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SAMPLE PAGES: Devices for the Wrist: Ecosystems Crucial
to Growth of Connected Watches and Bands
November 2014
Report price: US$ 3,495.00
Jan ten Sythoff | Analyst at Large
Ozgur Aytar | Research Director
“Devices for the Wrist: Ecosystems Crucial to Growth of Connected Watches and Bands,” a Research Report by Pyramid Research, examines the high growth opportunity which wrist-worn wearable technologies provide, how the ecosystem is developing, positioning strategies of the key industry players, and the launched and announced products to date. The report provides 5-year projections for shipments and revenue by device segment and global installed base. The analysis is built around Pyramid’s wrist-worn product database of over 70 models, mobile industry forecasts as well as end-user research conducted across several Western European countries and a global survey of over 200 industry players.
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Summary
• Following several decades of false starts, wrist-worn technology is becoming an enormous new opportunity: shipments for wrist-worn devices are expected to grow by nearly sevenfold in 2014 and threefold in the following year. Technology developments, high smartphone penetration rates, new applications and the availability of well-designed, easy-to-use devices are some of the key drivers behind this growth.
• The variety of products available has ballooned, with different designs, capabilities and brands, but the entry of Apple into the market in 2015 will be the key catalyst for growth.
• Manufacturers face multiple challenges in developing a smart watch that is attractively designed and balances functionality with the right combination of user interfaces. Furthermore, there is an inherent trade-off between functionality and battery life: typically, technology vendors such as Apple and Samsung favor functionality and have had to develop innovative ways in which the user can interact with the device. Traditional watch manufacturers such as Casio and Citizen prioritize battery life and limit functionality. In between are a broad range of different possibilities to meet different needs and tastes.
• There remains significant potential for product development and improvement, particularly as the chipset and technology suppliers improve their products,
with a particular focus on improving battery life.
• Highly functional smart watches will be dominated by the existing smartphone platforms, but there are also opportunities for devices with lower functionality, particularly for the traditional watch manufacturers, for whom typically design comes above functionality.
• Fitness and health applications will be a key driver for wearables. Many large technology companies are looking at cloud based health services as an important new revenue opportunity.
• Bluetooth is the connectivity technology of choice today; Wi-Fi drains batteries quickly but enables independent connectivity and could introduce new opportunities, particularly for mobile operators. We expect that NFC will make the biggest impact, opening the door to new applications, particularly in the areas of access control, loyalty, payments and travel.
• By 2019, we are projecting shipments to grow by 13-fold from its 2014 level, with more than 10% of the global population wearing a connected wrist-worn device. While the market is expected to be triggered by the Apple Watch, at the same time lower cost devices will also drive the market as chipset and component prices fall; furthermore, the price of connected bands will fall dramatically as new business models become established.
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Key findings
The “Devices for the Wrist: Ecosystems Crucial to Growth of Connected Watches and Bands” report comprises business model analysis, market sizing and demand analysis and trend analysis for wrist-worn device market. Insights and data are derived through a mix of primary research, secondary research as well as quantitative modeling for sizing the market opportunity.
The report draws on a total of three surveys and panels that gauge the status and expectations of both end-users and industry participants, including a survey of over 200 telecommunications and technology professionals conducted by Pyramid Research in August-September 2014 as well as a European technology end-user panel in Germany, Italy, Spain and the UK in July 2014 and a UK wearable technology end-user panel from January 2014, both of which were conducted by our sister company, Canadean Consumer.
In addition to these surveys, Pyramid conducted interviews with key players in the market to support its analysis of the evolution of the ecosystem and business models and development of a database of 70 wrist-worn devices. This effort was supplemented by secondary research, involving the gathering of relevant data and intelligence through publicly available sources, publications, trade associations, specialist databases and company financial reports, presentations and press releases.
Pyramid Research developed a model to size the market opportunity that incorporates global historical shipments, revenue and average selling price (ASP) data at the manufacturer level, survey findings on adoption levels as well as vendor plans over the next 18-24 months in the forecast through 2019.
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Report methodology
• The “Devices for the Wrist: Ecosystems Crucial to Growth of Connected Watches and Bands” report provides a comprehensive examination the nascent wrist-worn wearable technology opportunity to help executives make informed investment decisions, develop effective partnerships and optimize return on investment.
• This report provides a five-year forecast of wrist worn wearable volumes and revenues broken down into three segments, namely bands, smartwatches and cellular watches as well as a population penetration and installed base analysis to enable executives assess growth opportunities and position their companies for emerging trends in demand
• The report incorporates a detailed product analysis, highlighting the features, functions, pricing and capabilities of over 70 product models on the market, which provides an in-depth overview of key trends in the wrist-worn device market for any stakeholder and should support vendors in developing competitive strategies as well as differentiation.
• Survey data is included into the analysis, including both end-user awareness information as well as the results on an online industry survey to assess the industry’s position and expectations of the market opportunity.
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Reasons to buy
Table of contents 2 Table of exhibits 4 Executive summary 6 Introduction 10
I. Report scope, definitions and segmentation II. Survey and panel overview
Section 1: Market overview and background 14 I. Overview of wearables and connected watch opportunity II. End-user awareness III. Industry expectations IV. Watch market overview V. Smart watch history
Section 2: Analysis of the smart watch ecosystem 22 I. Smart watch ecosystem overview, brand positioning and key takeaways II. Application developers: Positioning strategies
i. Runtastic V. Traditional watch manufacturers: Positioning strategies
i. Swatch ii. Casio
VIII. Smart watch platforms/vendors: Positioning strategies i. Google ii. Samsung iii. Apple
XII. Mobile network operators: Positioning strategies i. AT&T ii. NTT Docomo iii. Swisscom
XVI. Chipset and component manufacturers: Positioning strategies i. MediaTek
Section 3: Assessment of wrist-worn products 44 I. Key takeaways II. Product and manufacturer overview
III. Product segmentation and pricing i. Smart watches ii. Bands iii. Cellular-connected smart watches
IV. Product challenges V. Product analysis
i. User interface ii. Interactivity and functionality iii. Android Wear user interface iv. Design v. Battery life vi. Functions and applications vii. Android Wear applications
VI. Product positioning: Price versus functionality VII. Product connectivity
i. Wi-Fi ii. NFC
Section 4: 5-Year forecast of wrist-worn device shipments, revenue and installed base 64
I. Key forecast assumptions II. Industry survey results: Population penetration expectation for
2019 III. End user awareness III. Product availability IV. Wrist-worn device shipments by segment V. Bands: Shipment and revenue forecast VI. Cellular smart watch: Shipment & revenue forecast VII. Smart watches: Shipment and revenue forecast VIII. Global installed base and penetration forecast
Appendices 75 Companies mentioned Sources and related research About Pyramid Research
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Table of contents
Product count by segment 10
Overview of survey and panel surveys 11
Survey respondent breakdown by company type 12
Survey respondent breakdown by region 12
Smartphone penetration in selected markets, ye 2013 14
“Which of the following have you heard of?” 15
“Which of the following wearable technologies have you heard of?” 16
“In five years time, what level of population penetration do you expect to see for wearable connected devices (in your country)? 17
“Please rank the following types of wearable devices in the order of how successful you expect them to be over the next five years” 17
“Is your company involved in the connected wearable device market?” 18
“Which of the following devices are/will be within the scope of your company’s involvement in the connected wearable device market?” 18
Global watch revenue, 2012, 2013 19
Average watch prices by country of manufacture, 2013 19
Early smart watch failures 20
Smart watch ecosystem 22
“In your view, how would strong adoption levels of wearable devices impact the following?” 23
“Please rank the following brands in the order of how successful you expect them to be in wrist-worn wearable devices” 24
Runtastic pro app 27
Positioning of watch vendors and smart watches 29
Swatch Touch 30
Positioning of smartphone manufacturers 33
Cellular-enabled watches and subscription costs 37
AT&T devices (Filip watch, Martian watch, Fitbit Flex) 38
NTT Docomo’s Move Band 2 39
Limmex emergency watches offered by Swisscom 40
Smith Optics I/O Recon connected goggles 40
Apple S1 SIP and Qualcomm TOQ Smartwatch 41
MediaTek LinkIt overview 42
Manufacturer breakdown by type 45
Prices by segment: low, average and high 46
Yingqu InWatch One, Garmin Forerunner, Tomoon Fire 47
Sony Smartband Talk, Jawbone Up24 48
Filip, hereo and Tinitell wristphones for children 49
Samsung Gear Live, Timex Ironman One GPS+ 49
“How important are the following challenges that the industry must overcome to ensure mass market adoption of wearable devices?” 50
“How would you expect the user to interact with connected devices worn on the wrist?” 51
Product positioning: functionality and user interface 52
Android wear menu and user interface 53
Apple Watch designs 54
Smart watches with classic designs 55
Kairos smart watch has both a classic and a digital screen 55
Watch battery life 56
“How important do you think the following applications will be in driving wearable device adoption?” 57
Early Android wear applications by category 58
Product positioning 59
Wearable connectivity capability 60
“Please rate the importance of the following ways in which wearable devices connect” 61
Telefonica’s TU Go service 62
Apple Pay on an Apple Watch 63
Starwood Hotel watch app 64
Connected wrist-worn device shipments, 2013-2019 65
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Table of exhibits
“In five years time, what level of population penetration do you expect to see for wearable connected devices (in your country)? 66
“Which of the following new technologies have you heard of?” 67
“Which of the following statements do you consider to best represent wearable technology in 2014?” 67
Bands, cellular smart watches and smart watches launched 2012-2014 68
Segment market shares, millions of shipped units, 2013-2019 69
Connected band shipments and revenue, 2013-2019 70
Cellular smart watch shipments and revenue, 2013-2019 71
Smart watch shipments and revenue, 2013-2019 72
Wrist-worn device installed base and population penetration, 2013-2019 73
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Table of exhibits (cont’d)
End-user awareness: Across four countries in Europe
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According to Progressive Media’s consumer end-user technology survey in Germany, Italy, Spain and the UK, end-user awareness for wearable technology is highest in Spain and lowest in Germany.
Source: Canadean Consumer: Connected Consumer Tracker Q2 2014; UK, Spain, Italy, Germany
“WHICH OF THE FOLLOWING HAVE YOU HEARD OF?”
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
UK
Spain
Germany
Italy
Average
Wearable technology
Smart watch
4G
Smartphone
According to our survey, the biggest impact of high adoption of wearable devices would be on the use of services such as mobile data access, voice use (for interactivity), advertising and application downloads.
The impact on other hardware sales, such as traditional watches, tablets and smartphones, is less pronounced, but note that the impact on smartphone sales (and loyalty) is overall seen as positive, despite overlapping capabilities.
Conversely, traditional watch sales are expected to be impacted negatively and though this impact was expected to be small by the technology industry, the announcement of the Apple Watch hit traditional watch stocks such as Fossil, Richemont and Swatch negatively.
Communication, information, navigation and entertainment applications will all benefit with increased usage, but we expect that the area of fitness and health will be the most important growth area, driving application downloads and mobile data usage.
Smart watch ecosystem overview
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The proliferation of wearable devices will have the biggest impact on data usage, application sales, voice interactivity and targeted advertising.
“IN YOUR VIEW, HOW WOULD STRONG ADOPTION LEVELS OF WEARABLE DEVICES IMPACT THE FOLLOWING?” (N=178) (AVERAGE OF INCREASE, DECREASE, NO IMPACT RESPONSES)
-40% -20% 0% 20% 40% 60% 80% 100%
Mobile data
Voice interaction
Targeted advertising
App sales/downloads
Smartphone loyalty
Smartphone sales
Tablet sales
Watch sales
Source: Pyramid Research Industry Survey, August 2014
Product analysis: Interactivity and functionality
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More advanced smart-watch functionality requires more sophisticated user interface combinations; vendors must choose the best combination of user interfaces for the level of functionality they want to offer.
PRODUCT POSITIONING: FUNCTIONALITY AND USER INTERFACE
Limited functionality
Advanced functionality
High interactivity
Limited interactivity
Devices with more functionality require a more sophisticated user interface, and vice versa. Thus, at one extreme, the Apple Watch has very sophisticated functionality and allows the user to interact in several different ways: buttons, touchscreen (to swipe up only), voice as well as vibrations/touch and gesture.
Android Wear mainly uses touchscreens and voice for interaction but does support manual buttons also. Apple points out that touchscreen interactivity is not fitting for a watch because the screen cannot be seen, but it remains to be seen how this will develop in the future. It is still unclear whether users will be willing to use voice commands to interact with wrist-worn devices.
The traditional watch manufacturers’ smart watches, with their limited functionality, have stuck to the use of hardware buttons for interactivity. The most recent device from Casio lets users assign hardware buttons in the way they prefer. Simplicity is chosen over functionality, given the uncertainties highlighted above.
Manufacturers must therefore carefully decide which types of user interfaces should be used and combined to best access the functions and capabilities of their devices.
Source: Pyramid Research
Apple
Asus
AT&T
Casio
Citizen
Epic Systems
Fitbit
Fossil
Garmin
Geak
HTC
Huawei
IBM
Jawbone
Kairos
LG
Limmex
LVMH Bulgari
Magellan
Martian
Mayo Clinic
Mediatek
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Companies mentioned
Microsoft
Motorola
Neptune
Nike
NTT DoCoMo
O2
Omate
Omron
Pebble
Qualcomm
Richemont
Rolex
Runkeeper
Runtastic
Samsung
Scosche
Seiko
Sony
Swatch
Swisscom
Telefonica
Timex
Tinitell
Tomoon
Toshiba
Yingqu
Smartphone Forecasts The Smartphone Forecast tracks annual handset sell-through of total mobile handsets and smartphones for a 10-year period including five historical years and five forecasted years. Smartphone sell-through is segmented by the top 10 vendors (including select vendors by country) and segmented by operating system. Granular data is provided for each of more than 50 countries, making Pyramid’s smartphone forecast the most detailed on the market today.
Mobile Data Pricing: Innovative Practices To Drive Adoption and Traffic This new Research Report by Pyramid Research provides a strategic analysis of the mobile data opportunity across different regions through 2018, and keys to developing the mobile data business. The report includes an in-depth assessment of mobile service provider pricing plans worldwide, identifying effective data plans and best practices to grow mobile data usage and revenue. The report incorporates detailed country case analyses for China, France, India, Japan, the UK and the US, with examples of a variety of pricing schemes from different market environments and types of players.
Cellular M2M Services in Africa & the Middle East: Market Sizing, Forecasts and Case Studies This Telecom Insider Report by Pyramid Research presents the different M2M market segments in the region and includes market sizing, forecasts, growth drivers and case studies. It analyzes the main developments and key trends in cellular M2M verticals, including the telematics/fleet management, utilities/smart city, consumer electronics, health, industrial, financial/retail and security sectors. This Insider also presents case studies of Vodacom in South Africa, M-KOPA Solar in Kenya, Etisalat in the UAE, Sequoia Technology in Mozambique and Turkcell in Turkey, examining how these different players approach the M2M opportunity. We conclude with recommendations.
South Korea: LTE-A and 10Gbps Broadband to Drive Operator Investments This Country Intelligence Report offers a precise, incisive profile of South Korea’s mobile and fixed telecommunications and pay-TV markets based on comprehensive proprietary data and insights from our research in the South Korean market. Published annually, this presentation-quality, executive-level report provides detailed analysis of the near-term opportunities, competitive dynamics and evolution of demand by service type and technology/platform across the fixed telephony and broadband, mobile and pay-TV sectors, in addition to a review of key regulatory trends.
Mobile Data Forecasts
Forecasts updated quarterly A premium version of Pyramid Research’s Mobile Demand Forecast, Mobile Data tracks current and future demand for mobile data services, within the context of overall mobile demand. This forecast includes all the same tracking as the standard Mobile Demand Forecast but breaks down mobile data ARPS, revenues and subscriptions at the service level.
CLIENT CONFIDENTIAL
© 2014 Pyramid Research. All rights reserved. No material contained in this report may be reproduced in whole or in part without the prior written permission of the publisher. Neither the information nor the opinions expressed in the report should be construed as a recommendation for the purchase or sale of any security. The information contained in this report has been obtained from sources we believe to be reliable, but neither its completeness nor accuracy can be guaranteed. Opinions expressed are based on our interpretation of the available information and are subject to change.
Sources and related research
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About Pyramid Research
To learn more about Pyramid Research’s product offerings and how they can be of service to your company, please contact [email protected] or visit us on the Web at www.pyramidresearch.com.
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Pyramid Research (www.pyramidresearch.com) offers practical solutions to the complex demands our clients face in the global communications industry. Its analysis is uniquely positioned at the intersection of emerging markets, emerging technologies and emerging business models, powered by the bottom-up methodology of our market Forecasts for more than 100 countries — a distinction that has remained unmatched for more than 25 years.
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Our highly structured analysis closely examines the performance, technology trends, macroeconomic environment and regulatory conditions of service providers and equipment vendors in each of the more than 100 countries we cover. Using a bottom-up approach, we size market demand across services and countries, and conduct end-user surveys to validate adoption trends and anticipate shifts in demand. Our commitment to intensive, direct interviewing of regulatory authorities, service providers and manufacturers — complemented with end-user data — ensures the most reliable portrait of every market we examine.
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