Bright Days ahead for Wearables Market

CCS Insight forecast has high hopes after a solid 2019

The smart wearables market is doing great in 2019, especially compared with its big brother, the smartphone market. Global shipments of smartwatches in 2019 are expected to grow by 20% over the year, to 89 million units, and those of fitness trackers are expected to rise by 21% to 54 million units. In contrast, this year, we expect the global smartphone market to drop by 2%.

Smartwatches are clearly building appeal among different user groups. The Apple Watch continues to move from strength to strength, with almost 12 million pieces sold in the first half of 2019, generating more than $3 billion revenue for Apple. We expect Apple’s total smartwatch sales in 2019 to grow by a solid 35% from 2018.

But Apple isn’t the only smartwatch maker enjoying growth. Samsung, Fitbit, Garmin and Huawei are all building volume in 2019. This isn’t unexpected, as the Apple Watch has had a “halo” effect on the market, prompting more and more people to buy a smartwatch. What’s surprising is the current weakness of Google’s Wear OS platform. The company has appeared less involved in smartwatches in recent months, but it’s likely to be working hard behind the scenes to deliver improved products. The billions of Android smartphone users are a prime target to deliver future growth to the smartwatch market.

Another huge wearable category is kids’ smartwatches, which continue to see strong success in China, where 27 million such devices are projected to sell in 2019. Chinese consumers love technology, and specific applications like mobile payments boost adoption of kids’ smartwatches. Interestingly, these devices are still struggling in Western markets. US carriers have made efforts to launch the category, but after a good 2018, demand remains quite stagnant this year. In Europe, demand is only lukewarm. Parents’ concerns about privacy and health, children wanting fitness bands and full smartphones, and sheer lack of awareness mean that kids’ smartwatches are likely to remain niche for now. But growing efforts from telecom operators such as Vodafone and Sky to cross-sell kids’ smartwatches with other services could move the needle.

While smartwatches are marching on, with over 200 million devices expected to be in use at the end of 2019, fitness trackers, which initially led by adoption, experienced some hiccups in the past couple of years, especially in Western geographies. Several players including Jawbone and Misfit abandoned the fitness-tracker market, leaving Fitbit as the main provider in the West, followed by Garmin. Yet, even Fitbit saw its sales plummet to 9 million units in 2018, down from 22 million in its peak year of 2016. Western consumers now find less value in the simple fitness bands, even with the added convenience of long battery life, preferring to move on to smartwatches, which offer all the functionality of fitness trackers and so much more. Some new adoption of fitness trackers in Western markets is notable, yet limited, and demand for fitness trackers is expected to flatten out in the next few years, at its current, much lower level.

But the story is different for the Chinese market leader in fitness trackers, Huami. In the first half of 2019 alone, it sold an estimated 13 million fitness bands and recorded revenue growth of over 35% from its wearables business. The secrets to this good performance are in pricing — Huami fitness bands are priced at less than $20 in retail — and in Huami’s partnership with Xiaomi, which is a household brand in China and has a strong presence in India and a growing number of other markets, where fitness trackers present an opportunity for people to own an affordable wearable device.

Clearly, different markets and different consumer groups are attracted to different categories of wearables, and future growth will come from various directions. Our outlook for the wearables market is positive: we expect worldwide adoption to reach 650 million devices at the end of 2023, more than double the number at the start of 2019. In 2023, almost 230 million smart wearables will be sold worldwide, producing revenue for their manufacturers of $26 billion.

Wearables are starting to become a significant generator of revenue for companies that persisted even as the market got off to a slow start and amid changing winds.

CCS Insight’s latest Market Forecast: Wearables, Worldwide is available to clients here.

Our annual consumer survey on wearable devices is under way, so stay tuned for the results.