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BY:

Wearables Market Report 2015

Table of Contents

Introduction To the Report – Page 3 Global Wearables Revenue & Forecast – Page 4 Global Wearables Shipment & Forecast – Page 5 Global Wearable Shipment by Device Category – Page 6 Wearables Vendor Landscape – Page 7 Timeline of Wearable Devices – Page 8 Smartwatch Shipment & Forecast (Units)– Page 9 Smartwatch Shipment Vendor Split – Page 10 Smartwatch Shipment Analysis by Regions– Page 11 Apple Watch Shipment Forecast – Page 12 Barriers to Wearables adoption – Page 13 Conclusions – Page 14

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Introduction The term ‘Wearable’ refers to any electronic device or product which can be worn by a person to integrate computing in his daily activity or work and use technology to avail advanced features and characteristics. This report provides a quantitative and qualitative information of the global wearable electronics market and all its segments (both - shipments and market revenue wise), and also forecasts the same till 2020. The global wearable electronics products market revenue is expected to grow roughly at a CAGR of more than 38% and cross $20.30 billion by the end of 2020, with steady sales of wristwear and footwear category, along with the emergence of the small market size for eyewear and bodywear category. Major players in the market are Samsung Group (South Korea), Sony Corporation (Japan), Adidas AG (Germany), and Nike, Inc. (U.S.), among others. Apple will be a force to reckon with in the coming years.

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Global Wearables Revenue & Forecast (bn $)

• Sales of smart wearable devices, such as the Apple Watch, will generate USD20.3 billion in revenue by 2020

• The smart wearables market will reach an inflection point in 2015, driven by the launch of the Apple Watch

• Other manufacturers – such as LG, Motorola and Samsung – will eventually benefit from the increased interest in smart watches as a credible device type, but we do not anticipate any vendor matching Apple’s market share in the short or medium term.

• Smart watches will dominate sales of wearable devices by 2017, but take-up is still limited by consumer interest.

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0.00

5.00

10.00

15.00

20.00

25.00

2014 2015 2016 2017 2018 2019 2020

2.50

6.90 11.10

15.60 17.20

18.80 20.30

*Source: Techbitzz Research

Global Wearables Shipment & Forecast (mn Units)

• We estimate the global wearables market will grow at a compound annual rate of 38% over the next five years and hit 187 million units shipped in 2020.

• The smartwatch will be the leading product category and take an increasingly large share of wearable shipments

• The Apple Watch will account for 40% of smartwatch shipments in 2015 and reach a peak 48% share in 2017.

• Fitness bands and miscellaneous wearable device types, like smart eyewear, will continue to cater to niche audiences.

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0

20

40

60

80

100

120

140

160

180

200

2014 2015 2016 2017 2018 2019 2020

20

42 68

93

117

143

187

*Source: Techbitzz Research

Wearable Shipment by Device Category

• Smart bands account for about 90% of smart wearable device sales in developed markets in 2014, but this category will peak in 2016, driven by cannibalisation from smart watches with greater functionality, and new devices that serve niche use-cases more capably

• Nevertheless, we anticipate that smart watches will become the dominant wearable smart device in terms of worldwide sales in early 2017, when Apple has cemented its hold on the market. In our forecast, we anticipate that the smart watch market in developed regions will be worth USD12.9 billion by 2020

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0

20

40

60

80

100

120

140

160

180

200

2014 2015 2016 2017 2018 2019 2020

0 3

10 30

48 60

96

1 2

4

6

10

13

2 16

28

33

38

49

58

18 22

28

26

25

24

20 Wristbands

Smartwatches

Smart Glasses

Others

*Source: Techbitzz Research

Wearables Vendor Landscape

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*Source: IHS

Wearables can be divided in 4 categories: •Fitness and Wellness - Devices which are used in the monitoring of activity and emotions. •Healthcare and Medical - Devices which require FDA or equivalent approval. They are used in monitoring of vital signs, as well as for augmenting senses. •Industrial and Military – Devices that receive/transmit real-time data in military and/or industrial environments. •Infotainment - Devices that are used to receive and transmit real-time information for entertainment or enhanced lifestyle purposes.

Wearable Device Timeline

• Now that both Apple and Google are in the smartwatch market, they will dominate, much as they have in the smartphone and tablet markets. Because these platforms make up nearly 97% of the entire mobile market, many mobile users interested in wearable devices will gravitate toward Apple Watches and Android Wear-based devices.

• Barriers still persist, and these will inhibit consumer wearables adoption and usage. Smartwatches in particular must become standalone computing devices with more robust functionality for the devices to become mainstream.

8 *Source: Yahoo Finance, Techbitzz Research

Global Smartwatch Shipment & Forecast (mn Units)

Smartwatches' share of the larger wearables market will expand over the next few years. Smartwatches include devices like the Pebble, Samsung Galaxy Gear, the Moto 360, the LG G Watch, and the coming Apple Watch, but not the fitness trackers and wristbands. Apple's product will also make the smartwatch category as a whole more mainstream and appealing to consumers, even if they ultimately choose a (less-expensive) competitor, helping propel the smartwatch market as a whole going forward.

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0

10

20

30

40

50

60

2014 2015 2016 2017 2018 2019 2020

2

16

28

33

38

49

58

*Source: Techbitzz Research

Global Smartwatch Shipment Vendor Split (2014)

Clearly, Samsung has a huge global distribution power. In terms of products shipped (sell-in), they had a market share of 28% in 2014, in terms of sell-out around 17%. 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.

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28%

9% 7%

8% 7%

6%

35%

Market Share

Samsung

Nike

Garmin

Fitbit

Sony

Pebble

*Source: Forbes, Techbitzz Research

Global Smartwatch Shipment Region Split (2014)

• North America and Europe accounted for approximately 60% of the overall market share in 2013. Higher purchasing power and awareness among users is expected to drive the regional industry over the next six years. Health and fitness are expected to remain the key smartwatch applications through the forecast period, which can be attributed to the increasing percentage of health-conscious consumers that need real-time tracking and feedback of their daily activities. The market in Asia Pacific is expected to grow at the fastest rate, mainly on account of high smartphone penetration in the region.

• China-based companies such as Huawei, ZTE and HTC have been focusing on smartwatch development. The regional market is also expected to be driven by growing product proliferation in Japan, Singapore and India.

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35%

32%

25%

9%

Share by Region

North America

Europe

APAC

RoW

*Source: Techbitzz Research

Apple Watch Shipment Forecast (mn units)

• Apple Watch will account for 40% of all smartwatch shipments in 2015 and reach a peak 48% share in 2017. That share will fall to 45% in 2020, according to our estimates.

• At $350, the Apple Watch's entry-level price tag will be higher than the prices for competing smartwatches currently on the market. In general, smartwatch average selling prices will decline over time as consumers choose less-expensive alternatives to Apple Watch. Thus, Apple Watch will remain among the most expensive smartwatch devices on the market.

• The Apple Watch's debut will kick-start smartwatch growth.

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0

5

10

15

20

25

30

2014 2015 2016 2017 2018 2019 2020

0

6.4

12.1

16.1

18.2

22.4

26.3

*Source: Techbitzz Research

Barriers to Wearables Adoption

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The lack of a persuasive use case

Among the biggest barriers that could limit smartwatch adoption — and wearables adoption overall — is people still don't see the point of

these devices.

Lack Of A Killer App We have long stood by the idea that killer apps

would be the key to popularizing wearable

device usage, and developers have yet to

create a robust wearable app ecosystem for any

smartwatch device.

Basic fitness bands are limited to primarily tracking health- and fitness-related data

and spitting this aggregated data back

out onto a smartphone or tablet.

Style Because many of the

wearable devices mimic ubiquitous

fashion accessories (watches, bracelets, glasses), one of the

biggest concerns from consumers is the look

and style of the device.

•We estimate the global wearables market will grow at a compound rate of 38% over the next five years to hit 20.30 bn in 2020.

• The smartwatch is the wearable device category to bet on. The Apple Watch will kick-start growth in the overall smartwatch market, but over the long run cheaper alternatives will surface

•Other wearables, like fitness bands and Google Glass, will continue to cater to niche audiences.

•Price will be a significant factor to how smartwatches will perform with consumers over the next few years. Over time, we expect average smartwatch prices to drop, which will drive demand.

•Now that both Apple and Google are in the market, they will dominate much as they have in the smartphone and tablet markets, as these platforms make up nearly 97% of the entire mobile market

•Barriers include price, style, lack of a killer app ecosystem, and limited functionality

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Conclusions

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Authors

Write to us at aditya@research48.com

“Techbitzz” is an initiative by management consultants in Telecom & Related fields like Payments, Analytics & IT. It focuses primarily on mobile devices and upcoming technologies like Internet of Things, Cloud Computing and Big Data Analytics. www.techbitzz.com

Research48 is a data driven international market research and consulting firm helping clients plan, strategize, and compete in the global market. www.research48.com