Demystifying the Smart Power Tools Market

Market Overview

• All in all, the smart power tool market is immature and growth will be a gradual process.
• Over 9 million more smart power tools will ship in 2027 (12.3 million total) than in 2022—growing at a Compound Annual Growth Rate (CAGR) of 31%. This includes both retrofitted devices (e.g., connectivity tags) and devices with built-in connectivity, although the latter is rarer.
• The proliferation of cordless power tools is propelling much of the growth in smart power tool shipments.
• North America and Europe are currently the most mature markets, each with more than 1 million shipments in 2022. By 2027, these regions will ship 4.9 million and 3.2 million smart power tools, respectively.
• Asia-Pacific—with China leading the way in industrialization, infrastructure development, and urbanization—is experiencing similar growth to North America (a 34% CAGR) and will overtake Europe in terms of annual shipments by 2024. By 2027, the Asia-Pacific region will see more than 3.8 million smart power tools shipped.
• The Do-It-Yourself (DIY) segment, an inherent feature of Western culture, has the highest market potential among American and European consumers.
• Bluetooth, by a fairly wide margin, is used most often for smart power tool connectivity—with 2.5 million shipments in 2022 and 9.4 million shipments expected in 2027. Long-Term Evolution (LTE), although currently outpaced by Wi-Fi and LoRa, will become the second most common connectivity technology by 2027—when more than 1 million smart power tools will feature LoRA. 5G is a more nascent opportunity due to the high costs.

“Enterprises will provide good traction for tool manufacturers due to the opportunities of having tools connect to a Manufacturing Execution System (MES). One of the advantages of having power tools connected is that the workforce can ensure that operations are done correctly, while collecting data for quality follow-up.”  – Harriet Sumnall, Analyst at ABI Research

Key Decision Items

Tool Maintenance Is Where True Value Lies

Smart tool solution providers need to incorporate predictive maintenance into their product lineup as data analytics can be used to curb equipment failure and smoothen the workflow. In the eyes of the customer—manufacturers, industrial players, construction companies, and DIY consumers—there is irreplaceable value in being able to detect which tools are underperforming and why. This way, they can fix or replace tools accordingly and prevent significant downtime/economic loss for enterprises. Even in the consumer space, providing customers with predictive maintenance apps helps them reach their sustainability goals by extending the life span of their tools.

Additionally, smart tools improve the quality control process in industrial, manufacturing, and construction work settings. In some industries, such as the automotive space, a sub-par Quality Assurance (QA) process can precipitate a Public Relations (PR) disaster. For example, selling a vehicle with a faulty brake line would surely lead to a product recall and tarnished brand reputation. However, by leveraging the intelligence and data that the smart tool solutions generate, manufacturers can track which tool was used for a specific task. Users can then confidently attribute performance issues to a specific tool and fix it or order spare parts.

Smart Tool Manufacturers Can Expect Increased Demand for Cordless Products

For smart tool vendors, it’s crucial to understand the growing need to develop wireless or “cordless” power tools for enterprises and consumers. At the heart of this trend are safety concerns, as wired tools create potentially dangerous work environments. While wired power tools open the risk of trips and falls, wireless tools do not. This can save companies a substantial amount of money by reducing the frequency of employee injury liabilities. Cordless tools also provide easier handling for the user and more flexibility when it comes to charging.

Cordless power tools are not a new concept; rather, the rapid advancements in lithium-ion battery development have been an enabling factor in its emergence. However, until further breakthroughs are made in battery performance, it’s expected that large industrial power tools will continue to be mains powered, while smaller portable tools will make use of wireless features most often.

Ramp Up Production and Education

Currently, the main inhibitor to the smart power tools market potential is the lack of quantity and diversity of products. With only a limited number of intelligent tool solutions available, the market is largely uninformed on how adding intelligence and connectivity to power tools equates to value. Indeed, most enterprises and consumers are not fully aware of the benefits that these technologies provide. Beyond smart tool manufacturers ramping up production, solution providers must educate their target audience(s) on how specific challenges can be overcome with smart power tool solutions like analytics dashboards or automation. And because change is generally resisted by companies, the value must be conveyed beyond any doubt.

Distinguish between the Different Connectivity Technologies

To make a tool “smart,” it needs to first be connected. Within the smart tool ecosystem, there are five main options to choose from: Bluetooth, Wi-Fi, Long-Term Evolution (LTE), 5G, and LoRa.

• Bluetooth plays a momentous role in the industrial/enterprise vertical because it can provide reliable and simultaneous connectivity for numerous devices. Plus, if the appropriate infrastructure is installed, Bluetooth tags track the location of tools within the confines of a worksite. Bluetooth is the most common connectivity option for smart power tools.
• Wi-Fi finds its way in both consumer and enterprise settings. As the second main connectivity technology for intelligent tools, Wi-Fi enables power tools to connect to a home or organization and share applicable data via server transfer. Like Bluetooth, the range is limited.
• LTE is best served for the most expensive tools because it covers wider geographical parameters than Bluetooth and Wi-Fi. While LTE implementation comes with higher costs, customers will appreciate the fact that this connectivity technology lets them track their assets anywhere they go. By 2027, LTE will take the place of Wi-Fi as the second most common connectivity technology for smart power tools.
• 5G, like LTE, provides enhanced security and reliability. In most smart power tool use cases, 5G’s capabilities are no better than LTE. With a 5G approach, power tool connectivity may be fast and convenient, but it’s also very pricey. For these reasons, 5G should not be a major focus for low-grade smart power tools and, instead, will be viable for high-value tools, such as large saws that require real-time control over settings.
• LoRa shines in settings where a multi-device connection needs to be done at one point, allowing the user to extract insights from various types of devices. For example, construction sites and manufacturing plants can use LoRa to connect intelligent power tools alongside worker safety monitoring and tracking devices.

Key Market Players to Watch

• Atlas Copco
• Bosch
• DEWALT
• Makita
• Milwaukee

Dig Deeper for the Full Picture

If you’d like to learn more about the latest developments in the power tool market, download ABI Research’s Smart Power Tools: Market Evolution and the Role of Connectivity research report.

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This content is part of the company’s IoT Markets Research Service.