Market Forecast Wearables, UK April 2016 Update

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1 Market Forecast Wearables, UK April 2016 Update

2 Content Summary of the wearables forecast Smartphone companions forecast Quantified self forecast Wearable cameras forecast Augmented reality and virtual reality forecast Wearables categorization 2

3 Summary of the Wearables Forecast 3

4 Forecast Coverage CCS Insight's forecast currently covers four main categories of wearable devices: smartphone companions, quantified self, wearable cameras and augmented and virtual reality (AR and VR). The other categories are at a very early stage of development. For detailed segmentation, please see pages Each category is forecast in three scenarios: core, low and high, as the market is still young and has an elevated level of uncertainty. The core scenario describes the most likely outcome across all categories, given our current understanding. A change in one category can trigger changes in other categories. The summary presents the core scenario for all four categories. Low and high scenarios for the different categories cannot be added, as significant cannibalization could happen between segments a high scenario for one is likely to mean a shift toward the low scenario of another. We have developed a split by device form in the core scenario. This is a top-down split and subject to a significant uncertainty owing to the very early days of the market; one hugely successful product can greatly change the outlook. The sell-in value forecast is developed at a constant exchange rate of pounds to dollars from April 2016 onward. 4

5 Key Messages The segmentation of wearable devices, largely unchanged since 2015, can be found on pages We expect 5 million wearable devices to be shipped in the UK in 2016, up 33% from 3.7 million in The sell-in value will reach 0.55 billion in 2016, up 24% from 0.44 billion in Quantified self will remain the largest category by volume with 1.9 million devices. Smartphone companions will remain the largest by value: 1.5 million units worth 0.29 billion. AR and VR will see strong growth of adoption in 2016, to reach sales of 0.8 million units. In 2020, 14 million wearable devices will be shipped in the UK, growing at a compound annual growth rate (CAGR) of 30% between 2015 and The wearables sell-in value will reach 1.09 billion, with a CAGR of 20%. AR and VR will become the largest category by value in 2020, accounting for 43% of the total wearables value and 30% of the total wearables volume. Quantified self will still be the largest category by volume, with 4.8 million units, but will account for just 14% of the total value. Smartphone companions will reach 3.6 million units shipped, at a value of 0.37 billion, accounting for 34% of the total wearables value. Wristwear will remain the dominant form in volume terms until

6 Installed Base of Wearables Will Surpass 30 Million in the UK in 2020 Installed base at end of year (M) Augmented and virtual reality Wearable cameras Quantified self Smartphone companions Quantified self is currently the most adopted category of wearables and will remain such until Smartphone companions saw a big increase in 2015, and will continue to grow, approaching the level of quantified self devices in AR and VR will see strong adoption, mostly through smartphone VR devices that use the screen, processing power and some sensors of a smartphone. They will become the largest category in Wearable cameras will still grow but will be the smallest category by 2017, despite being some of the pioneering wearable devices. 6

7 Key Assumptions We expect the smartphone companion market to grow considerably, driven by: Smartphone companions continuing to offer multiple functions An emerging clear usage beyond notifications All key smartphone operating systems supporting wearables A growing number of apps dedicated to wearables Proliferation of reference designs The Apple Watch selling well to the growing number of users with compatible iphones Many manufacturers embracing Android Wear Falling retail prices Adoption of smartwatches for children The average replacement cycle is now assumed to be three years. We assumed a replacement cycle of four years in the previous forecast. Our extensive first-hand experience with smartwatches and expectation of further innovation in the coming years have led us to believe that the replacement cycle will most likely be three years. Battery degradation as well as general wear and tear are key factors that will drive replacement sales. 11

8 Smartphone Companions: Split into Subcategories Subcategory Definition Basic Low-end smartphone companions with basic functionality, mostly smartphone notifications. Examples of current devices Fossil Q Grant Advanced noncellular Ringly Casio STB-1000 Mid-range and high-end smartphone companions with multiple functions beyond simple smartphone notifications. Apple Watch Advanced cellular Cogito Classic Mid-range and high-end smartphone companions with multiple functions beyond simple smartphone notifications, and featuring cellular connectivity. Samsung Gear S Moto 360 LG Watch Urbane 2nd Edition Pebble Time Intel MICA Samsung Gear S2 Doki Watch 12

9 Smartphone Companions in Use Will Reach 9 Million by 2020 Installed base at end of year (M), and as share of smartphone installed base (%), core scenario % % % 3.2 In 2020, almost 12% of smartphones in use in the UK will be connected to a smartphone companion. This is equivalent to 13.7% of the population using a wearable device. 6.5% % % % % 12% 10% 8% 6% 4% 2% 0% 13

10 Scenarios: Drivers of Smartphone Companion Adoption LOW SCENARIO CORE SCENARIO HIGH SCENARIO No new uses or value Clear uses beyond only mirroring a smartphone screen Apple Watch drives significant usage scenarios Short battery life puts consumers off Smartphone makers differentiate with wearable accessories High retail price Low retail prices: down to 20 or below, or in bundled offers Less-costly no-name devices flood the market Cultural factors: rudeness of looking at your watch Complex intellectual property rights situation 18

11 Quantified Self: Split into Subcategories Subcategory Definition Examples of current devices Lifestyle fitness Devices designed to be used every day, all or most of the time. They measure everyday behaviours like walking, inactivity, sleep and calories burned. Fitbit Alta Misfit Shine 2 Jawbone Up3 Xiaomi Mi Band 1S Performance fitness Devices designed to measure performance related to specific sports and fitness activities. These are usually running watches, but other examples include models for swimming, golf, weightlifting and hiking. Garmin Forerunner 225 OMsignal Smart Shirt Jabra Sport Pulse Wireless TomTom Spark 22

12 Quantified Self Devices in Use Will Surpass 9 Million in Installed base at end of year (M) and as share of population (%), core scenario % % % 3.8 Almost 3 million devices were estimated to be in use at the end of By the end of 2020, over 14% of the UK population is expected to own a quantified self device. A clear utility, the growing popularity of an active lifestyle, as well as very affordable retail prices, will drive adoption. Gifting also remains a strong sales driver. 7.7% % % % % 14% 12% 10% 8% 6% 4% 2% 0% 23

13 Hearables: Competitive Landscape Included Not Included Motorola Hint Samsung Circle Jabra Sport Pulse Wireless Sony Smart B-Trainer Doppler Labs Here SMS Audio / Intel BioSport Basic Bluetooth headphones and earpieces Definition: a hearable is an ear-centric wearable with at least one additional feature beyond audio (a heart-rate monitor, activity counter, step counter or temperature sensor, for example). The definition addresses devices targeted at consumers, and does not include medical devices that require regulatory certification, such as hearing aids. The device needs to be connected to a smartphone by Bluetooth or the headphone jack. Primary uses: Consumer: music, activity and sports tracking. Key current players: Jabra, SMS Audio (Intel) and Sony. Apple (Beats) may join this category. 26

14 Smartphone Virtual Reality: Competitive Landscape Samsung Gear VR Carl Zeiss VR One View-Master VR Google Cardboard Definition: smartphone VR devices provide a fully immersive virtual reality experience. They use the screen and processing power of a smartphone, which is inserted into the device. Some advanced, high-end products like the Samsung Gear VR include sensors, a camera and other enhancements. Simple cardboard or plastic devices with extremely low retail pricing provide a basic but sufficiently good introductory VR experience at the low end. Primary uses: Consumer: gaming, home entertainment and sharing user-generated content. Enterprise: marketing, tourism and education. Key current players: Google, Samsung, Carl Zeiss. 45

15 Dedicated Virtual Reality: Projected Evolution to to 2020 Distant future Products: availability, functionality, maturity Early prototypes, developer kits. First Oculus and Sony devices launched, a small number of other devices following. Pricing High. Oculus sets price at $600. Users Application or use Developers, individual enthusiasts. Gaming, exploration of other uses, trials. Gamers, early enthusiasts, trials by enterprises. Predominantly gaming. Technology Very immature. Developing. Some problems solved, but others in progress. More devices, mostly improvements of early models. Good link to major games consoles. Relatively stable. Gamers, early enterprise adoption in some verticals (retail and travel, for example). Predominantly gaming, but also other entertainment content, marketing. Third generation. Problems solved. Links to other connected devices. Large variety of products. Socially acceptable. Adoption beyond gamers. Many possibilities in enterprise, education and entertainment. Anything. Immersion can be in daily situations. Development in various directions. 48

16 Smartphone VR: Alternative Scenarios Installed base at end of year (M) Drivers of low scenario Not enough engaging content Poor experience on low-cost VR devices Prices not falling quickly enough Health concerns Low Core High Sell-in volume (M) Low Core High Drivers of high scenario Bundling with smartphones Plenty of attractive content Viral adoption Adoption of user-generated 360-degree video Adoption in education Adoption in travel Prices declining even faster than in the core scenario 56

17 CCS Insight's Usage-Based Categorization Smartphone companions Quantified self Augmented and virtual reality Wearables Wearable cameras Emerging wearables Professional sport Healthcare 60

18 Category Definition and Examples Smartphone companions Doppler Doppler Labs Here Labs Here Ringly LG Watch Urbane Pebble Time Steel Apple Watch Motorola Motorola 360 Moto (2015) 360 (2015) Samsung Samsung Gear S2 Gear S2 Smartphone accessories that provide another screen for what is happening on the smartphone and enhance the smartphone experience. Some might have independent cellular functionality. May include some additional features such as fitness tracking or heart-rate monitoring. 61

19 Category Definition and Examples Quantified self Jawbone Up3 Misfit Shine Misfit Shine Xiaomi Mi Band 1S Fitbit Alta Basis Peak SMS Audio BioSport In-Ear Headphones Devices to track and quantify fitness, well-being and other activities or aspects of daily life. They need to sync with another device (a smartphone, tablet or PC), typically via Bluetooth. Examples are fitness bands, clip-ons, smartwatches, earphones and smart shirts. OMsignal OMsignal 62

20 Category Definition and Examples Wearable cameras Panasonic Narrative GoPro Polaroid Cube Pivothead Sony 4K Action Cam Devices that can be worn or attached to the body and are capable of taking photographs or videos. Some upload content automatically to the cloud through smartphone connectivity. Examples are action cameras and lifelogging devices. 63

21 Category Definition and Examples Augmented and virtual reality Microsoft HoloLens Recon Jet Sony PlayStation VR Microsoft HoloLens Google Cardboard Oculus Rift Vuzix M300 Samsung Gear VR Headsets that overlay visual and other information on top of the real world (augmented reality) or create a fully immersive new reality for the viewer (virtual reality). These devices can work on their own (like Microsoft's HoloLens), attach to a PC or other computing devices (Google Glass, Oculus Rift or Vuzix) or provide a shell (possibly with added sensors) for a smartphone, the processing power and screen of which create a virtual reality. 64

22 Category Definition and Examples Professional sport Oakley Instabeat Zepp Golf STATSorts / GPSports Riddell Hits Adidas F50 with micoach Reebok Checklight Wearables to quantify or enhance sports performance by providing real-time information. Can also be used for practicing and improving specific techniques like a golf swing. They link to a smart device or process data independently. 65

23 Category Definition and Examples Healthcare ReSound Qardio Moticon Nuubo Google X healthcare smartwatch Neubac Dexcom Devices to track medical conditions, state of health and body functions. This is a complex category, with plenty of research and funding. In many countries, these devices typically require approval by governing bodies. 66

24 Category Definition and Examples Thalmic Labs Myo Disney Playmation Emerging wearables Bionym Nymi Logbar Ring InteraXon Muse Thync New gadgets and concepts that do not fit into any other category, have not achieved any significant volume to date or do not have a clearly sizable addressable market. Over time, these devices will form new categories, join existing categories or fail. 67

25 Currently Available Products Product category Eyewear Smartwatch Wristband Token, clipon, jewellery Smartphone companions Camera Hearable Other Quantified self Wearable cameras Augmented and virtual reality Professional sport Healthcare Emerging wearables 68

26 More information about CCS Insight's wearables service can be found at: CCS Insight EMEA: North America: Tel: Tel: