China market

To estimate the revenues to each country

According to market research firm Markets and Markets recently released a report said that the global smart home market will reach 122 billion US dollars in 2022, 2016-2022 average annual growth rate of 14%. Smart Home Product Category covers lighting, security, heating, air conditioning, entertainment, medical care, kitchen supplies. The potential of the smart home industry has attracted a great deal of capital to join, including traditional hard-ware enterprises, internet companies and real estate home improvement enterprises, which have all taken the lead in the smart home market. Google, Apple, Microsoft, Samsung, Huawei, Xiaomi, Meizu and many other technology companies into the game, in its efforts, the global smart home industry prospects. In the meantime, the continuous development of mobile communications technology continues to provide smart home industry with strong technical support, including 5G technology, Bluetooth 5, the next generation of WiFi standards have a clear commercial timetable. As more and more new technologies emerge, the integration with the smart home will generate strong synergies such as artificial intelligence, speech recognition and deep learning technologies, all of which are constantly pushing forward the smart home industry and striving for the integration with smart home technologies Deep integration. Smart home products will become more and more popular, more and more detailed classification, the types of products involved will be more. Remote control will have some development, but will eventually be replaced by a complete system of intelligent home.

1. Introduction to China

The national census of 2010 recorded the population of China as approximately 1,370,536,875. About 16.60% of the population was 14 years old or younger, 70.14% were between 15 and 59 years old, and 13.26% were over 60 years old. The population growth rate for 2013 is estimated to be 0.46%. Since economic liberalization began in 1978, China has been among the world's fastest-growing economies, relying largely on investment- and export-led growth. According to the IMF, China's annual average GDP growth between 2001 and 2010 was 10.5%. In the early 2010s, China's economic growth rate began to slow amid domestic credit troubles, weakening international demand for Chinese exports and fragility in the global economy. In the online realm, China's e-commerce industry has grown more slowly than the EU and the US, with a significant period of development occurring from around 2009 onwards. According to Credit Suisse, the total value of online transactions in China grew from an insignificant size in 2008 to around RMB 4 trillion (US$660 billion) in 2012. The Chinese online payment market is dominated by major firms such as Alipay, Tenpay and China UnionPay. China's middle-class population (if defined as those with annual income of between US$10,000 and US$60,000) had reached more than 300 million by 2012. China's domestic retail market was worth over 20 trillion yuan (US$3.2 trillion) in 2012 and is growing at over 12% annually as of 2013.

China currently has the largest number of active cellphones of any country in the world, with over 1 billion users by February 2017. It also has the world's largest number of internet and broadband users, with over 688 million internet users as of 2016, equivalent to around half of its population. The national average broadband connection speed is 9.46 Mbit/s, ranking China 91st in the world in terms of internet speed. By 2014, China hosts more than twice as much national bandwidth potential than the U.S., the historical leader in terms of installed telecommunication bandwidth (China: 29% versus US:13% of the global total). China Telecom and China Unicom, the world's two largest broadband providers, accounted for 20% of global broadband subscribers. China Telecom alone serves more than 50 million broadband subscribers, while China Unicom serves more than 40 million. Several Chinese telecommunications companies, most notably Huawei and ZTE, have been accused of spying for the Chinese military. China is developing its own satellite navigation system, dubbed Beidou, which began offering commercial navigation services across Asia in 2012, and is planned to offer global coverage by 2020. According to survey data, China manufactured 320.22 million electric rice cookers in 2015, nearly 50 million of which were for export (shown in Fig. 3). Retail sales reached RMB16.3 billion, up 8.8% year on year. Leading brands including Gree, Midea and Supor all strengthened their development of induction heating (IH) rice cookers. This is expected to further promote the structural upgrade of the rice cooker industry. Competition in the mainland kitchen appliance market has escalated from price war to technology war, with the focus of competition shifting towards the medium- to high-end market. In order to make breakthroughs, many manufacturers on the mainland have devoted a lot of efforts to R&D. Players in the industry are now investing an average of 2% of sales in R&D and are designing different product models and functions to suit consumers’ cooking habits and conditions of their homes.

According to the 2016-2021 China Smart Home Industry Development Analysis and Investment Potential Study Report released by China Reporting Hall, it is estimated that the potential market size of China's smart home is about 5.8 trillion yuan. The total size of China's smart home market is expected to be 2018 Reached 225 trillion yuan, a huge space for development. Among them, the market of smart home shares the highest proportion. The overall growth rate of the smart home market in China in the next 3-5 years is estimated to be about 13%. It is yet to come when the market erupts. From the proportion of view, the highest proportion of smart home appliances market share of home appliances, smart air conditioners, smart refrigerators and smart washing machines accounted for the total market share of more than 70%. However, the overall growth rate of home appliance smart home devices has been slow due to problems such as product price and functionality. On the other hand, smart lighting, smart door locks, sports and health monitoring, and home video cameras are not only relatively inexpensive but also meet the immediate needs of consumers, resulting in relatively fast market growth. As the market share of smart home appliances is relatively high and the growth rate is relatively low, it is likely to drive down the overall growth of China's smart home market.

In terms of space for development, the potential market for China's smart home industry is huge. According to the classification of China Interior Decoration Association's Intelligent Committee, the smart home system products are divided into twenty categories including: control panel, intelligent lighting system, electrical control system, home background music, home theater system, intercom system, video surveillance, Burglar alarm, power lock access, smart shading, smart appliances, HVAC systems, solar energy and energy saving equipment, automatic meter reading, smart home software, home wiring system, home network, sports and health monitoring, automatic watering plants, pet care With animal control. On a social basis, more and more communities are now enjoying broadband access and the information superhighway has been laid into the community and into the home. The construction and operation of smart homes rely on the basic conditions already available. A few years ago the concept of smart home disputes speculation has quietly played a market cultivation, and consumer education responsibilities, everyone's awareness has greatly improved. From a technical point of view, the technical development of the smart community has been from the decentralized control phase, the fieldbus phase has been developed to TCP / IP network technology stage, to solve the centralized management of distributed control of all devices in the community, and regional networking in the community problem. Smart home core equipment, smart home terminal supporting technology continues to mature, and into the smart home terminal development and promotion have the basic conditions, such as the LCD screen digital display technology and network technology is becoming more mature.

The Chinese household appliances market grew by 8.8% in 2012 to reach a value of $78,409.9 million. The compound annual growth rate of the market in the period 2008-12 was 8.6% (shown in Table 1). The Chinese household appliances market has enjoyed a period of strong growth, with annual ratios reaching double digit levels in 2011. This trend is forecast to continue during the 2012-2017 period (shown in Table 2). The Chinese household appliances market is expected to generate total revenues of $76.7bn in 2012, representing a compound annual growth rate (CAGR) of 8.6% between 2008 and 2012. In comparison, the Japanese and Indian markets will grow with CAGRs of 0.6% and 6.5% respectively, over the same period, to reach respective values of $22.4bn and $3.4bn in 2012. The major domestic appliances segment is expected to be the market most lucrative in 2012, with total revenues of $68.7bn, equivalent to 89.6% of the market's overall value. The minor domestic appliances segment will contribute revenues of $8.0bn in 2012, equating to 10.4% of the market's aggregate value. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.9% for the five-year period 2012-2017, which is expected to drive the market to a value of $122.6bn by the end of 2017. Comparatively, the Japanese and Indian markets will grow with CAGRs of 0.7% and 6.9% respectively, over the same period, to reach respective values of $23.2 billion and $4.7 billion in 2017.

2. WDIRC selling

The forecast of WDIRC selling can be shown in Table 3 during the first ten years since product listed. Here the assumptions of households, occupancy ratio, initial sale, selling price, and manufacture cost are 455,940,000, 0.0080%, 36,475, 250 and 200, respectively. The first year is set as the baseline for comparison with the following years, the sale volume, year penetration, revenue, cost and profit are 36,475 (sets), 80 (ppm), 9,118,800 (USD), 7,295,040 (USD) and 1,823,760 (USD), respectively. As we think, the growth rate with years will be 1, 2.46, 6.10, 9.77, 12.97, 16.75, 18.10, 20.46, 21.13 and 25 times over the first year. The year penetration of WDIRC will be from 80 ppm to 2000 ppm at the end of tenth year, the totally ownership (penetration) is close to 1.07%, it still is a low penetration ratio in China even WDIRC listed in market for ten years. However the revenue, manufacture cost and profit these three also present an ascending trend, the profit earned from China is about $ 45.594 million at the tenth year in an exclusive market, it owns a huge market and profit in this market. Totally according to our prediction and assumption, the selling in China will be up to 4,878,188 sets and the total owner ratio will be 10.699 ppm, even this, the penetration ratio is still lower than other consumption electric products such as TV, Refrigerator, Air conditioner, and Wash machine.

How about the annual growth rate for selling WDIRC in China market is, Fig. 4 shows the result. Here the calculation of revenue can use this equation as “WDIRC’s Revenue = Annual growth rate * Year + Baseline”, the formula can be written in a mathematic equation in the figure. According to this regression by data simulation, the annual growth rate it take about 20M per year (r² =0.9816), in other words, by averaged the annual revenue is 20M in China market for selling WDIRC products during the first decade.

3. Rice selling

Regarding the sale of WFR, it will depend on the sale of WDIRC. Because if we attempt to pursuit an automatic cooks without use WDIRC device, the function of WFR will not be fully present. Traditionally we cook rice via a rice cooker that need to wash them before cooking, so despite rice or WFR that doesn’t matter for manual cooking. However for a fully automatic cooking, the use of WFR is important and critical, especially in use WDIRC for an automatic cooking. Therefore according to the consumption of rice or grain, the reasonable sale of WDIRC, the level of E-commerce development, the prediction of WFR within ten years is shown in Table 4. The first year since the marketing of WDIRC, the online sale of WFR is 340,466 kg, here the assumptions of population, rice consumption, sharing of WFR, online buying rate and market sharing are 1,382,323,332, 82.10, 0.01%, 10.00%, and 30%, respectively. How to calculate the WFR volume by online/offline sale, Eq. 1 is the equation for calculating the WFR sale volume.

Eq. 1 SaleVolume=Population x RiceConsumption x WFRratio x On/OffBuyingRatio x MSharingRatio

(eg. 343,466= 1,382,323,332 x 82.10 x 0.0001 x 0.1 x 0.3)

The use rate of WFR is set as 0.0002 kg/person-year. Based on this, we can get the annual revenue is $ 340,466 (WFR priced as $1), and the profitability is set to 10%, so the profit that will earn $ 34,047. Changing with the time, the ratio of WDIRC in kitchens will increase and cause the use of WFR increasing. We assumed the series of growth rate (G.R.) with years is 1, 12.89, 27.14, 28.55, 32.47, 42.70, 54.32, 56.80, 63.39 and 78.81. It is based on the prediction of WDIRC’s growth. By this series of G.R., both revenue and profit, they will also be presented like these serials when the dealing cost of WFR through online/offline transaction is keeping constant. Whatever the cost of online/offline transactions depends on the volume of WFR’s selling, so if the volume with time is scaling up, the dealing cost will be significantly lowered, in other words, the profitability with time will increase more than our prediction. If all hypotheses are true, the profit in tenth year will approach to $ 2,683,235. Eq. 2 calculates the penetration of WFR which to be used in this country by people. From this indicator (URate of WFR), we can see the level of penetration of WFR on the first year, the use rate is 0.2g per year per person, even at the tenth year, the level of WFR use rate in China is still underestimation, that’s meaningful for us to optimistically think, the use rate of WFR can be easy completed and it will be grew up more than our prediction.

Eq. 2 URate of WFR = SaleVolume of WFR / Population

(eg. 0.0002 = 340,466 / 1,382,323,332)

Regarding the revenue of WFR selling in China, Fig. 5 shows the result. This is a prediction by data simulation according to our assumption, the regression could be calculated as “WFR’s revenue = Annual growth rate * Year + Baseline”. The result shows the annual growth rate is 3M per year (r²=0.9774), in other words, the increasing of revenue of WFR selling in China is 3M dollar per year. This growth can help the company to maintain its team in the local market for servicing customers.

4. To summarize the revenue and profit

Here according to the estimations above, we summarize the incomes from sales of WDIRC and WFR in China. Both revenues and profits are presented in Table 5. In the first year, the products of WDIRC and WFR are unfamiliar with Chinese people; namely the recognition and acceptance aren’t well to local consumers, so on the beginning (1^st year) sales would be not good and the totally revenues and profits will be $ 9,459,266 and $ 1,857,807, respectively. Both of them will increase with years when selling with good experiences and promotions. Through our forecast, at the end of tenth year, the profits of WDIRC and WFR will be up to $ 45,594,000 and $ 2,683,235, and the totally profit will be $ 48,277,235, this is a huge profit which be created in China market by our novel products and services.

Totally the revenue of WDIRC and WFR (2W) selling in China market can be shown in Figure 6. The 2W revenue in first year is 9.459 million dollars, after that the growth rate of revenue is 30M per year, this is a simple regression by mathematic model to predict the revenue on product selling. In practice, there are other factors that need to be considered much more, it could be higher than this or lower. Whatever by this calculation let us to trust that the market it always be there.