Have Smartwatches Already Peaked?

Reporter at PCMag
3 min read
This story originally appeared on PCMag

For the first time in its short history, the worldwide smartwatch market saw a year-over-year decline of 32 percent, according to IDC. Together, the top five vendors shipped 3.5 million units in the second quarter of 2016 -- down substantially from the 5.1 million delivered a year ago.

Apple retained its No. 1 position, selling 1.6 million watches; second-place Samsung counted only 600,000. But while Cupertino is far-and-away the market leader, it is also the only company to experience an annual decline, dropping 55 percent from 2015.


The Apple Watch $699.99 at Apple Store arrived only about a year ago, with prices ranging from $349 to $10,000. And while there was initial interest, it appears some folks are still pondering the wearable technology.

"Consumers have held off on smartwatch purchases since early 2016 in anticipation of a hardware refresh, and improvements in watchOS are not expected until later this year, effectively stalling existing Apple Watch sales," Jitesh Ubrani, senior research analyst for IDC, said in a statement.

There is hope for the tech titan, which is slated to launch watchOS 3 this fall, promising a faster user experience and features that put the wearable more in line with its iOS counterparts.

Unfortunately, a decline for Apple means a decline in the entire market.

"Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted," Ubrani said.

The remaining top vendors, meanwhile, made positive (though not quite enough) progress over the last year: Samsung doubled its shipments, Lenovo got a 75 percent boost and LG and Garmin contributed another 25 percent each.

IDC data includes only smartwatches capable of running third-party applications, including Apple WatchMoto 360$299.99 at Best Buy, and Gear S2. Devices like Fitbit Blaze$179.99 at Amazon and Withings Activité $449.99 at Amazon are excluded since the research firm considers them "basic wearables."

The market makeup, however, is slowly shifting. Only a handful of traditional watchmakers have entered the race, trailing behind technology-brand counterparts. But, as IDC research manager Ramon Llamas pointed out, key vendors like CasioFossil and Tag Heuer are making waves.

"Still, participation from traditional watchmaker brands is imperative to deliver some of the most important qualities of a smartwatch sought after by end-users -- namely design, fit and functionality," Llamas said. "Combine these with the brand recognition and distribution these brands already have, and it's reasonable to expect the smartwatch market to grow from here."

IDC predicts a return to growth in 2017, driven by platform development, cellular connectivity and an increasing volume of applications. Exactly when that rebound will happen, however, remains unclear.

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