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Is the smartwatch market tanking or on a long, slow climb?

Matt Hamblen | Nov. 4, 2016
Two analyst firms are far apart on Apple Watch shipments in Q3

In July, IDC said the smartphone market declined by 32% in the second quarter of 2016, but the firm also predicted an improvement in 2017 as next-generation smartwatches launch with cellular connections to LTE wireless, instead of via Bluetooth to a smartphone.

At Canalys, Matte said the release of the second-generation Apple Watch models Series 1 and 2 late in September made up the "vast majority" of the 2.8 million units Apple shipped in the third quarter. The Series 2 includes GPS and starts at $369.

With 2.8 million units shipped, Apple was easily the biggest smartphone maker in the third quarter, Canalys said, taking 45% of the market, well ahead of Samsung with 18%, Fitbit with 17%, Garmin with 3% and Pebble with 2%.

The Apple Watch Series 2 GPS with its focus on fitness apps puts it in direct competition with Fitbit, Matte said.

Even though IDC and Canalys differ substantially on third-quarter shipment numbers, the smartwatch market is still nascent. That means that any fluctuations in a single quarter will seem more drastic simply because they are compared to a small market one or two years earlier, analysts noted.

A bigger concern for smartwatches might be where the market will be in two to five years. Samsung executives have openly expressed disappointment in the market, while Apple has been publicly optimistic. Still, both companies seem to rally with new products and new capabilities.

"I'm still bullish in the long term for the smartwatch," Matte said. "How many million sell per year in two or five years nobody can predict."

Matte predicted smartwatch prices will come down in coming years as smartwatches replace the cheaper fitness bands.

"Absolutely, the smartwatch success has not been what most originally wanted, with lower numbers in the early years than anticipated," Matte said. Even Fibit's longtime success was tamped down in the third quarter, he noted.

"While I'm bullish on the smartwatch category, there's some truth to the idea that there's general technology fatigue by buyers," not just for smartwatches, Matte added. "That's more true in China than the U.S. But even with softness in the market, I personally think there's utility with a health device to run apps on the wrist."


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