The Chinese Smart Hardware Sector Will Enter The Adjustment Phase In 2016
摘要： In 2014 and 2015 we have witnessed the rise of the smart hardware sector. So, what kind of development will this particular sector have in 2016?
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Before we get into the discussion of the potential development this year, let’s first have a look at what the smart hardware sector had encountered in 2015. The year of 2015 for this particular sector can be concluded as painful but still positive, which was shown in three aspects:
a. Small-sized enterprises meet their bottleneck in terms of sales while having trouble cashing in with their business model, which makes it harder for them to get financing.
b. Some brick-and-motor traditional enterprises start to plan their business layout and launch relevant smart products under the influence from trend of smart hardware and innovators. In general, these traditional giants would use their superior marketing network and R&D capability to attack startups that only focus on a few products.
c. After having their first glimpse of smart hardware in 2014 and 2015, consumers are no longer curious about such products and tend to rationally evaluate the products, which in some way lowers the consuming power.
However, this is something normal that will happen during the development of an industry. Every industry will go through processes of emergence, development, maturing and improvement, among which the adjustment phase is inevitable. That being said, a certain amount of time is needed in order to really set an industry on the right track. And during that process, the whole industry will be chaotic, without order, since it’s a process literally starts from scratch.
In this process, most people still don't really know about the unknown 1, and usually two situations will occur: speculations about the unknown 1 will be understood and built based on the existing matter and experiences; development based on predictions about future technologies. No matter it’s built on what way, it will all lead to the scenario in which the market will shape the industry deeply.
Therefore, in my opinion, after the chaotic development in 2014 and 2015, the smart hardware sector in 2016 will enter a adjustment phase in 2016.
1. The change of marketing strategy
Whether it’s the marketing concept, industry technologies, the use of products, or the smart standard, will all be adjusted accordingly. From the aspect of marketing concept, some products’ concept have been magnified due to the limit of the industry technologies in terms of crowdfunding and technological development. That said, these products face problems adopting new technologies into practical use, which makes consumers really start to doubt about the products.
In 2016, the smart hardware sector will no longer continue to focus on the marketing of product concept since the market itself is now changing the relationship of manufacturers and users.
2. Industry technologies
Whether it’s the push from innovators, or the intervention of brick-and-motor enterprises, they both have boosted the development of industry technologies and relevant technologies of the industrial chain. The perfect example will be the emergence of a complete set of relevant technologies, or let’s say, solutions, which include voice recognition, chip, communication, sensor, and software control technologies.
As the industry technologies develop and adjust in 2016, the application of smart technologies will continue to improve and mature, and stabilize. Without a doubt, stable and mature technologies are extremely important for the development of technologies since they are the fundamental backbone for the growing product system.
3. Adjustment on financing
In 2016, investors will be more cautious and invest less. The fast and wild developing stage of the smart hardware sector has passed, and therefore investors will not make investment that frequently anymore. On one hand, investments in some projects are not bringing revenue. On the other, the influence of the adjustment phase is also something hard to come by. And due to these two main factors, investors are now becoming extra careful about investing in the smart hardware sector.
Price adjustment takes place when an industry reaches a certain stage. Simply put, 2016 will a difficult year for entrepreneurs that want to find financing in the smart hardware sector due to the increasing difficulty of finding investment and the decrease of the average investment amount. However, the EBITDA（Earnings before interest，tax，depreciation and amortization）of valuation will also be under great influence in the adjustment phase.
Additionally, consumers are becoming more rational, pushing the market itself to modify the smart hardware sector in the adjustment phase. It’s a process that this particular industry must go through.
[The article is published and edited with authorization from the author @Chen Gen, please note source and hyperlink when reproduce.]
Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.