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No boom yet for wearables but VR could provide spark, says TrendForce

Steve Rogerson
November 25, 2015
Wearables have not experienced the boom in demand vendors hoped for, but they are showing steady growth, according to Taiwan-based market research firm TrendForce.
The total wearable device shipments in 2015 are estimated at 68.1 million units. In 2016, annual wearable shipments are expected to grow 64 per cent to above 112 million units. This projected growth rate mainly reflects the short base period.
“Apple Watch has not been able to significantly lift the overall demand for smartwatches,” said Jason Tsai, TrendForce wearable device analyst. “Smart bracelet remains dominant in the wearables market. The industry is betting on wearable virtual reality (VR) technologies to be the main growth driver for next year. Hence, a lot of attention has been paid to several VR devices that are set to launch at the start of 2016.”
Smartwatch vendors so far have only been able to leverage their brand names to sell their devices. The market positioning of smartwatches is still unclear and provides too few reasons for consumers to buy them. Apple Watch is the only smartwatch that has exceeded ten million sets shipped this year.
Nonetheless, Tsai noted that sales of Apple Watch had fallen short of expectations since its launch over six months ago. TrendForce therefore has lowered the projected annual shipments of Apple Watch for 2015 from 15 million to 12 million sets. Next year’s annual shipments are expected to reach 20 million sets.
“Smartwatches will become more appealing if vendors can aggressively market two or three device-specific features that consumers would find valuable,” Tsai said. “Apple, for instance, has successfully used its brand name to build an initial user base for its smartwatch. The next step is to capture consumers who want value for their money, or else Apple’s smartwatches will remain only as collectibles for Apple fans.”
Smart bracelets, on the other hand, have staked out a clear position in the wearables market as fitness and sleep trackers.
“Consumers buy them because of their functionality,” said Tsai. “And this is why Fitbit, which is a lesser-known brand, is able to pull ahead of the pack of competing wearable vendors and beat several major brands in market share.”
TrendForce estimates that annual smart bracelet shipments for 2016 will grow to 45 million units, greatly surpassing projected shipment figure of smartwatches for the same period, which will be around 32 million units.
The shares of smartwatches and smart bracelets in the overall wearable market will unlikely change significantly in 2016 even if vendors such as Apple, Fitbit and Xiaomi are able ship tens of millions of their respective devices. The next hot application segment in the wearables market will be VR devices. Tsai said that the annual shipments of smart headwear was set to hit eight million units this year and would soar to 27 million units next year. This explosive growth is heavily attributed to the rising demand for wearable VR technologies.
At the start of next year, major vendors such as HTC, Oculus and Sony will launch their VR devices, which are expected to bring over US$60bn in annual sales. As this market rapidly emerges, it draws in powerful players in the tech industry. For example, Samsung has already invested in Fove, which develops VR devices that can track eye movements. Chinese tech giant Tencent has recently announced its own VR project.
TrendForce anticipates that the competition will become very heated next year with the entries of new participants and products.
• A study from Juniper Research has found that the global number of banking apps accessed via smartwatches will reach the ten million mark in 2017, rising to more than 100 million by 2020. The research found that the use of smartwatches to access push banking information services has been steadily gaining traction over the past 12 months. A number of global banks have launched apps for the wrist, while the launch of Apple Watch in April 2015 further accelerated the demand for wearable banking apps.
However, the research notes that while wearable based banking information services has emerged as a key trend, it is perceived by many as a gimmick at present. Juniper believes that while wearables, including smartwatches and glasses, are not suited for conducting complicated financial instructions, wrist based wearables will become a key device for multi-factor authentication for banking transaction approval in the future.
“Digital banking has experienced a substantial progression towards personalised computing,” said research author Nitin Bhas. “We do believe that, keeping pace with technology evolution, wearable banking will witness a faster adoption rate than mobile banking especially amongst millennials.”
The research also observed that although banks have introduced a number of innovative new services in the space, such as AR (augmented reality) banking apps and a cashless money box, these generally have a short life span with the consumers. Juniper believes banks and financial institutions will need to offer customers more targeted services, aimed at specific user needs. This will be enabled through customer analytics and big data management platforms from vendors such as Oracle, Infosys, Fiserv and SAP.
The research estimates that the global mobile banking user base will reach two billion by 2020, representing 37 per cent of the global adult population. SMS based push banking services are on the decline with banks noting a decline in average number of messages sent to mobile banking users.