Apple Watch expected to take a big chunk of smartwatch market

The Apple Watch is expected to snag nearly two-thirds of the smartwatch market for all of 2015, according to a new forecast from market research firm IDC.

IDC had said two weeks ago that Apple will ship to retailers about 21 million Apple Watches in 2015. That's in the mid-range of other analyst forecasts of 15 million to 30 million for the new device.

Then on Thursday IDC said that all smartwatches and a small number of other smart wearables will total 33.1 million shipments in 2015, putting Apple Watch at 63% of that total. Smart wearables are defined by IDC as devices capable of running third party apps, such as Apple Watch and Android Wear watches like the Moto 360.

The IDC prediction comes amidst some other striking analyst forecasts for the Apple Watch, but also amid questions about the overall value of smartwatches.

Financial analyst Brian White of Cantor Fitzgerald recently declared the Apple Watch will "prove to be the best selling product in Apple's history (within the first 12 months.)" Various estimates say it took one day of pre-orders to sell 1 million Apple Watches, while it took Apple 74 days to sell 1 million iPhones and 28 days to sell 1 million iPads.

Research firm Slice Intelligence told Reuters this week that about 2.8 million Apple Watches were sold through mid-June, nearly two months after the device first went on sale. Apple hasn't reported how many Apple Watches it has sold and is not expected to separately report that number in the future. Slice gets its insights by mining e-mail receipts. The entry-level Apple Watch costs $349 and is the most popular in sales, Slice said.

About 20% of Apple Watch customers are also buying a spare watch band, with the entry-level sports band selling for $49, Slice noted. IHS, which performs teardowns of popular devices, estimated that the sports band costs $2.05 to make, not including packaging, shipping and any exclusive Apple materials.

Apple looks to have a big impact on the smartwatch market for years to come. IDC said smart wearables (mostly smartwatches) of all brands will total nearly 90 million shipments in 2019, which is an 84% annual rate of growth. Apple's share is expected to stay about the same in coming years as in 2015, at more than 60%, IDC said.

Basic wearable devices and fitness bands that don't run third party apps, like those from Fitbit and Xiaomi, have dominated the market for wearables so far, but will fall behind smart wearables for the first time in 2016, IDC said.

"Smart wearables like the Apple Watch and Microsoft's Hololens are indicative of an upcoming change in computing, and the transition from basic to smart wearables opens up a slew of opportunities for vendors, app developers and accessory makers," IDC analyst Jitesh Ubrani said in a statement.

IDC analyst Ramon Llamas expects a battle between different smartwatch operating systems, even though IDC predicts Apple will surge ahead in 2015. "Android Wear, Tizen and WatchOS [from Apple] are moving ahead with improved user interfaces, user experiences and applications," he said. "Each platform is vying for best-in-class status."

In early June, Llamas had questions about the value of smartwatches like Apple Watch to buyers, especially when compared to fitness bands like Fitbit. "There's pressure on the smartwatch to prove its value," he said in an interview at the time. "That includes: What can I do on my smartwatch that I can't do on my smartphone"

He also questioned how well a smartwatch priced above $300 can continue to sell when the market is filled with sub-$100 fitness bands.

Smartwatches, to many analysts, are not a proven commodity for many other reasons, including battery life and the difficulty in bringing much computing usefulness to such a small device.

Gartner analyst Van Baker in April summarized the uncertainties about smartwatches in general noting that Apple Watch shipments could be 20 million smartwatches in a year or much higher. "No one really knows," he said at the time.

In an interview, Ubrani predicted that once developers begin building effective apps for smartwatches, buyers will feel justified in paying more for a smartwatch than for a fitness band.

"Things are starting to crystallize for the smartwatch, especially with apps," Llamas added in an interview. "We've already had third party apps for Pebble and Android Wear and Tizen. Apple has taken the right approach by providing notifications first in Apple Watch, and then apps." These notifications including getting a sports score or a notice of a call or email on a smartwatch.

Still, Llamas said, "We don't know what the killer smartwatch app is going to be. We do know that people like notifications and they like fitness apps. It's up to the developer community to make the case for wearable tech, and specifically wristwear. They have to find apps that run independently on the watch and don't need to have the smartphone to have utility. Once that happens, now we're talking."

Ubrani said that smartwatch makers are "putting the building blocks in place but so far nothing much has emerged from it." There will come a point "when the utility of a smartwatch will be enough to justify the premium pricetag."

Apple has focused heavily on the fashion features of its smartwatches, including an 18-karat gold version with a starting price of $10,000. "The fashion focus at Apple will definitely help them," Ubrani said. "With any wearable, fashion will play a big role because people wear them in public and want to look good."

Buying trends show that consumers are willing to spend on smartwatches to replace total spending on PCs, tablets and smartphones, but they also steal from what they are willing to spend on their fashion budget to purchase stylish smartwatches, Ubrani said.


Matt Hamblen

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