Smart home devices are experiencing a slump, but the longer-term outlook is brighter, according to IDC’s Worldwide Quarterly Smart Home Device Tracker.

The tracker says that the decline in the category continued during the first quarter of 2023 with a year over year shipment decline of 5.6% and a total of 186 million units shipped.

The slump was led by smart speakers (down 15.4%) and networked video entertainment devices (down 7.8%) compared to the prior year.

Overall, IDC expects the market to decline by 1.8% this year due to weak demand and economic volatility.

Smart Home Device Slump

Jitesh Ubrani, the research manager for IDC’s Mobility and Consumer Device Trackers suggested that lack of upgrades between generations of devices is a key to the poor results. Even the Matter standard, which increases ease of use, was not enough to stem the declines.

The better news is in the longer term. The firm predicts growth next year and for that growth to continue through 2027, when volumes will reach 1.1 billion devices. The longer-term outlook suggests that categories such as lighting, thermostats and home monitoring and security will grow during the next five years as awareness grows and emerging markets mature.

“In more mature markets like the United States, high installed bases of devices coupled with issues of underutilization, ongoing disruptions from supply chains, logistics issues, high inflation, and record high credit card debt have impacted the market’s growth in 2022 and the first part of 2023 and are expected to continue to put downward pressure on the market for the foreseeable future,” Adam Wright, research manager, Smart Home and Office Devices for IDC, said in a press release. “But other regions that are earlier in their adoption curve like Latin America and parts of Asia/Pacific have much opportunity for growth.”

The forecast change in smart device market share between this year and 2027 is uneven. Video entertainment will decline (32.5% to 26.5%) while home monitoring/security will rise (22.4% to 23.5%). Lighting will jump significantly (11.9% to 20.5%), smart speakers will decline slightly (12.5% to 11%) and thermostats will decline slightly (2.9% to 2.6%).