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Why smartwatch makers need the Apple Watch

Apple’s entry into the smartwatch market will benefit all smartwatch suppliers, according to global information firm IHS Technology.

The market is expected to grow from 3.6 million unit shipments in 2014, to 101 million shipments in 2020, the company says.

“Apple Watch success will drive the overall smartwatch market,” claims Antonios Maroulis, analyst at IHS Technology. “The smartwatch will become a key accessory device offered by most leading smartphone manufacturers seeking to dominate this new profitable market.”

He adds, “We forecast the ratio of smartwatch shipments to smartphone shipments will increase from 1:500 to 1:20 between 2014 and 2020.”

IHS says Apple’s marketing expertise will raise consumer awareness of the smartwatch category, and as a result will benefit all smartwatch suppliers.

The Apple Watch will leave an enormous addressable market untapped because the Apple Watch requires a modern iPhone and has a starting price of $349, IHS says.

The two billion Android smartphone users and those Apple customers unwilling to spend so much on a smartwatch is a large target for Android smartwatch makers.

In the IHS baseline smartwatch forecast, Apple’s 2015 Apple Watch shipments will hit 19 million units, or 56% of the total smartwatch market.

Over time, IHS forecasts Apple’s share of the market will fall to 38% in 2020 as other smartwatch makers refine their products and successfully serve the vast Android smartphone market, which Apple chooses not to address.

Google’s Android Wear will ship 96 million units over the next five years, leveraging the vast Android smartphone installed base. Should Google add iPhone support, it will increase its addressable market still further, IHS says.

“Should Apple stumble with its foray into smartwatches, the smartwatch market will suffer similarly,” says Ian Fogg, senior director of mobile & telecoms at IHS. “Smartwatches could then follow the fate of Google Glass. Without Apple and its marketing strength, the smartwatch category needs greater marketing spend from other smartwatch makers to overcome damage to consumer perceptions.

Fogg adds, “Apple’s smartwatch competitors need the Apple Watch to succeed.”

IHS predicts applications will drive the smartwatch market.

“Delivering a wide range of apps will be critical for smartwatch success,” Maroulis says. “Apple’s and Google’s success with existing smartphone application stores will give them an invaluable head start over challengers.”

IHS says Apple has an advantage in smartwatches because of the quality and range of apps for iOS devices such as the iPhone and the iPad. Similarly, Google has a head start because of the Google Play Android app store.

Device makers may find tactical success in the short run with proprietary OS platforms such as Pebble or niche open platforms such as Tizen, which Samsung supports. But in the long term, IHS says only standard platforms that are supported by many hardware makers will deliver sufficient scale to prove attractive to app makers.

Because of weak app ecosystems, IHS forecasts other smartwatch OS devices, excluding Apple and Android Wear, to amount to just 40% of smartwatch shipments in 2020.

 

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