We do not believe that Apple will focus on an iWatch product, but rather will offer a far more capable wearable – for two primary reasons, explained in this analysis. Other providers of watch-type wearables are also discussed.
At least four categories are in mass market introduction; beginning to blur whatever lines of demarcation exist between fashion and technology for mass-market products
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After a spate of attention given to the topic of “glasses” in late 2012, inspired by Google Glass, focus has now turned to the subject of “smart watches”. There has been a series of product announcements – notably from Samsung, Sony and even Qualcomm.
These products have centered attention around the concept of the watch as an adjunct to a smartphone. It appears from comments on the web that actual early users who are enthused about their smart wrist pieces emphasize the ease of being alerted to incoming messages, without the need to pull their smartphones from their pockets or purses to find out if the message is important.
The analysis of the actual watch devices in the industry press has turned to subjects such as power consumption versus features, as well as the level of support any given device is likely to get from apps developers.
Our view of the “watch” area is different. The wrist appears to be a highly attractive location for a number of potential purposes, for a number of different high tech suppliers. The overarching issue is, as in most cases regarding mobile – personalization.
How to get one’s product suite to be the most closely ingrained in the habits and consciousness of the greatest number of users.
From this vantage point, a device on the wrist has a good deal to recommend it. The wrist is one of the only parts of a person’s body that is visible to the person virtually all the time.
At the present, early stage, the Battle For The Wrist has involved two primary types of product offerings:
- “Smart Watches” – these might better be called Smartphone Adjunct Wrist Devices, as discussed below;
- Health/Fitness Bands – devices with certain sensors for monitoring body signs and activity and analytical software.
The emphasis on the “watch” in the current situation is curious. We wonder if the smartphone has not already begun to contribute to sending the watch on the path to the same slippery slide towards decline as occurred with the camera.
After all, the “time” is probably one of the pieces of information that is most readily available to everyone. People are literally surrounded by devices telling them the time – cellphones in particular, but also computers, ovens, routers, etc.
The early round of smart watches has put emphasis on features, which are adjunct to one’s smartphone. The devices are ancillary to a smartphone, with which they communicate typically over a BlueTooth link. They do not have cellular capability – at this time.
It is well to note three over-arching characteristics of wearables, and of wrist-type wearables in particular.
1. Mobile-centric. They must be virtually designed from inception to be mobile-centric, using spectrum resources with standard protocols which today means: i) 802.11X, ii) Bluetooth 3.0, iii) NFC, iv) 3G and 4G, or v) other standards. Since i, ii,and iv already cover tens of billions of devices and billions of active individual users, an interface developed for intelligent wear is simple to do, cheap, and works with almost anything out there, or planned in the foreseeable future. In addition these standards are also backwardly compatible.
2. Power Consumption. This proves to be quite challenging and of overwhelming importance. The user expects a watch battery to last for years and it figures that a smart brooch or biosensor or exercise band may need a multi-year life or a natural, motion-based, way of recharging. Will users be happy with devices that require fequent re-charging, similar to their smartphones, even if the battery lives are considerably longer than the phones?
3. Diminutive, Rugged Form Factor. The IT resources in the wear must be smaller than current smartphone elements. Since the latter are on a path of constantly shrinking in size, this requirement appears to be quite doable. In addition, however, the wearable components must be rugged; able to stand up to both the elements, such as humidity dampness, static charges, as well as a constant rate of rapid movements beyond what is expected of a standard mobile device’s life.
Reviewing the sets of products, devices and approaches that occupy the wearable area, we reach the conclusion that the much-discussed concept of the “smart watch” is likely quite inappropriate for reasons discussed below.
There are two categories of players in the wearable area. First are the giants of the smartphone global market, Apple and Samsung, as well as Google, which is prominent in all areas of mobile cloud related developments. The other major players are what we would term first movers.
In the case of Apple, specifically, we believe the best business approach for Apple in the wearable area will be to not present a watch as such.
Instead we expect that Apple, consistent with its leading-edge integration approach, will present what we term is: “I watch over you” (iWatch over YOU).
We reach this conclusion, based on two key factors:
1) The least important product feature in this whole category is “to tell time;” and
2) The most important economic feature of intelligent wear for the market leaders is to have a low marginal rate of technical substitution over the long term so as to minimize the cannibalization of the existing smartphone base.
This is a burden fundamentally shared by the market leaders who have that installed base, such as Samsung and Apple.
A clear strategy to garner a rich marginal growth element out of the wearable area will be to utilize the powerful processing and communication capabilities as well as the IP networking capabilities – i. e.. Personal hotspots and Bluetooth – of their existing Android and iOS smartphone bases This implies that the intelligent wearable is probably of most value if it can collect a great deal of information of importance to the wearer and tramsmit it to to the natural network aggregation center which is currently a smartphone – while satisfying the key factors as to power consumption, size and wireless link.
When we look at the “smart watch,” a basic profile has been developing, which includes: a) time piece features, plus, b) some smartphone features, such as SMS, messaging, alerts, emails, recording, camera, some simple apps, such as social media, twitter related ones.
Sony, for example, calls SmartWatch2 “a second screen for your Android phone” that includes notifications, an app interface and the ability to control your phone from your wrist all in one neat little package. Samsung has now added features including a camera, microphone and speakers in the watchband. The Qualcomm Toq includes a stock ticker and AccuWeather information apps. All of the above are courting developers for additional apps for these devices.
In the case of Apple, the concern for technical substitution has to be foremost in mind in order to avoid the economic impact, of cannibalizing one’s own base. While the current watches do not generally feature a direct cellular link, that development is being pursued. So that substitution could be a serious challenge in the future.
Being just a watch with an array of features that mimic and supplement the smartphone does not seem to us to be enough for the “iWatch over YOU” concept. Not that Apple has to do anything completely unprecedented.
The wearable on the wrist, as Nike illustrates, in their initial “FuelBand” (and as a slew of other health/fitness wearble suppliers demonstrate) has a unique location: a piece of fashion on one’s wrist; intimately proximate to the body for sensing. Sensing can include heat, pulses, movement even pallor. It is easily part of any workout wear and in the case of paring with a smartphone will have added attributes.
Battery life is minimized by utilizing low power RF, such as Bluetooth, relying on a smartphone-based OS for network management activities, synching with OS-based cloud storage and more advanced processing, including an intelligent assistant, such as Siri.
All of this capability will be managed by the Smartphone as aggregator, such as an iPhone.
This would lead Apple into a world of MHealth and related applications with the iPhone doing the heavy lifting and the body sensors focusing on the sensing with a long battery life.
While some others may include biometric sensors in their “smartwatches” – the Crossbow 41 from Swiss provider Hyetis is an example – it is logical to expect Apple, especially, to explore this path. The company has done an enormous amount of work on wireless sensors. In February 2013 Apple was granted a patent on a system of wearable, or attach-able devices, described as follows:
“The invention relates to sensing systems monitoring applications in sports, shipping, training, medicine, fitness, wellness and industrial production. The invention specifically relates to sensing and reporting events associated with movement, environmental factors such as temperature, health functions, fitness effects, and changing conditions.”
The invention involves various wearable strips, MMDs (movement monitor devices). These can communicate with remote receivers (RRs) or interrogation devices (IDs, which may be cell phones.) These MMDs include a method of attachment (for example, adhesive), a processor, detector, and a communications port. The devices are designed to sense and provide metrics on a number of conditions, such as “airtime, speed, power, impact, drop distance, jarring and spin.” The development also includes a second type of device called an Event Monitoring Device (EMD) that can monitor and transmit data about “temperature, humidity, chemicals, heart rate, pulse, pressure, stress, weight, environmental factors and hazardous conditions”.
Other Providers – Majors
Google recently confirmed that it had quietly acquired smartwatch developer WIMM some months ago. In addition Google has filed numerous patents in the sensor area and acquired a patent (8,279,716) in October 2012 that included the following description.
“A smart-watch can include a wristband, a base, and a flip up portion. The base can be coupled to the wristband and include a housing, a processor, a wireless transceiver, and a tactile user interface. The wireless transceiver can be configured to connect to a wireless network. The tactile user interface can be configured to provide interaction between a user and the smart-watch. The flip up portion can be displaceable between an open position exposing the base and a closed position concealing the base. Further, the flip up portion can include: a top display exposed when the flip up portion is in the closed position, and an inside display opposite the top display. The inside display can be concealed when the flip up portion is in the closed position and be exposed when the flip up portion is in the open position.”
Samsung launched Galaxy Gear in September, notable primarily for its ancillary features – speakers, a microphone, and a camera, built into the watch strap.
Sony has SmartWatch 2, as described above. The device includes better battery life (as compared to the Samsung Galaxy Gear) and some ruggedized features (for water/environment resistance.)
Qualcomm’s Toq has been notable largely for its use of the company’s proprietary Mirasol display technology, highly power efficient. The Toq is being offered only in a limited run. The Qualcomm and Sony watches work with all Android devices, while the Galaxy Gear must be paired with a Samsung phone.
Casio’s approach is to acquire “smartness” by low risk steps to advancing their existing product family as identified by their “G-Shock” announcements. This Goliath in the watch business, $3 billion in revenues, announced the “Bluetooth edition” featuring: calendar and time alerts; dongleds to the iOS/Android smartphone; alerts the user to voice and message notices; is a music player extension off the smartphone.
This is a low risk, easy to, edition and the “Shock” family keeps all of its outdoor attributes. In addition, Casio makes a battery life claim of two years (in normal use?) with 12 hours a day active mobile to Bluetooth link. It is not very clear exactly what this means,, but as noted earlier, the battery life is of prime importance for success in this category and finding the right balance of feature eat urge sets and, use of strong computing assets such as a nearby smartphone, will be important attributes to a smart watch’s market success.
Other Providers- First Mover Examples
Pebble is a first mover with a low price of $150.00 and the basic set of features. Omate’s TrueSmart, in addition to the basic feature set is a micro-SIM. This watch also exhibits the screen size dilemma. The smartphone world has been going for ever larger screen sizes; while the world of a watch screen is probably 1.5 inches at best. The price for TrueSmart is about $199.00, shippng for the fall holiday season.
Hyetis, the Swiss-based provider, offers the $1,200, first edition of its Crossbow 41, essentially a basic feature smartwatch, with an emphasis on high resolution photography, 41 MP, and the most extensive array of environmental sensors ofer in the category so far:
GPS, temperature (external), altitude, depth and the claimed ability to gather biometric information, although specifics are unclear at this time.
Interestingly many of these environmental sensors are available in non-smart watches for a far lower price.
We expect continued, frenzied action in the wearables space. This includes non-smartwatch wearables, led by the Nike Fuelband and including companies such as Heapsylon, which offers a set of smartsocks and related wearables, its Sensoria line, whch are fitness trackers – a foot and an ankle version of Nike’s Fuelband and all part of the trend for Intelligent Wear.
We prefer to look at the wrist area as “wrist-based wearables” including smartwatches and we expect the list of entrants to grow. The watch market, which is generally estimated to be about $60 billion per year, at retail, is viewed by some as a plum ready for attack by smart mobile-related devices. However, a substantial part of the market, perhaps 40-60% appears to be high-end luxury watches, led by Rolex, Omega and Cartier and other lesser participants, such as Tag Heuer. This segment hardly seems like a target for smartwatch penetration. So it is really only a portion of the estimated $60 billion that may be displaceable.
It appears that while there is some attractiveness to the smartwatch-as-cellphone-adjunct, this is probably a limited market. There may eventually also be some attractiveness, even greater in potential, to the smartwatch-as-cellphone-replacement. In the meantime we believe that the wrist has major potential value as a location for biometric sensorsing and that this should enter into any decision Apple makes. We will continue to track what Apple, Samsung and other significant players are doing, as this fashion trend coupled with the growth of mobile body networks and the need for cloud access, will spur a new wave in tomorrow’s fashions.