Market Analysis - Trends & Outlook

Wearable Technology Market

By !Preethi Myla Vaikuntaraman

Wearable Devices - Types and Categories

Wearable devices come in many forms and have varied application

❖ Wearable devices are clothing or accessories that incorporate advanced electronic technologies (circuitry, wireless connectivity etc)!

❖ Wearable devices are worn by the user for extended periods of time and the devices significantly enhance user experience!

❖ A plethora of such devices exist - from smart rings acting as an extension of your smartphone to devices that monitor blood glucose levels and heads-up displays employing holographic optics

Healthcare and fitness category of wearables currently dominate the market

❖ In this report, we classify wearables into four categories1 based on their application and use. The four categories are:

Fitness and Wellness!includes sports and

activity monitors such as Nike+Fuelband, Lark

sleep sensors etc.

Infotainment!includes smart watches (Pebble), smart glasses

(Vuzix), wearable imaging devices

(GoPro) etc.

Healthcare!includes ECG/

continuous glucose monitoring (Medtronic,

Cardionet), wearable patches (Proteus

sensor)

Industrial/Military!

includes smart clothing (Zephyr Bioharness),

HUDs

1 Based on IMS research category

Wearable Devices - Current Market and Forecasts

Fitness and activity monitors have seen high consumer adoption in 2012

❖ According to various estimates, the highest revenue generating products sold in 2012 were wrist wear (fitness and activity monitors accounting for anywhere between 60%-90% market share) and continuos glucose monitors (wearable medical devices).!

❖ Such devices have seen high consumer adoption, which is expected to pave the way for increased awareness and adoption of other wearable infotainment devices such as smart watches and glasses!

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Consumer Interests in Wearable Device types

Tech-Sensitive Textiles And Clothing

Headset/Eyeglasses

Sensor-Enabled Wristwear

Medical Devices That Transmit Data

0% 10% 20% 30% 40%

Source: BII Report, April 2013

Estimated Market Share for wearable devices, 2012

Other!25%

Medical Devies!15%

Fitness Devices!60%

Source: BII, IMS and media articles

Competitive landscape within the different categories

Source: IHS World market for wearable technology - 2012,2013

There are more crowd funded projects for smart watches than big companies

❖ The Fitness market (estimated to be $2-$3 billion) dominated by players such as Nike, Adidas, FitBit, Jawbone etc have led the charge in wearable devices and brought it to the mainstream market !

❖ However, the entry of big-name brands such as Google, Apple and Samsung has lent credibility to the industry and increased awareness of wearable devices of the infotainment sector among mainstream consumers!

❖ But still, the market is currently dominated by startups borne out of online crowd-funding campaigns such as kickstarter and indiegogo

Expected to enter the market!Apple iWatch!

Google Smartwatch!Microsoft Smartwatch!

LG ‘G Watch’!Acer!ZTE!

Nissan

Uncertainty in the future of the wearable technology market

❖ While many high-level mobile execs expect wearable devices to play a significant role in 2014, forecasts for the wearable tech industry varies widely!

❖ Forecasts vary from 64mn devices shipped in 2017 (by Berg Insight) to 485mn in 2018 by ABI research.!

❖ The wide variation is attributed to the differing expectations on the adoption of wearable devices by mainstream consumers!

❖ IMS research forecasted the market size under three scenarios (based on adoption rate) that vary from 40mn to 171 mn devices shipped!

❖ Many researchers expect fitness and medical wearable devices to have the highest market share; BI projects 80% market share of Activity monitors (fitness and medical) in 2017

Source: IHS Inc. September 2013

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Key Drivers for Wearable Device Adoption in the Infotainment Market

Wearable devices are as much a fashion choice as a functional one

❖ A wearable device is a highly visible part of a user and a lot more personal than smartphones or PCs. Hence, two characteristics that usually do not feature in the decision making process for other tech products, play a significant role here!

❖ Fashionability!

❖ Uniqueness!

❖ A dress or jewelry conveys something about the wearer, similarly the usage of any wearable device sends a message about the user. !

❖ Mainstream adoption of wearables in the consumer market depends on wearable devices achieving the above two qualities

The recently unveiled galaxy gear smart watch was criticized for being too bulky and unappealing to women

The stylish and minimalist Shine fitness tracker

Price remains a key barrier for mainstream adoption of wearable devices

❖ One of the biggest roadblocks for widespread consumer adoption of wearable devices is the price of the current devices. The average price of smart watches currently available for sale or pre-order in the market is $245, while the Vuzik smart glasses cost $999!

❖ 55% of respondents in a survey conducted by TNS market research say that wearable devices are too expensive!

❖ Survey conducted by GfK noted a significant drop in purchase intent among users after they learnt the price of current wearable devices (note graph below)!

❖ With more players in the market and lower priced products, the adoption of wearable devices as a mainstream consumer product is expected to increase

Change in purchase intent of young consumers after learning current price of product

0%

10%

20%

30%

40%

SmartWatch SmartGlass

Before knowing price After knowing price

31%$

54%$

15%$

Price$Level$of$Smartwatches$currently$available$in$the$market$for$sale$or$pre>order$

$100$$199&

$200$$300&

>$300&

Stand-Alone wearable devices have a potentially larger market

❖ Under the current scenario, growth of the wearable tech market is limited by the level of penetration of smartphones. Almost all mainstream wearable devices now are paired with smartphones (most fitness devices and many smartwatches) !

❖ Smartphone penetration is more than 50% in the developed countries whereas it is less than 20% in some of the large developing markets (such as India, Philippines and Thailand etc)!

❖ Increasingly, wearable devices will evolve as a stand-alone device and hence its potential market and adoption will see significant growth in the future

Complement to Smartphone Stand-Alone Device

The overlapping market of smart watches and fitness devices

❖ Fitness devices track distance traveled, how long you have been inactive, sleep time and sometimes heart rate. Certain devices such as Nike and Basis bracelets also display time.!

❖ These functions can also be performed by a smart watch loaded with sensors, while being paired to a smartphone to receive and make calls. Through an app ecosystem, a smart watch is capable of acting as a fitness device and more!

❖ This suggests, the smart watch market has the potential to encompass the fitness devices market as well. How this plays out in the industry, remains to be seen.

Wearable devices will have a higher adoption among younger demographic

❖ The current user segment for wearable devices comprise of sport or fitness enthusiasts and early tech adopters!

❖ Within mainstream consumers, there are certain segments that are more inclined to wearable devices. In the initial stages, companies should target these segments to increase mainstream adoption of wearables!

❖ Teenagers are potentially a great market for early stage wearable devices. This consumer segment wants to be always on and connected and wearable devices would add to the ‘cool’ quotient - teenagers’ fashion choice!

❖ Survey by GfK market research firm found that consumers aged 16 to 24 liked the idea of connected devices (watches and glasses)

Interest among 16-24 year olds for connected watch and eyewear

SmartWatch

Google Glass

0% 15% 30% 45% 60%

Privacy is a major concern for consumers, impacting wearables adoption

❖ With the recent NSA revelations, privacy concerns are at the top of mind for consumers regarding technology!

❖ An in-depth study conducted by Rackspace and Centre for creative and social technology showed that privacy concerns were the major roadblock for adoption!

❖ “don’t want to adopt wearable technologies because of privacy concerns” - More than half the respondents!

❖ “Google Glass and other wearable devices should be regulated” - Two-thirds of the research participants!

❖ “Prefer these devices to be banned completely” - 20% of respondents

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