Smartwatches, also termed “wearables” along with fitness trackers, have been around for some time, but their popularity has been limited due to their dependence on smart phones. Currently, to be able to use the smartwatch to its full potential, it needs to be hooked up via Bluetooth or a Wi-Fi connection, to the corresponding smartphone.
All this is set to change. Apple Inc., AAPL, is planning to release its next generation of wearables with their own cellular modems. Huawei has also revealed that it will release a smartwatch with its own 4G connectivity. “Uncoupling” smartwatches from their phones would mean that consumers would finally buy the smartwatch as a separate product, rather than as a good to have, but unnecessary accessory to the smartphone. This new smartwatch would have the capability to operate communications, work as a fitness tracker, and also buy items online – things that can currently only be done by hooking up to a smartphone.
While the smartwatch market hasn’t wowed consumers, there has been a steady growth in recent years. Data from IDC (Interactive Data Corporation) reveals that in 2016, 102.4 million units of wearable devices were shipped in 2016, of which, only 21.1 million were smart watches.
Having said that, the overall market growth is already at 30% for the first half of 2017. Samsung has shown a growth of 90% in its smartwatch sales with 1.4 million wearable already shipped in the first quarter of 2017 alone, and holds 5.5% of the wearable market right now. While Apple has a 14% share, predictions say that it is the android market that is set to grow in this sector. This year, the shipment of smartwatches is predicted to reach 30 million units.
If the rumor is correct, and “uncoupled” smart wearables are launched, the entire market dynamic changes. Analysts predict, there could be an additional compounded annual growth rate of 30%, with smartwatch sales reaching the 100 million mark by 2021. Apple is currently the market leader of smartwatches, owning half of the market share, but still lags in the overall wearable market at 14%.
These numbers will also change with Fitbit Inc., FIT, entering the smartwatch market. Fitbit is currently the market leader in the wearables market with its less capable devices known as fitness trackers. Fitbit is also slated to launch its own smartwatch later this year.
Currently, Fitbit isn’t doing too well in the stock market, with a steady decline of 63% in the last one year. Also, Fitbit’s growth rate has slowed by 5% to 10% in the first half of 2017 as its limited fitness tracker is not able to compete with the more capable smartwatch. However, there has been a rally of 4% on Tuesday’s trading after news of the smartwatch being launched by the company. Analysts say that every 1% increase in the smartwatch market share that Fitbit makes will add 7 cents in earnings per share.
“Uncoupled” smartwatches would also spell good news for French company, Sequans Communications SA (SQNS). The Benchmark analysts predict that the new “uncoupled” smartwatches will use the latest technology – the Internet-of-Things-optimized LTE-only technology – which is what Sequans has to offer. Sequans is the only company that has this technology on offer on a commercial scale. Sequans is expected to have a 50% market share in this technology by 2019, beating competitors Qualcomm (QCOM) and Sony Corporation owned Altair (SNE).
Currently, while there has been a 30% growth in the smartwatch market in the first half of 2017, the product hasn’t reached its full potential as its high cost does not justify its utility.