MarketLine Blog

Apple Watch – Leapfrogging competitors?

Yesterday, Apple took to the stage to reveal two new iPhone models – the iPhone 6 and iPhone 6 Plus – and its own smart watch – dubbed the Apple Watch. Both new iPhone models represent an attempt to take on competitor devices with larger screens, referred to as “phablets” – such as Samsung’s Galaxy Note range – which are gaining traction in the smartphone market. The Apple watch, meanwhile, represents a movement into the burgeoning wearable technology industry, in typical Apple style.

The Apple Watch shares much in common with the company’s other products – a premium design, high-end starting price ($349) and a closed ecosystem are all, once again, present. The watch will also come in two different sizes, and a multitude of strap options, which should further broaden its appeal. Clearly, Apple is, once again, looking to position itself at the top of a market to which it has arrived relatively late – the Apple Watch is not set to release until early 2015 – when compared to its competitors.

Apple_Watch

Samsung and Sony, for instance, have both been present in the smart watch market for a number of years, and already offer cheaper alternatives. The likes of LG and Motorola have also branched out into the nascent sector, and fitness companies, such as adidas, have also entered the wearable technology space.

So, Apple seems to be reacting to a trend with the Apple Watch, rather than setting one. The question is, therefore, why now?

As addressed in the MarketLine case study, Wearable technology: The new tech battleground?, Apple’s competitors are already aiming to steer the direction of the wearables market in their own desired direction. Google has introduced Android Wear, a wearable version of its Android operating system (OS), and Samsung has started to shift its wearable products away from Android towards Tizen, its own OS. Apple therefore felt the need to enter the market in order to prevent competitor OS becoming the dominant force in smart watches. This is critical, as digital content revenues through Apple’s App Store on iOS devices are an important revenue source for the company.

Apple will hope the fact that the Apple Watch requires a paired iPhone 5 or later to function will drive sales of its latest smartphone offerings, as consumers wishing to purchase the watch will also need a compatible iOS device. This should, in turn, allowing Apple to continue to enjoy significant digital content revenues through its App store, while also opening a wholly new source of hardware income from sales of its smart watch.

However, the fact that Apple has arrived late to the party may help its competitors. Apple has a history of shifting the direction of a market, rather than creating a new one. Although Apple’s entry to the smart watch market certainly marks a turning point, the hype generated also has the potential to draw attention to its competitors’ readily available offerings. The fact that the Apple Watch is not due for release until at least 2015 could mean that impatient consumers opt for an alternative, especially in the lead up to the lucrative holiday season.

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