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The U.S. Is No Longer the World's Largest Smart-Speaker Market

By Evan Niu, CFA - Updated May 22, 2019 at 10:57AM

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Chinese vendors are starting to catch up with domestic heavyweights.

Up until now, the U.S. has been the most important smart-speaker market in the world, benefiting domestic tech heavyweights like Amazon.com and Alphabet (GOOG 4.16%) (GOOGL 4.20%) subsidiary Google, which are enjoying considerable success in smart speakers as they continue to take over the smart-home space. Looking to build on that momentum, the search giant recently rebranded its smart-home efforts under the Google Nest brand while unveiling a new Nest Hub Max to compete with Amazon's Echo Show.

However, China just overtook the U.S. as the most important smart-speaker market.

Echo Dot on a side table next to a lamp and a book

Low-cost smart speakers like Amazon's Echo Dot are driving unit volumes. Image source: Amazon.com.

China represented the majority of Q1 unit volumes

Market researcher Canalys released its estimates on the smart-speaker market for the first quarter this week, showing a significant spike in unit volumes in China. China was able to grab 51% of worldwide shipments, compared to the 24% that shipped within the U.S. Worldwide volumes jumped 131% to 20.7 million. Unlike the U.S., China's holiday shopping season and New Year fall in the first quarter. Baidu became the top Chinese vendor, thanks in part to a sponsorship deal around the Lunar New Year that generated considerable interest, according to Canalys.

Here are the top five vendors:

Vendor

Q1 2019 Shipments

Q1 2019 Market Share

Year-Over-Year Growth

Amazon (AMZN 3.66%)

4.6 million

22.1%

84.7%

Google

3.5 million

16.8%

7%

Baidu (BIDU 2.13%)

3.3 million

16%

N/A*

Alibaba

3.2 million

15.5%

204.3%

Xiaomi

3.2 million

15.4%

411.4%

Others

2.9 million

14.2%

89.8%

Total

20.7 million

100%

131.4%

Data source: Canalys. *Baidu had not yet entered the smart speaker market a year ago.

Amazon and Google are still dominating the market globally, but geographical shifts could have impacts on those companies' prominence.

Small, affordable smart speakers are where it's at

It's become abundantly clear that small, affordable smart speakers are what's driving unit volume growth, particularly for Amazon and Google. Retailing for $50, the Amazon Echo Dot and Google Home Mini are often available for even less, thanks to various types of promotions like reduced pricing or giveaways.

Just today, home audio specialist Bose announced its smallest and most affordable smart speaker to date, the $260 Home Speaker 300. Samsung's Galaxy Home Mini was just detailed in FCC filings, even though the full-sized version hasn't even shipped yet. Even Comcast is reportedly working on a health-oriented smart speaker, according to CNBC, although it's not clear what price point the telecommunications and media conglomerate may be targeting.

Neither Amazon nor Google have strong positions in China. Amazon just shuttered its Chinese e-commerce operations, and Google's online services have long been neutered due to government censorship and other factors. On the other hand, Apple (AAPL 4.08%) has a strong presence in the Chinese market, and Siri is one of few voice assistants that can handle Mandarin, one of the more challenging languages for robots to understand linguistically.

Apple's HomePod launched in China earlier this year, but its premium pricing will inevitably hurt demand. If all of that isn't enough to convince Apple to launch an affordable HomePod Mini, then I don't know what is.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
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Apple Inc. Stock Quote
Apple Inc.
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Alphabet Inc. Stock Quote
Alphabet Inc.
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Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
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Alphabet Inc. Stock Quote
Alphabet Inc.
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