A rising tide that will lift all ships should help sales of the Apple Watch and an endless number of competitors. According to research firm IDC, the wearables market will reach 129 million “units” by 2019. The risk for companies like Apple Inc. (NASDAQ: AAPL) is that they will need large market share to make their wearables businesses highly successful.
Source: Wal-Mart Stores Inc.
According to IDC researchers:
A combination of new vendors, new devices, and greater end-user awareness will drive the worldwide wearables market higher in 2015. According to the most recent forecast data from the International Data Corporation (IDC) Worldwide Quarterly Wearable Device Tracker, vendors will ship a total of 45.7 million units in 2015, up a strong 133.4% from the 19.6 million units shipped in 2014. By 2019, total shipment volumes are forecast to reach 126.1 million units, resulting in a five-year compound annual growth rate (CAGR) of 45.1%
Propelling the market higher in 2015 is an increased focus on smart wearables, or those devices capable of running third-party applications. These include devices like the Apple Watch, Motorola’s Moto 360, and Samsung’s Gear watches. The total volume of smart wearables will reach 25.7 million units in 2015, up a whopping 510.9% from the 4.2 million units shipped in 2014. Basic wearables, or those devices that do not run third party applications, will grow from 15.4 million units in 2014 to 20.0 million units in 2015, resulting in 30.0% year-over-year growth.
The market will be significantly fragmented in a way that will be a challenge to wearable watches. Sales of these will be 80% of the market. However, devices for clothing and eyewear will do well — good luck to Google Inc.’s (NASDAQ: GOOGL) Glass.
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What volume in wearables will make the sector highly profitable for consumer electronics companies? The number might have to be much more than 129 million. IDC recently reported that 377 million smartphones where shipped in the final quarter of last year. It is not clear, though, that vendors beyond Apple make much money selling smartphones.
The wearables market may be large on paper, based on IDC findings, but it may not be large enough to be a profitable business for most companies. Perhaps not any.
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