MarketLine Blog

Smartwatches – Samsung wise to stop the clock? Apple et al to gain advantage?

2015 promises to be an exciting time for the tech industry. Not least because it is being heralded as the year of the smartwatch, which is something 2014 could not achieve. 2014 did, however, witness many glimpses of technological advancement in the wearable technology industry, with many manufacturers turning their attention to smartwatches.

There are fundamentally two types of smartwatch, a stand-alone smartwatch which houses a sim-card (and therefore requires a contract plan) and needs no connectivity to a smartphone in order to work, and a smartwatch that operates only through pairing itself with your smartphone.

Samsung initially entered the market in 2009 with their first watch phone, the S9110, which had the ability to make and receive calls, as well as being functional with SMS, MMS and email. Whilst this was somewhat revolutionary at the time, the world was not yet ready for it and the watch phone flopped. In 2013, however, Samsung released the Samsung Gear, which ran Google’s Android operating system (OS). In such a competitive mobile market, Samsung were leading Apple by double its market share, though the company was struggling with declining revenues and made the decision to run their hardware on their own software – Tizen. The first Samsung product to use the Tizen operating system was the Samsung Z1, a phone that was promised for a late 2013 release but ended up only in stores in January 2015. The phone’s hardware was even scaled back turning it into somewhat of a budget phone, retailing in India for 5700 rupees (approximately $90). This move has however marked progress in Samsung’s move away from its reliance on Google Android, though it remains to be seen how successful the operating system can be when translated onto their phones in the future. Meanwhile, Tizen made its way on to the Samsung Gear smartwatch in a 2014 software update, which was originally released with Android’s Jelly Bean operating system, with its successors, the Samsung Gear 2, Gear 2 Neo, and Gear S all natively using the Tizen OS. Vice President, Young-Hee Lee, announced on 3 March 2015 that Samsung had decided “It’s time for us to pause. We want a more perfect product” in manufacturing the smartwatches, stating “we’ve been introducing more devices than anybody else”. Could this leave the door open for their rivals to take advantage in this very important year for the market, or will Samsung’s current offerings be enough to sufficiently compete?

2015 is expected to see sales of all smartwatches increase due to the release of the long awaited Apple Watch, which is due for release in April this year. Like all Apple products, it will have a carefully planned marketing campaign and while industry experts are unsure how the Apple Watch will initially fare, it is anticipated to eventually overhaul the smartwatch market, much like the company did with smartphones through its release of the Apple iPhone. Questions were asked of Apple when they announced the product unusually early, in September 2014, knowing it wouldn’t be released until at least early 2015. The reason is thought to have been to allow their rivals into the market first with smartwatches they expect will attempt to compete with the Apple Watch, while gaining feedback through their rivals, gauging consumer reaction and interest.

The two technology giants are likely to control the largest shares of the market during the early days of smartwatch boom between them, with April likely to be the most successful month for smartwatch sales to date, on account of the Apple Watch. There are, however, as previously mentioned, a number of other companies who have penetrated the market already, such as Sony, LG, Microsoft, Motorola, Asus, Huawei and Pebble Technology Corp., a surprisingly small company which undertook the most successful Kickstarter campaign to date, earning over $15m of funding for its latest smartwatch, an amount that has surpassed the $10m funding it brought in for its first product, which as of 31 December 2014, had sold over one million watches worldwide.

While many consumers will currently be questioning why they need a smartwatch, it is clear that the industry is something companies such as Apple will be investing a lot of money into, and may even have some serious competition from smaller companies, as evident with the Pebble smartwatch. With Samsung ruling themselves out of any further releases in the near future, it paves the way for up and coming companies like Huawei to make a real dent in any potential revenues that could have been taken by their South Korean rivals. By leaving releases in the hands of their competition, Samsung may have thrown the towel in at precisely the wrong time.

Take a look at the Wearable technology: The new tech battleground? Case Study.



Posted in Accessories, Retail.

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