Imagine waking up every morning to the sound of soothing music and dim lights that become steadily brighter when it is time to get out of bed. Or having a bathroom that senses when you walk into it and automatically turns on the lights and fan. Or having the ability to turn on your air conditioning while you are travelling home from work. These innovations once sounded futuristic, but they are all available in Hong Kong today.
While the market for smart home products is still at an early stage in Hong Kong, it is growing as consumers wake up to the benefits connected living offers. HKT Smart Living was one of the early entrants when it launched its smart home services in 2012. The company operates at the top end of the market, offering services for larger properties that typically require custom fitting and bespoke systems. It creates connected homes that enable customers to control everything from dimming their lighting, to closing the curtains, to turning on music or changing the setting on their air conditioning through their smartphone. It recently teamed up with Samsung to offer voice control for Samsung appliances.
“A smart home makes use of technologies to enhance the quality of living and bring customers extra comfort, convenience and efficiency,” says Ringo Ng, Managing Director of HKT’s Consumer Group.
Florence Kong, Founder of Hong Kong-based architectural and interior company FAB-A-MATTER, incorporates smart home features into her designs. She says most customers want the ability to control lights, curtains and temperatures through their smartphone. “Think about closing the curtains, switching off the lights, adjusting the room temperature or ventilation, setting the security alarm, or any of the little things that most people might want to do before leaving their homes,” she says. “With your smartphone or Apple Watch, all you need is to connect to your home, and you can take care of these tasks on the go.”
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She adds that some customers also want smart security devices and door access control, as well as the ability to use voice and gesture activation to control the devices in their property. “The market for smart homes in Hong Kong is definitely growing. We have been working with developers like Sun Hung Kai Properties and private clients in designing smart homes. There are more property developers willing to spend more to incorporate Internet of Things (IoT) into the design to make their products more competitive in the property market. We see that there is more demand in the area. Apart from smart home design, we are also working in smart office and hotel design for corporate clients and hotel owners,” Kong explains.
Alongside bespoke services, residents in Hong Kong also have the option to set up “off the shelf” services, such as Amazon Alexa or Google Home, to control devices in their property.
Daniel Chun, Chief Executive Officer of Hong Kong-based Remotec Technology, which focuses in smart controls, home automation, and the emerging opportunities in the IoT market, says: “The Hong Kong market is quite fragmented with many products distributed through traditional retailers like Fortress, computer shops and online stores.” He points out that as well as providing convenience, smart homes can help homeowners save money, both through enabling devices to be controlled remotely and through using the information they collect to use them more efficiently. He thinks smart home devices can be particularly valuable in helping to limit the use of air conditioning, either by using smart fans to circulate cool air better, or by using smart control technologies and smart thermostats to limit the length of time they are running.
Significant growth potential
Chun’s company has been in business for more than 28 years, with most of its clients in the United States, but he expects demand in Hong Kong to pick up, particularly if individual appliances could be retrofitted with the technology. “There are 2.5 million households in Hong Kong and there is close to 95 percent coverage of broadband Internet at affordable prices,” he says. He adds that with most households having air conditioning, fans and lighting, there is likely to be significant pent-up demand for a simple smart home value-proposition.
Kok Tin Gan, PwC Hong Kong Cybersecurity and Privacy Partner, points out that most of the products available in Hong Kong are at the lower end of the spectrum, and really futuristic innovations, such as smart refrigerators that monitor when the milk is running low and automatically put in an online order with a grocery store, have not yet made it to the city. He adds that the market in Mainland China is much more developed than in Hong Kong, with many developers factoring in smart home applications when they build apartments. “I think if you look at the overall digitization trend, Hong Kong tends to lag other places,” he says.
But things look set to change. Smart city has been identified as one of the Hong Kong government’s four innovation focus areas, and in 2017 it set the target for Hong Kong to be a smart city within five years. While smart city is different from smart homes, the smart homes sector should still benefit from improvements to the underlying infrastructure, such as the planned launch of fifth generation communications technology, which enables better implementation of IoT. “We see that both the awareness and market in Hong Kong for smart homes has been growing in the last few years, with people creating a smart home when they move into a new house or during renovation,” says Ng of HKT.
Jason Ho, Vice President, Electrical and Network Assurance, at Intertek Hong Kong, says: “The demand could be huge in this area once consumers catch up with the trend of smart homes as the property market in Hong Kong is well developed.”
But there are a number of hurdles the market needs to overcome before smart homes can really take off. One of the issues is a lack of Cantonese language support, which is limiting the take up of smart speakers and voice-activated producers.
The small number of players in the smart home market in Hong Kong is a challenge, as it limits competition and keeps prices higher. “I think if there was more competition in the market, more people might able to enjoy connected living in the future,” says Kong. “I am very positive for the future. I believe there will be more artificial intelligence (AI) and augmented reality incorporated into smart home products. This will bring more comfort, convenience and enjoyment to our daily life.”
A spy in your home?
Despite the many advantages smart homes offer, there are concerns about data security and the privacy of users. Ian Christofis, Managing Principal Consultant at nCipher Security, a United Kingdom-founded encryption hardware specialist, explains that privacy is a major concern due to the fact that many smart home devices are either voice or gesture activated. “There are a whole range of things, like Amazon Alexa and Google Home, which are listening all the time and waiting for a command,” he says. “Consumers need to know what information is being collected and if the company is only using it for the purposes that they say they are, and if they are being transparent about it.”
He explains that most manufacturers claim they do not send voice recordings back to their cloud service unless they hear an activation phrase through the speaker, but this is not always the case. “There has also been a lot of press lately about companies admitting they do keep some of the recordings in archive material to help train their algorithms to better recognize the commands and understand people.
“So, when people think they are having a private conversation in their lounge, it could potentially be going back to a cloud service and be used for further analysis and training, including being listened to by staff at that organization,” Christofis says.
He adds that if people have gesture-activated devices, such as a camera on their television, it could also be filming information and sending it back. “Privacy advocates want there to be clear transparency about what is happening with this information.” There are also potential issues with security. “Smart devices can be hijacked through a virus or downloading malware on to them. They can then be used as a surveillance device or a botnet to attack other servers,” he says.
He adds that if people have home surveillance cameras, they need to be very sure that they are the only ones who can see what they record. “There was a case in the U.K. recently where people using an app to view their home cameras were actually looking at someone else’s house.”
Christofis points out that it is not only audio and video recordings that people need to ensure are secure, as much more simplistic devices, such as temperature sensors, can also show information, such as when people typically get home. Gan of PwC agrees that security should be a key consideration. “The more things you have connected to the Internet, the more your chance of being attacked increases. In the past if you only had one connected device, you only had one entry point for hackers,” he says.
For those worried about security, Christofis says there are some basic standards that device manufacturers should comply with to protect consumers, such as ensuring all data sent to the cloud is encrypted. Every device should also have a unique randomly-generated default administration password, printed on the back of the device, and not guessable from the serial number, as well as the ability to securely update the firmware so if security problems are discovered they can be fixed. “We need to be pushing the vendors of both devices and systems to make them secure and really strongly respect people’s privacy,” he says.
Ho of Intertek thinks consumers should also be aware of cybersecurity issues when deploying the IoT in their home. “They should be aware of whether devices will collect their personal data. They should fully understand the reasons behind why and how data is being collected and processed, as well as how to avoid being hacked and having their personal data leaked and accessed in an unauthorized manner,” he says.
Gan points out that consumers also need to think carefully about what authentication methods they use. “Biometric authentication, such as facial recognition or fingerprints, is the most secure, but the downside is that if your biometric data is compromised, you can never change it,” he says. “A password is less secure, but if you lose it, you can change it.”
“We need to be pushing the vendors of both devised and systems to make them secure and really strongly respect people’s privacy.”
In the meantime, smart homes services are expected to continue to develop. In the future, Ho expects smart home ecosystems to become connected with other ecosystems, such as healthcare, public utilities and vehicles. Ng of HKT thinks facial recognition and AI will increasingly be incorporated into smart home products. “Currently, a system can respond to users with a pre-programmed setting. In the future, we expect the system to learn and process the users’ demographic data and other behaviour to customize a scenario for each user’s lifestyle,” he predicts. “The interaction between system and user will be closer.”
A role for accountants
Data security and customer privacy issues are likely a key focus for accountants advising companies in the smart home sector. In Hong Kong, data is covered by the Personal Data (Privacy) Ordinance, but Kok Tin Gan, PwC Hong Kong Cybersecurity and Privacy Partner, warns that the rules are a bit outdated in terms of breach enforcement and disclosure aspects. Companies based in the city can also fall under the far more wide-reaching European Union General Data Protection Regulation (GDPR). Ian Christofis, Managing Principal Consultant at nCipher Security, an encryption hardware specialist, explains: “If companies do any business with people in Europe and collect information about them, they are subject to the GDPR, meaning they have to protect the data properly and be transparent about what they are doing with it.” If companies breach the regulations, they can be fined up to 4 percent of global turnover.
“A lot of companies have been caught by the law because of its global reach. If a company is based in Hong Kong but provides a global service, such as a hotel chain with guests making bookings from Europe, the GDPR applies,” Christofis warns.
Gan agrees: “Hong Kong is an international city, so there will be a lot of Europeans coming here to work, stay in hotels, or live here as expats. As a result, a lot of companies in Hong Kong will fall under the GDPR.”
“Accountants can utilize their trust ecosystem in the smart home area to provide comfort to consumers.”
To help companies avoid falling foul of the regulations, he advises them to be fair and transparent, stipulating to the consumer what information they are collecting, what the purpose of collecting it is, and giving them the right to opt out if they want to.
He adds that it is also critical that companies get their security right. “I see a lot of companies have neglected security, but after they have collected sensitive information from the consumer, they need to protect it. They need to encrypt it and be clear what the retention period is.”
Gan thinks accountants can play a role in helping to build trust in the smart homes sector. “The role of accountants has evolved. If we look at what we do now, we are trying to build trust beyond the numbers. Accountants can utilize their trust ecosystem in the smart home area to provide comfort to consumers that things are run in a transparent and fair manner,” he says.
