2015 Prediction Update: Wearables continue to show massive potential as a disruptive technology. In the smartwatch space, this year has seen apps originally designed for a larger smartphone screen converted into companion smartwatch apps. In addition, several luxury brands including Tag Heuer and Hermès have entered the space via collaborations with more traditional technology players.
Industry Prediction Update: Watching the Growth of the Wearables Market
By Tunde Ibiyemi
Wearables: Disruptive Technology?
In 2015, new products and concepts in wearables continue to show their potential as disruptive technology – opening up new markets and overtaking existing ones. From luxury brands to healthcare organizations, and government agencies to travel services, it is clear there is growing interest in this space. However, the market remains fragmented in 2015 and is yet to take off.
2015 Prediction: Wearables market makes progress but remains fragmented
In our end of year Cartesian Coordinates newsletter for 2014, we made several predictions about the progress the wearables market would make in 2015. We made three predictions overall: firstly, that the Apple Watch would drive growth in the luxury end of the wearables market; secondly, that technological evolution would open the door to significant new healthcare applications; and finally, that despite these advancements the market would remain fragmented in 2015.
Watch This Space
If previously wearables were making headlines focusing on eyewear, 2015 saw companies latch on to perhaps a more practical space: your wrist. From luxury to sports to app design, the humble wristwatch is going through another technology evolution, and has become the prime launching vehicle for wearables. IDC projects that the smartwatch, which currently account for under a third of the wearables market in 2015, will exceed 40% market share in 2019.
In 2015, luxury brands have teamed up with device and software manufacturers to bring their smartwatch offering to market. Several luxury brands players have launched or plan to launch luxury smartwatch devices before the end of the year. Google have partnered with Swiss watchmaker Tag Heuer and Intel to deliver a smartwatch based on their Android Wear platform, and Gucci have announced a partnership with pop star will.i.am to offer a smartwatch of their own. In order to tap into the luxury designer smartwatch space, Apple have announced a collaboration with Hermès to offer a custom watch face and designer leather straps for their Apple Watch device. We expect that this trend for luxury ‘smart’ wearables will continue to increase in the coming years.
Also recognizing the importance of the smartwatch space, apps originally designed for a larger smartphone screen are being converted into companion smartwatch apps. Versions of Uber’s ride-sharing app and Spotify’s music streaming app were announced for both Android Wear and WatchOS, and allow for more convenient access to basic app functionality. In time we expect the emergence of smartwatch-specific apps which will maximise the use of its inherent strengths.
One area where we expect wearables to have a significant impact on is the health and well-being sector. Activity tracking devices are already motivating users to become more active through simply measuring and reporting basic details such as number of steps and heart rate. In the UK, the health insurer ‘Vitality’ offers rewards such as free cinema tickets to users who record a certain number of steps or minutes of activity in a day. As with the luxury sector, sports and health-related device manufacturers like Garmin, Polar and FitBit, have all incorporated activity tracking into their wrist-wear devices, offering heart monitoring accessories as part of the complete package.
An NHS report in the UK published in late 2014 indicated that wearables are expected to play a key part in the treatment of patients in future years. In 2015 we have seen doctors in Poole integrating smartphone data from epileptic patients into patient records, and sufferers of memory loss in Staffordshire using camera and GPS technology to help them combat their condition.
In the future we can expect the potential for the data gathered by such devices to be shared with doctors to allow for more effective treatment (on both a reactive and proactive level) as well as with health insurance companies to incentivise healthy living with lower premiums. Both of these use cases have the potential to revolutionize healthcare systems and the overall health of the general population.
Although technology is still a limiting factor in these use cases, a more significant hurdle is regulation, which is tight for some categories of healthcare equipment. The US Food and Drug Administration requires that any device making a health claim be certified as a Class III device, requiring the highest level of regulatory approval. The potential benefits that wearables have to offer in this sector are huge, but convincing a risk-averse and highly regulated industry to embrace them is likely to be challenging.
We first indicated that the wearables market would remain fragmented throughout the course of this year, and this has largely been borne out. Forecasts from IDC suggest that over 80% of the smartwatch devices to be sold in 2015 will run a manufacturer specific OS. Android Wear, the open-source smartwatch OS from Google, currently commands just over 15% of devices sold.
More Than an Accessory
The wearables space is still in its infancy. We are likely to see a consolidation of market share, with platforms and operating systems increasingly overcoming the problems that have previously pushed OEMs to design their own software and fragment the market. As these fundamental problems are slowly overcome, we can expect to see accelerated progress as developers concentrate on crafting new applications. These new applications will move beyond accessorising existing app experiences, including functionality uniquely optimised for wearables.
Leading up to our Year End Review, read about the ten events and themes we believed would shape the technology, media and communications industry in 2015. Which ones are leading the transformation?
- High altitude networks
- LTE small cells and 5G
- Repurposed spectrum
- 4K OTT
- Apple Pay
- Soft SIM
- OTT and the cable industry
- The sharing economy
- Cloud Services
> Read our industry predictions for 2015 in our December 2014 Coordinates Newsletter
 "IDC Forecasts Worldwide Shipments of Wearables to Surpass 200 Million in 2019, Driven by Strong Smartwatch Growth" IDC.com., 17 Dec 2015, http://www.idc.com/getdoc.jsp?containerId=prUS40846515.
 National Information Board, Personalised Health and Care 2020, November 2014
 Daniel Cooper, "The FDA will regulate wearables making health claims", 20 January 2015, http://www.engadget.com/2015/01/20/fda-wearables-guidance-note