Alexa Connect Kit

Amazon Moves Up the Supply Chain

The company is leveraging its Alexa intelligence to penetrate the smart home and beyond.

In the midst of its announcements of new echo speaker devices and other electronics incorporating its Alexa voice assistant, Amazon unveiled its latest effort to push into the home automation market.  The company introduced a chip on a system board roughly the size of a quarter that it is selling to OEMs to incorporate into home appliances.

The Alexa Connect Kit delivers a board with a chip and antenna that will communicate over Wi-Fi and leverage the power of Alexa to control a wide range of appliances. Any device that has some sort of microcontroller will be able to incorporate this small board and benefit from Alexa functionality by being paired with Amazon’s chip. Amazon explains that the cost of the chip is only a few dollars, and some simple code can be written to program the chips to support each device.

With its latest announcement, Amazon engages more aggressively in a race with major players like Alphabet’s Google, Apple, and Microsoft to position itself at the center of the home. All of these players are promoting their voice assistants and services as the foundation of the automated home.

For example, Apple launched its HomeKit for manufacturers a few years ago but has faced steep hurdles with challenging privacy and security standards. Google Home got a boost up with the company’s purchase of Nest Labs in 2014. However, the home automation industry has continued to be fragmented with many manufacturers choosing to develop their own home automation solutions and rent space on the cloud to control them. The result is a marketplace where the consumer is unable to create a simple, unified solution for the home.

With the addition of its Connect Kit, Amazon hopes to create a winning combination with its voice assistant technology and its strong web, cloud, retail and distribution platform. It hopes to persuade major OEMs to adopt the robust, connected solution that can tap into the full power of Amazon’s powerful platform.

Amazon illustrated the benefits of its solution by integrating it into a microwave. It demonstrated the ability of a customer to either press a button on the microwave or use an echo speaker to execute commands such as popping popcorn or defrosting chicken. As can be imagined, the online critics were quick to criticize the demonstration. But they miss the larger point of creating a connected automated home environment. The microware was just a simplified demonstration.

Selected partners—such as consumer product makers Hamilton Beach and Procter & Gamble—are teaming with Amazon to test the Alexa Connect Kit. Other companies can start applying immediately to participate in the preview program, and it will expand more broadly at a later, undisclosed date.

Creating Value in the Automated Home

Of course, the true value of Amazon’s Alexa Connect Kit is not in the sale of the boards themselves. The value comes from both the data that can be captured and analyzed and the consumer loyalty that can be established as Amazon tries to position itself as the primary deliver vehicle of value of all types to the consumer. Creating a home portal to deliver the value that Amazon controls through its many businesses will greatly magnify the company’s value in the financial marketplace.

But don’t overlook that potentially disruptive impact Amazon could exert in the electronics supply chain for consumer electronics. It is already developing its own artificial intelligence (AI) solutions and chips. It is estimated that the company already has 450 chip designers on staff. It is not a big step from supplying simple controller boards to more advanced chips to OEMs as Amazon promotes its Alexa platform on a widening array of products.

OEMs have become more engaged in designing and outsourcing the production of their chips to foundries. Amazon could mark a major new force in the semiconductor space if it begins to design and sell its own chip solutions. It would be taking a page out of the playbook of companies like Apple and Google. In this case, Amazon would be positioned to create a significantly expanded value proposition.

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