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The Apple Watch could deliver an additional US$16.5 billion to Apple’s revenues by 2020, according to analyst firm Ovum, with the wearables market on the cusp of rapid growth over the next five years.Ovum expects revenues generated from the direct sale of wearable devices to consumers to reach US$26.6 billion in 2020, up from US$3 billion last year, with sales of wearable devices to reach 394 million units, up from 24 million units last year.
Multi-purpose wearables, such as the Apple Watch, will command a 31 per cent share of the installed base in 2020, with simple activity trackers and smart clothes making up the rest of the market.
Multi-purpose wearables, however, will take a greater slice of revenues, accounting for 62.3 per cent of total retail revenues, equivalent to US$16.5 billion in sales.
In line with the growth of the market, Ovum expects wearables will become “much more capable and ‘smart’ over the next five years”.
Ovum’s smart index classifies devices as:
– Index 1 (basic): only sensory capabilities, no screen, no apps, needs a secondary device, like a smartphone, to function.
– Index 2 (smart): has a screen but with limited capabilities, no third-party apps, needs a secondary device, like a smartphone, to function.
– Index 3 (super-smart): has a screen, can install apps, needs a secondary device, like a smartphone, to function.
– Index 4 (autonomous): has a screen, has own app ecosystem, can function completely independently.
Ovum expects the average smartness index for activity trackers will grow from 1.27 in 2014 to 1.88 in 2020, with more than 60 per cent of the installed base of activity trackers in 2020 to have a smartness index above 1.
“Affordability and better quality of service for smarter wearable devices will be key drivers in the shift from activity trackers to multi-purpose wearables such as the Apple Watch,” commented Ovum lead analyst for consumer technology Ronan de Renesse.
“Currently, the market is overcrowded in comparison to demand. Supply chains and marketing investments need to be tightly controlled. Larger vendors able to sustain investments for longer stand a better chance of establishing a market lead.”
