's going to have a hard time overcoming Apple's lure.

Source: Apple.

The Apple approach
Apple unveiled HomeKit at its developer conference in June. While it's an open platform in that developers can build apps for it and third-party automation devices will connect to it, only iOS devices can be used to control the system.

Apple is betting users will want to use its iPad and iPhone to control connected home devices, which could provide incremental sales of its high-margin devices. When iOS 8 launches next month, users will be able to pair home devices such as smart thermostats and connected lights, then use Siri voice commands to control devices individually or in groups.

With HomeKit, Apple can control the home automation space, while also giving its mobile users yet another incentive to remain within the company's ecosystem.

What everyone's fighting for
Transparency Market Research estimates the home automation market could hit $16.4 billion by 2019, up from just $3.6 billion in 2012. A Markets and Markets report says home automation will actually be worth $51.77 billion by 2020. That's a huge range, and it shows that no one knows exactly how consumers will respond to this nascent market.

It's too early to announce a home automation winner, but I think it's hard to bet against Apple. The company already has millions of developers creating apps for iOS, hundreds of millions of devices in the hands of users, and a very loyal following. Add to all that the fact that companies such as SmartThings will still play nice with Apple's HomeKit, and it's clear Cupertino has more than a few advantages.

The sheer size of Apple's mobile footprint ensures that nearly every home automation platform will have to support iOS devices. Meanwhile, Apple's HomeKit will go on being iOS exclusive, possibly driving incremental device sales.

We'll know more once iOS 8 launches and as consumers start purchasing more smarthome products. But if things do start moving in that direction, you can be sure Apple will benefit whether its devices are connecting to HomeKit, the SmartThings platform, or some other system.

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  • Report this Comment On August 19, 2014, at 9:55 AM, melegross wrote:

    I'm not impressed by this. Many large companies have attempted to be relevant in this space so far, and they've all failed.

    I don't see a reason why Samsung will be different.

  • Report this Comment On August 19, 2014, at 10:15 AM, Mathman6577 wrote:

    I agree with melegross. A few hundred million is not going to move the needle for Samsung.

    Also, the Internet of Things is all about hardware/software integration and Apple has a big advantage over Samsung, Google, etc.

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Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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