Wearalone Smartwatches Will Cannibalize 70% Of The Smartphone Market

Author

Andrew Sheehy, Contributor

October 8, 2015

Considering that worldwide shipments of smartphones this year will exceed 1.4 billion units, it’s hard to believe that 70% of that volume will one day be replaced by anything – let alone shipments of wearalone smartwatches, which are mostly still in the prototype phase.

But when we look at historical technological trends, a shift of this scale is certainly possible, and possibly inevitable.

When you consider that iPhone and Android phones were launched only in 2007, the extraordinarily rapid growth of the global smartphone market becomes clear. But more than that, the smartphone vendor landscape today is now utterly unrecognizable to what was the case a mere eight years ago. What happened to Nokia? To SonyEricsson? Or BlackBerry?

This goes to prove that the entire mobile ecosystem can be undone and re-done in less than a decade. And we should expect this undo-redo process to be repeated.

But first, what is a wearalone smartwatch?

A wearalone smartwatch has the ability to connect directly to the internet without the need for a companion smartphone. Because it contains the electronics needed to connect to a cellphone network directly, a wearalone smartwatch can have its own SIM card and associated mobile data plan.

To fully appreciate wearalone smartwatches, let’s take a look at the benefits to the user:

Advantages

Wearalone smartwatches will:

1. Make routine smartphone functions easier to accomplish: Because their smartwatch will have an effective personal assistant, users will be able to:

  • Call a friend while cycling;
  • Dictate an email while driving;
  • Check traffic conditions;
  • Control the home music system while preparing dinner.

True, all of these tasks could be accomplished using a smartphone – but it will be faster, easier and safer with a wearalone smartwatch.

2. Enable some genuinely new forms of behaviour: With a new type of shopping app and compatible network services, it will be possible to buy products right at the moment when the user is aware of their need (e.g. ordering more washing powder or a new toner cartridge).

3. Make user authentication easier: It will be possible to create sensors that respond to the user’s bio-patterns. This would reduce the need for the user to constantly enter a passcode.

4. Offer increased security: There is far less likelihood of leaving a smartwatch behind on a train or in a restaurant. And because these devices would be harder to lose or steal, users will benefit from lower insurance premiums.

Some see wearalone smartwatches as offering a kind of ‘smorgasbord’ of relatively minor benefits, such as being able to speak a diary appointment into your wristwatch, or finding out the population of Los Angeles while driving.

But I see their main function as providing even easier access to the web.

While I’m not saying that wearalone smartwatches will obviate the need for a personal display device, I am arguing that a lot of what we currently do using smartphones and even tablets could be accomplished equally, or even more effectively with a wearalone smartwatch. And because wearalone smartwatches will increase the number of functions that can be accomplished, the overall value that they deliver will be more than that delivered by smartphones.

Disadvantages

Any negatives stem from the limitations of a very limited display.

Compared with the large screens on most smartphones, and especially tablets, the small size of a smartwatch display is a definite drawback. Even if we think ahead to smartwatch concepts that incorporate large curved, flexible displays then users may be turned off by having to watch their videos and pictures on a curved screen, at an angle, with their arm constantly bent for a long period of time.

And it seems hard to see how a foldout flat screen could be implemented, or indeed whether it would be practical.

While the small screen is a significant negative, I continue to believe that the net value proposition will, in the end, be resoundingly positive.

Today, we have a ‘three-screen’ solution: smartwatch, smartphone and tablet. But is this really the best way to address myriad use cases? Does someone going for a run really want a have a smartphone strapped to their arm just so they can listen to some music? And does a driver really want to stop their car before taking a call?

With a wearalone smartwatch, the runner could take their smartwatch and leave their phone at home, take a call while driving and – if they wanted to catch up on TV on the morning commute then their ‘big screen’ tablet device would offer the best viewing experience.

It is this net positive package of benefits that will allow the wearalone smartwatch category to reach a similar scale to today’s smartphone market.

Where are wearalone smartwatches today?

In order to fully implement a wearalone smartwatch that could catalyse a mass market, more space must be created for the required electronics.

Currently all smartwatches use the central body to house the associated electronics as well as the display. But as flexible electronics, display and battery technologies develop; I predict that vendors will begin adding electronic functions into the strap.

A ‘wrap-around and wearalone’ smartwatch could triple the amount of space for electronics and the battery. The extra space would be enough to fully implement the functions that today’s smartwatches have to ‘outsource’ to a tethered smartphone.

So far, the only tangible signs of vendors acknowledging this are some design concepts published by Samsung (patented in 2013) and Nokia (2012) that have variously shown ‘wrap around’ phone/watch concepts. Recently, a report by The Verge also revealed a six-pin ‘hidden’ connection on the Apple Watch, which could be used to interface with sensors and/or electronics in compatible straps, further enforcing that moving into the strap is the way to go.

 

Impact on the smartphone market

If we imagine a time in the future when the wearalone smartwatch concept outlined above is fully realised, then it seems clear that the result would be a major cannibalisation of smartphone sales – a market that is already close to saturation.

The impact is illustrated in the following chart:

The following table shows that the impact of wearalone smartwatches will be small in 2020, but will grow quickly thereafter – with wearalone smartwatches causing the worldwide smartphone market to contract by 70% by 2030, up from just 4% in 2020 and 0% in 2015:

The future for the wearalone smartwatch

Launched in September 2013, Samsung’s Tizen-based Gear S includes a cellular modem and SIM card and is so far the only serious attempt by a major smartwatch vendor at a wearalone smartwatch.

But based on where the various enabling technologies are today and how they are developing, I am certain that we are going to see more wearalone smartwatch products launching in the coming years.

I think it is highly likely that Apple is at an advanced stage in formulating a plan for its own ‘wearalone’ smartwatch – a radically different implementation of a smartwatch than the company’s current Apple Watch offer – and there are two reasons why:

  1. Competitive rivalry: If Samsung is successful with its Gear S wearalone smartwatch then other vendors will introduce rival products and, eventually, Apple will be forced to introduce a wearalone product as well. Although the market leader, even Apple cannot ignore gathering trends that resonate with users: large-format smartphones and subscription music are two examples where Apple has had to follow others.
  2. Market segmentation: In its effort to create the smartwatch market, Apple has assumed that users will mainly perceive a smartwatch as a watch and that, therefore, smartwatches should look like watches, but the market might split into two segments.

I’ve got a problem with Apple’s view that a smartwatch is a mainly a watch: are we really saying that users will really wear a ‘real’ watch (say a luxury product) on one wrist and an Apple Watch (a computing device) on their other wrist? I just can’t see that happening.

Given that there is a clearly a market for both products, in time, we may see the company introduce a smartwatch that looks a lot less like a watch and more obviously like a computing device. The market is not ready for this stage yet – and nor is the technology – but that will change.

Ultimately, I see the future of the smartwatch market as being segmented: some smartwatches will look like watches but incorporate a few smart functions, while others will look nothing like a watch but incorporate full smart functionality.

But one thing is sure: change is coming. While many things in tech are unclear, it is absolutely clear that the next 20 years will prove more disruptive than the last 20 years, and I think one of those disruptions will be the rise of wearalone smartwatches and the demise of smartphones.

 

This article was written by Andrew Sheehy from Forbes and was legally licensed through the NewsCred publisher network.

 


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