Smart home as a service powered by AI

In light of the ongoing global supply chain realignment, where American and Western companies are seeking to diversify their partnerships and manufacturing sources, how do you foresee this impacting Korean manufacturers? Could this present an opportunity for Korean companies to expand their international market share and compete more effectively with their Chinese counterparts?

In light of recent actions by the American government, Korean manufacturers have gained certain advantages over previous conditions. However, it's essential to note that a significant portion of materials still originates from China. Consequently, we must create complete sets for export or domestic sales, even within the Korean market. While competing in the U.S. market, we endeavor to steer clear of engaging in price competition with Chinese manufacturers. The outcome of the upcoming presidential election in the U.S. remains uncertain, and much hinges on the policies of the incoming administration. This uncertainty poses a significant question mark over the industry's future trajectory. Ideally, we hope for continuity in current policies.

Over the past two decades, Chinese materials have dominated global markets. Despite this, we continue to procure raw materials from China and maintain operations in the country due to favorable pricing. Although Korean and Japanese materials offer superior quality, they come at a higher cost.

Do you believe that labeling a product as "Made in Korea" rather than "Made in China" provides a competitive advantage in terms of reputation in the Western market?

Absolutely. We strive to proudly display "Made in Korea" on our products. Our focus isn't merely on competing based on price but rather on offering value that distinguishes us in the market. This commitment to value is underscored by our dedication to introducing disruptive innovations annually, incorporating the latest technologies into our products. We aim to provide customers with compelling reasons to choose Commax products, thereby elevating their overall experience and satisfaction.

We're living in an era of constant disruption, where value is closely tied to the ability to integrate new technologies, such as AI, VR and IoT. How do you perceive the impact of digitalization and disruptive technologies on your sector?

For us, IoT isn't a novel concept. It became ubiquitous in Korea from 2000 to 2008, when we interconnected everything via the internet, primarily through embedded devices. Even PCs were integrated into smartphones during that period. Despite this, achieving ubiquity wasn't straightforward. We realized the need to interconnect various services within our smart home offerings. However, from 2008 to 2015, the ubiquity of IoT waned. Then, around 2014, IoT emerged, transforming connectivity from wired to wireless. This evolution provided us with greater flexibility to integrate hardware from various devices and expanded our collaboration opportunities with other companies. During this time, common protocols such as M2M and OCF emerged, enabling easier connections and setting global standards.

The advent of cloud technology was a significant breakthrough. Previously, we relied on on-premise servers at every site to collect data. Cloud platforms streamlined connectivity, eliminating the need for physical servers on-site. This facilitated seamless server-to-server connections, particularly for large-scale SI projects. As every company adopted cloud solutions, whether hybrid, proprietary, or through AWS, we found ourselves inundated with data. The challenge shifted from connectivity to providing valuable and user-friendly services. At Commax, we seized this opportunity by leveraging AI.

The introduction of GPT (Generative Pre-trained Transformer) has revolutionized our workflow. Colleagues now use GPT as a foundational tool for their tasks, reducing work time and enhancing access to information from diverse internet sources. Moving forward, we're committed to integrating AI into our services for both end-users and B2B partners. For instance, we assist construction companies in cost reduction by providing data on window size, direction, and wiring optimization through AI. By harnessing AI, we aim to offer enhanced services to end-users and empower our partners with actionable insights.

Recently, there's a growing trend towards developing customized AI solutions to establish unique selling propositions against competitors. This approach aims to position AI as a competition in terms of quality. How do you foresee AI evolving within the industry? Will it predominantly involve collaboration with third parties like Google and ChatGPT, or do you anticipate companies like yours eventually developing their own AI platforms?

For our specialized services, particularly those related to smart home functions, we recognize the imperative of developing our own AI capabilities. However, for other services, collaboration with established AI providers such as Google, Microsoft, AWS, Naver, Kakao, and KT is indispensable. About five years ago, we initiated collaborations with KT and Kakao to introduce AI Home, albeit in its nascent stages, focusing solely on Speech-to-Text (STT) and Text-to-Speech (TTS) functionalities, without delving into VR or AR. Through these collaborations, we gained valuable insights into integrating AI into home environments, utilizing our partners' AI services. We intend to continue these collaborations with both local and global players. Nevertheless, for functions like energy consumption management, scenario management, and parking management, where unique service offerings are essential, developing our own AI engine is imperative.

How significant is the competitive edge gained from developing your own AI, particularly considering the vast amount of data at your disposal for training purposes?

The competitive advantage derived from possessing vast datasets for training our AI is undeniably substantial. However, beyond its sheer strength lies its indispensability. Incorporating AI into every facet of industry is no longer a matter of choice but a necessity. Companies that lag behind in adopting AI risk losing out on critical opportunities, while those actively pursuing AI integration are poised to sustain their business operations. It's not merely a question of strength but rather a matter of survival in today's competitive landscape.

For over 50 years, Commax has been a leading provider of total solutions for smart homes, manufacturing and offering a diverse range of over 300 product lines. These include wall pads, intercoms, video phones, and security solutions. Recently, the company has expanded its offerings to cater to the needs of hospitals and hotels. Could you share some insights into Commax's future direction and its mission in the years to come?

Presently, our primary focus remains on the residential sector, complemented by high-end CCTV solutions tailored for specialized service areas. Additionally, we've made significant inroads into the hospital sector, with approximately 90% of Korean hospitals utilizing our communication equipment, facilitating seamless connectivity from patient rooms to nursing stations and between operating rooms and external areas. As we strive to expand our global footprint, drawing from our 56 years of industry experience, we are committed to maintaining our trajectory. Furthermore, we recognize the importance of fostering deeper partnerships in each country we operate in, thereby ensuring our sustained growth and relevance in the evolving market landscape.

You've transitioned from a focus on interphones and security hardware to encompassing both hardware and software solutions. In light of this shift, would you classify Commax as a technology company or a manufacturing company? How would you define Commax's identity today?

Commax embodies the essence of an ICT service company, particularly emphasizing productization through service offerings. Our aim is to leverage partner hardware to deliver enhanced services, thereby ensuring continued profitability. Hence, we identify as an ICT service company.

Considering these changes and looking ahead, what do you anticipate will be the primary challenges in achieving this vision?

Our focus is shifting towards enhancing our presence in the smartphone market. Currently, we are dedicated to exploring avenues to provide greater value and convenience through our hardware, software, and applications, as well as through cloud and AI services. While AI may not be a panacea, it can significantly augment human capabilities. Our strategy involves incrementally introducing various services, with the aim of culminating in a pivotal and indispensable offering within three years. Most AI services are accessible through smartphones or PCs, so we prioritize developing essential AI services tailored for homes, apartment complexes, and smart cities, rather than pursuing extravagant AI solutions.

In the West, Smart Home Services to a middle-income family involves platforms like Google or Alexa, perhaps coupled with a few lights that can be controlled remotely. For wealthier individuals, smart homes often entail developers integrating AI technologies right from the start. Conversely, in Korea, there seems to be a much higher penetration of advanced smart home solutions. How do you perceive the evolution of smart homes on the international market? What challenges need to be addressed to make this technology mainstream in Western markets?

Firstly, it's essential to recognize the diversity in housing types between Korea and Western countries. In Korea, the predominant housing format is apartments, whereas in the West, individual houses prevail. Our Smart Home service is tailored specifically for apartment complexes, which typically boast robust infrastructure. Every service is routed through the server room, facilitating seamless data exchange, now extending even to cloud-to-cloud connectivity. Given that apartment complexes accommodate at least 10,000 residents, meticulous data management is imperative to prevent any inconvenience. Moreover, community-centric amenities like swimming pools, gyms, restaurants, kids' cafes, laundry facilities, and senior community spaces are integral to the valuation of these complexes nowadays. We enhance residents' experiences by providing reservation, security, and access control services for these amenities. Additionally, we offer cost-effective management solutions for common facilities such as ventilation, air purification, and electricity usage monitoring. This model diverges significantly from U.S. homes, which predominantly consist of individual residences that do not necessitate such extensive community infrastructure. Within apartment complexes, we can analyze data for each household, even down to individual rooms, allowing us to offer tailored advice on energy consumption reduction. Through leveraging data analytics, we empower residents to decrease their utility costs and potentially even their maintenance fees. This holistic approach resembles the functionality of AI-driven services.

In terms of penetrating more traditional markets, how viable is retrofitting, not only for apartment blocks but also for individual homeowners seeking smart home solutions?

Currently, our focus lies on the retrofit market rather than the individual market, which faces fierce competition from Chinese and local manufacturers. For instance, in turn-key business, five major competitors dominate the local landscape, even offering competitive prices, making it challenging to compete. However, opportunities exist in the high-end market segment, such as luxury hotel residences designed by skilled architects. We've already successfully implemented our smart home services in prestigious locations like the Burj Khalifa 15 years ago, and the Ten York condo in Toronto, Canada. Presently, we're in discussions with developers for projects in Neom City, Saudi Arabia, which comprises seven significant developments.

In the retrofit business, adhering to global standards is crucial. For example, we prioritize implementing Matter, a more robust standard compared to OCF, and ensuring compatibility with various APIs to integrate with other services. Additionally, our products are designed to utilize SIP (Session Initiation Protocol), a standard internet protocol, further aligning with global standards. We're committed to incorporating a wide range of global standards across our devices, platforms, and management programs.

One of the prime examples of devices encapsulating all these values is your smart mirror. Commax was the first company in Korea to receive the AI+ certification, and you've seamlessly integrated the Matter 1.2 version into this device. Could you elaborate on the advantages of this mirror compared to existing solutions?

Initially, our focus was on maximizing the user experience by introducing a larger display. We recognized that, at home, users might not always interact directly with touch panels for smart home functions. Hence, we envisioned a home infotainment device with a simpler and more intuitive user interface, readily accessible when needed. Moreover, a larger screen allowed us to incorporate additional content, such as dynamic visuals or background music, enhancing the overall experience. As we continue to develop this product, our goal is to provide users with compelling reasons to integrate the smart mirror into their homes. We're actively working on expanding content offerings and integrating AI services. In the next two years, we anticipate embedding AI Home into our smart mirror products, making them even more enjoyable and user-friendly. These smart mirrors will offer personalized advice on home management and device usage, reflecting our commitment to meeting the evolving needs of our customers.

A.I. Home Mirror(CHM-2200)

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When it comes to content for your smart mirrors, there are two main categories: external AI services and content generated by your other products.

While we may not directly provide every type of content, we offer connectivity to a wide range of platforms based on individual preferences. This includes access to platforms like YouTube, Instagram, Facebook, and OTT services, tailored to the user's needs.

When competing for contracts on a global scale, such as the Neom City project, how crucial is it to offer a comprehensive suite of services? In the realm of smart homes, where everything is expected to be interconnected, how robust is your current value proposition across your various services?

We firmly believe that the primary value of a smart home lies in ensuring safety and security. Thus, our focus remains on delivering reliable security services as a foundational element. Secondly, we prioritize energy efficiency in alignment with ESG standards, striving to create more sustainable and environmentally friendly homes. Thirdly, we emphasize essential community services, facilitating connections to government services for tasks like issuing identification information directly through our devices. Moving forward, we aspire to expand our offerings to include more social services tailored to homes, with the aim of providing a platform for accessing these services at no additional cost.

COMMAX Venturus serves as a global accelerator, dedicated to nurturing Korean IT startups in domains like Artificial Intelligence, Healthcare, and Smart Cities for expansion into the international market. How does your collaboration with startups contribute to the development of new services and solutions?

Prior to 2017, while we had numerous valuable partnerships, there were limitations due to insufficient R&D funding. Consequently, integrating their products with ours often proved time-consuming. Recognizing the need for a sustainable growth platform, we established Commax Venturus. This platform fosters sustainable growth by embedding startups' innovations—spanning IoT, hardware, cloud services, AI, life services, and healthcare—into our devices through their applications. We remain committed to forging robust partnerships with emerging startups to facilitate mutual growth and innovation.

Just to clarify, as an angel investor, do you also provide these startups with a distribution channel for their services?

Absolutely. We boast a network of 100 sales channels locally and 120 sales points globally, providing startups with valuable distribution avenues for their services.

How many users are currently using your services?

In Korea, we have approximately 10 million users, and globally, we serve around 2 million users. And we project that within five years, our user base will expand to approximately 100 million globally.

This projection is based on our ongoing side project this year, which involves approximately 1 million households. This indicates that every two to three years, we aim to significantly increase our user base. Currently, around 80% of this projection is already fixed. Additionally, we anticipate further growth through upcoming projects, with an initial phase targeting 1 million households in the next two years.

Achieving such ambitious growth necessitates expanding beyond Korea, despite its favorable business environment, which is constrained by a declining population. How do you envision your expansion outside of Korea in terms of market penetration? And what collaborations are you pursuing to enhance accessibility to your services?

Language poses a significant challenge for us, given that Korean is predominantly spoken only within Korea. Before the advent of AI, we encountered considerable difficulties in translating content into languages like English, Arabic, Chinese, and others, presenting a major obstacle. However, with advancements in AI translation technology, this process has become significantly more manageable. We utilize AI for translations, such as converting content into Arabic, where our Arabic partners conduct inspections to ensure accuracy, acknowledging that machine translation isn't flawless. Leveraging AI translation allows us to offer our content in multiple languages on our devices. Looking ahead, if GPT continues to evolve, embedding a translation engine within our devices may obviate the need for extensive manual translation efforts. Presently, our devices support 20 languages, including Korean, English, Spanish, Arabic, Russian, French, Chinese, Hindi, among others.

When considering the most promising markets for your products, China might seem like the obvious choice. However, which markets are your primary targets for penetration?

Without a doubt, the U.S. stands out. Specifically, we're eyeing the five major cities: New York, San Francisco, Los Angeles, Chicago, and Atlanta. These cities are witnessing the development of new apartment complexes, typically spanning five to seven stories. There are townhouses as well. Notably, we've already secured over 20 projects in the U.S. I was pleasantly surprised by the shift in residential trends towards complexes rather than single-family homes. This presents a significant opportunity for us, and thus, the U.S. is our primary focus. Following closely behind is Saudi Arabia.

To establish a foothold in the U.S. and Saudi markets, collaboration with real estate developers is crucial. How challenging is this collaboration today?

Local partnerships are essential for our success in these markets. In Saudi Arabia, we've cultivated relationships with partners spanning three decades. They possess intimate knowledge of the Commax brand, our products, and competitive advantages, effectively promoting our offerings in the region. Similarly, in the U.S., while our partnership may not be as longstanding, it remains robust. Our U.S. partners collaborate closely with local construction firms and developers to introduce our products and services. They also facilitate software integration tailored to local preferences. Recognizing that we cannot cater to every aspect, we provide a comprehensive platform, including hardware, software, and management services. Our partners then customize these offerings to align with local preferences—a process we refer to as "glocalization." Essentially, we deliver globally standardized products and platforms, which our partners adapt to local styles using the components we provide.

European markets are known for being both competitive and conservative. Convincing someone with an 800-year-old Roman building to adopt smart solutions would undoubtedly pose challenges. What message would you convey to potential distributors or partners in Europe regarding the future of home solution services?

In Western Europe, particularly countries like Spain and Italy, where local players dominate, the market is exceedingly tough to penetrate. The resistance from customers to adopt new solutions is also substantial. However, in Eastern Europe, including markets like Russia, Ukraine, Czech Republic, Poland, and Hungary, we have already established a significant presence. We possess expertise in transitioning from old systems to new ones, making these markets more favorable for us.

As the company's President, you've witnessed the rollout of numerous devices to the mass market. How confident do you feel about your latest lineup of products, and which one do you believe stands out as truly unique?

Our journey to enter the U.S. market spanned 15 years of persistence. Initially, we focused on selling one-to-one kits, a strategy that proved successful before being overshadowed by Chinese competitors. Despite setbacks, we persevered, eventually realizing that the traditional distribution channel was no longer viable. Instead, we shifted our approach to directly engage developers and construction companies through local partners—a strategy that yielded results after three challenging years. Looking ahead, our focus remains on providing AI as a service, tailored to the unique preferences of different regions in the U.S. This customized approach allows us to deliver enhanced value to developers and ultimately, end users.

Your industry is quite challenging, requiring engagement with local partners, developers, and end users to communicate the added value of your product. With such a long chain of stakeholders, it must be both exciting and demanding. As the second generation in Commax, when the time comes for you to pass on the company to someone else in your family or to a new CEO, what milestones have you set as objectives for yourself during your tenure as president?

As the second-generation CEO entrusted with continuing our family business for over 50 years, I have set several key objectives. Firstly, my goal is for Commax to achieve a revenue of 1 billion dollars. Secondly, I aim to foster a culture of continuous disruptive innovation, ensuring that every moment brings forth new and groundbreaking ideas. Passing on this spirit of innovation to the third-generation leader is paramount to me.

Furthermore, my extensive experience in various countries has proven invaluable. I possess a deep understanding of European, American, Latin American, and Arabic cultures. Interestingly, I've found that Japanese and Korean cultures, despite appearing similar to outsiders, harbor significant differences. For instance, while Japanese and German cultures may seem alike, Korean culture diverges greatly. Koreans prioritize individuality akin to Italians, contrasting with the collective mindset prevalent in Japan. Understanding these nuances has been crucial in navigating diverse markets and fostering successful partnerships.