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Apple's rivals hope its iWatch makes "wearable" work

Source: Reuters - Fri, 5 Sep 2014 14:15 GMT
Author: Reuters
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By Jens Hack and Eric Auchard

BERLIN/FRANKFURT, Sept 5 (Reuters) - Know what a "Wearable" is? Most top tech executives would struggle to define it. Now they're hoping that Apple will do it for them.

Next week, Apple Inc is expected to stride into the market for wearable accessories that link wirelessly up to phones and create a template for other firms that have struggled to create products consumers would want to be seen in.

Rival electronics makers have been marketing hundreds of wearable products over the past year, but have little to show for it in sales despite huge hype for accessories seen as a critical boost to the vast but increasingly saturated market for mobile phones.

Executives at Europe's big consumer electronics trade fair this week in Berlin readily admit to hoping that Apple can crack the missing code for everyone. Where the U.S. innovator leads, its rivals plan to follow by bringing their own improvements or by seeking out profitable niche markets that Apple ignores.

"If Apple offers its own product, it will expand the market," Sung-jin Lee, Director of LG Electronics Inc's watch product planning team, said in an interview.

"This is what we wanted," Sunny Lee, CEO of Samsung Electronics' European business told Reuters when asked about Apple's likely debut.

Media reports have pinpointed 9 September as the date Apple will introduce its long-rumoured smartwatch - a wrist device that typically connects to a nearby phone. Expectations are high for the iWatch, which could be the tech giant's first brand new product after a four-year dry spell during which it faced pressure to create another groundbreaking consumer gadget.

So far Samsung dominates the smartwatch market, with 74 percent, but numbers remain small. Compared to the 1.3 billion mobile phones expected to be sold industry wide this year, just 1 million smartwatches shipped in the second quarter of 2014, according to market research firm Strategy Analytics estimates.

BUT WILL YOU WEAR IT?

Those kind of volumes suggest the industry remains in wait-and-see mode, despite devoting huge marketing energy to wearable devices that has garnered an amount of press attention disproportionate to the number of products on the shelves.

"Ultimately, what all these companies have been doing is just public prototyping," or testing the market, said mobile analyst Ben Wood of market research firm CCS Insight.

So far tech companies have struggled to impress consumers in part because younger generations who rarely wear watches but glance at their phones instead don't see the point of a wrist-worn accessory unless it can do something a phone can't.

Apple's arrival promises to bring fashion sense and sleek design to a market that so far has emphasized the technology inside their products rather than its outward usability or aesthetics, Wood noted.

"We are in the Stone Age of wearables right now," said Wood - a self-confessed wearables geek who has 15 such devices strewn on the floor of his office.

While "wearables" is a flexible term that covers health and fitness wrist bands, ear pieces, and even smart glasses or goggles, research firm CCS Insight predicts 87 percent of the market will be wrist-worn devices by 2018.

It forecasts the number of wearable devices to ship will reach 135 million in 2018, up from just under 10 million in 2013. That forecast is partly based on anticipation that Apple will enter the market and on hit products eventually emerging.

GOLD RUSH

So far market-leader Samsung has launched five watch models including one which can make and receive phone calls without linking to a nearby phone. Its closest competitors, according to Strategy Analytics' data, are Pebble Technology Corp, which holds 13 percent of the market with its square-faced black phones offering links to Web apps, and Sony Corp., which has 8 percent and recently launched a new smartwatch model that look like a computer clock.

In a bid to muscle in, LG announced this week in Berlin a range of smartwatches inspired by the design of classic Swiss watches. Unlike many rival black and boxy devices on the market, one doesn't spot the electronics inside at first glance.

"It is not a gold rush yet, but it has the potential to be," said Lee, the LG watch executive, of the wearables market.

Chinese network and phone equipment maker Huawei has so far dabbled in wearables but believes that as long as the devices are sold as accessories to phones, rather than by shrinking phone functions to fit inside, the category won't take off.

"A wearable should be a stand-alone product - and that may take a while," Shao Yang, Huawei's vice president of consumer marketing, said in an interview in Berlin.

Traditional watch makers may also benefit if tech firms find the right mix of fashion and function.

In a recent interview, Swatch Group CEO Nick Hayek said smartwatches might convince younger generations to start wearing something on their wrists - making them Swatch targets at a later stage.

The Wall Street Journal and other media report that Apple's device is likely to come in two versions and simplify the process of making mobile payments, but may not actually ship until next year.

Industry executives expect it to eventually also sport an array of sensors to enable health and fitness monitoring. (Additional reporting by Harro Ten Wolde and Klaus Lauer in Berlin, Silke Koltrowitz in Zurich and Christina Farr in San Francisco; Editing by Sophie Walker)

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