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The Size Of The Smartwatch Market & Its Key Players

Mar 7 2014, 5:31am CST | by

The Size Of The Smartwatch Market & Its Key Players

As a champion of the traditional mechanical watch industry I am also deeply interested in the still infant smartwatch industry. The two aren’t directly related but will sooner or later be at odds as they are going to vie for the same wrist real estate space. Wearable computing devices may be fodder for early adopters as of early 2014, but all signs point to the ideal that wearable devices will eventually replace those that we carry around in our pockets or bags. That battle will eventually be not whether someone wishes to wear a traditional watch versus an electronic one, but how they will be able to integrate their love of traditional watches with the necessity of owning and using a wearable device. I’ve even gone so far as to recently cover the top new smartwatches for 2014 as well as interview the founder of Pebble about how they are approaching the future.

The newly formed Smartwatch Group is a research company based (of all places) in Switzerland to track the movements of the smartwatch industry as well as to quantify its developments. As of 2014 Pascal Koenig, managing director of the Smartwatch Group has begun to release statistical data and insights about the watch industry not only for the tech industry, but also in a way that is useful toward the traditional watch industry. I spoke with Mr. Koenig about the group’s current summary of the smartwatch industry as well as what it all might mean.

Ariel Adams (AA): As of 2014 how large in US dollars would you say the smartwatch industry is?

Pascal Koenig (PK): In 2013, the global smartwatch industry reached a global market volume of USD 700 million, ten times the size of 2012. In 2014, the industry will grow to USD 2.5 billion – 5% the size of the watch industry. In the years to follow, the smartwatch industry will keep growing at a 3-digit rate.

AA: You indicate that Samsung is by far the largest shipper of smartwatches as of the end of 2013. This is despite the fact that their single smartwatch product (the Galaxy Gear) was not a critical success. Is this because Samsung is the biggest player in the game right now? What percentage of units shipped do you think are actually selling?

PK: Clearly, Samsung has a huge global distribution power. In terms of products shipped (sell-in), they had a market share of 34% in 2013, in terms of sell-out around 20%. But even if the first product generation was not a big market success, Samsung is determined to build up its smartwatch business, as this is a key driver for future growth. They just presented a new smartwatch generation with significant improvements.

AA: Some of the products included in the list are of course technically smartwatches but for years haven’t been described as such. This includes watches from brands such as Casio and Garmin. Will these companies benefit from the creation of the new smartwatch-named segment or will they suffer from the expected increase in competition?

PK: New sensor technologies in combination with a continuous link to the Internet will revolutionize the watch industry over the next decade. The challenges for Garmin and for Casio are very different. While Garmin’s know-how in heart rate monitoring and localization technologies is becoming commoditized, Casio needs to position itself against future products from big consumer brands such as Samsung, Apple and Google. But I am not afraid for Garmin and Casio: these two companies belong to the early adapters of smartwatch technologies – and these technologies will provide huge opportunities in the years to come.

AA: Over 17% of the companies in the list are categorized as “other,” but together they would be the second largest shipper with a market volume of about $125,000,000. Who are some of these companies and how important are their products to the industry?

PK: These 17% represent 30 companies from 10 different countries. Included are companies from the sports segment such as Adidas, Polar, and TomTom, security companies such as myFilip and Limmex, as well as further watch companies such as Citizen. The strongly growing ecosystem is important for the smartwatch industry as a whole: there are many highly innovative companies that did not make it into the top 10, but have the potential to become highly successful in the years to come.

AA: Notwithstanding these figures, what products and smartwatch features do consumers actually value and ultimately purchase/desire?

PK: So far, activity monitoring has been the killer application of smartwatches: products such as Nike’s Fuelband and Fitbit have shown to be highly effective for people to embrace a healthier lifestyle. To a lesser degree, notifications can be a practical feature of smartwatches, as the number of messages increase and smartphones become larger. But these two applications are just the tip of the iceberg. Based on continuous hardware improvements, 30,000 software developers are currently building smartwatch apps that will make us healthier, more efficient, safer, and better connected.

AA: How do you feel this list will change at the end of 2014? Not only in the size of the market, but who the dominant players are?

PK: We expect that the number of companies that offer smartwatches will grow fivefold from 40 to 200 until the end of 2014. Together with the exploding number of app developers, this growth of hardware providers will form a virtuous circle for fast growth of the smartwatch industry in the years to come. In terms of the dominant players, we expect Apple and Google to be among the Top 10 players at the end of 2014.

AA: Many critics and industry insiders freely admit that in many ways “connected” smartwatches are still an immature product and not ready for mainstream consumption. Would you agree? If not why?

PK: I completely agree that smartwatches are still immature, as strong product benefits are widely missing. But this is changing quickly due to incredible advances in sensor technology, app development, and billions of USD going into smartwatch-related R&D. Moreover, while the first phase of the smartwatch revolution has been very technology driven, future smartwatches will start to be good looking. In this respect, today’s watch industry has much to offer to this emerging industry.

Ariel Adams publishes the watch review site

Source: Forbes

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