A Wearables Forecast

Bob O'Donnell / April 1st, 2014

Analyzing and discussing a product category from afar is always a fun exercise, but for me, the pedal doesn’t really hit the metal until I put together a market forecast. As an industry analyst, building forecasts is part of what I do and the process helps me crystallize my thoughts about the direction I believe a market is taking. To do it well, you need to think about definitions, categorization, key component trends, new technologies, consumer trends, big vendors, small vendors and more.

I’ve put together many forecasts for PCs, tablets and smartphones over the years, but recently completed the task of building my first forecast for the smart wearables market. Doing this one was a particularly interesting exercise because of the relative newness of the category and the rapid speed at which it’s evolving. Of course, it’s also a very hot topic now—witness all the recent columns written here on Techpinions—so that made it fun as well. But the other reason it was interesting is because of how wide ranging the existing forecasts are—they are truly all over the map, which simply confirms how dynamic a marketplace it currently is. In fact, because of this, I also built three different forecast scenarios with three different sets of numbers that represent where the market could go: a baseline (most likely) scenario, an optimistic scenario and a pessimistic scenario.

But enough preamble…onto the numbers.

Despite all the hype, my expectation is the worldwide market for smart wearables (my baseline view) will be decent but not as large as many have predicted, at least in the near term. Specifically, I’m forecasting the combined total of the wearables market—and I’ll explain exactly what I mean in just a bit—will be about 9.9 million unit shipments this year, generating just under $2.1 billion dollars in worldwide revenues. The US market will represent a large majority of worldwide shipments and revenues with 7.7 million units in 2014 and $1.7 billion in revenues.

I define smart wearables as “intelligent devices worn somewhere on the human body that generate and/or display and/or communicate digital information.” To be clear, that digital information may be no more than a vibrating notification that a new text message has arrived on your phone, but it is information nonetheless. In order to make sense of the market, I chose to break it up into six subcategories that are determined primarily by where on your body the device is worn: “headworn” wearables, such as smart glasses; “wristworn” wearables, broken up into two separate categories for smart watches and smart bracelets; “earworn” wearables, such as smart headsets; “fingerworn” wearables, such as smart rings; and a tiny catch-all “other wearables” category for things like necklaces, pins and other non-standard (at least at present) form factors.

By 2018, the end of the five-year forecast period, my baseline forecast has worldwide wearable shipments across all six categories totaling just over 70 million units and generating approximately $12 billion in revenues. For the US, the numbers are about 37.1 million units and $6.2 billion in revenues. The chart below graphically depicts the worldwide shipment numbers split by category.

Wearables Forecast Chart

As you can see, I expect the “wristworn” categories of smart watches and smart bracelets to be the most successful by far, with the lower cost smart bracelets owning the largest portion of the wearables market throughout the forecast period. Of course when it comes to wearables, there are still more questions than answers, but it’s going to be an interesting market to watch.

If you are interested, a complete 49-page forecast report on the US and WW smart wearables market is available for purchase through my company, TECHnalysis Research.

Bob O'Donnell

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.
  • Bruno Deserto

    Very interesting….. Personally, I wouldn’t buy a smart watch right now if if I were to…. I would go for the google one as it seems to be the best around right now.

    • Space Gorilla

      As far as I can tell the Google watch (Android Wear) doesn’t exist yet. I’m sure there are prototypes ‘in the lab’, but what we’ve seen so far are concept videos and simulations, not actual finished products. I’ll believe it when it ships.

      • Bob O’Donnell

        They’re not here yet, but there’s no question that they will be. Not just Android Wear-based devices but others as well. Many companies are working on these types of products as we speak….

        • Space Gorilla

          I agree lots of wearable devices are coming, but those Android Wear videos aren’t real, they’re concept videos. Or were those actual products? Didn’t seem like they were real and a guy from Motorola said something along those lines, that this was a concept video, a simulation. Didn’t you write an article about concept videos being a red flag? I dunno, this reminds me of the Microsoft Courier hype, it looked really cool but there was no way a real product was going to work like that. Let’s just say I’ll be pleasantly surprised if an Android Wear watch lives up to what I saw in those videos.

          • Bob O’Donnell

            Fair point, but I feel pretty certain that at least some of those products are on their way. Now, whether they can live up to the expectations that some of those videos have set remains to be seen, of course, but based on discussions with component vendors, competitors and more I think they are real.

          • Space Gorilla

            Again, we agree, I also think many of these products are going to be shipped, but those videos ‘smell’ a lot like the Courier thing, vaporware as an attempt to blunt Apple’s probable entry into the space. Apparently Courier did make it to the prototype stage but it was not even close to the concept video. I don’t think Google et al are doing themselves any favors by showing a perfect slick concept video at this point. Ship first, brag later.

      • Kenny

        it does and will come soon

        I feel a certain nervousness coming fro you and many other Apple lover

        are you afraid it will impact your Darling Apple?

        • Space Gorilla

          The “nervousness” you feel is coming from within, you’re projecting.

      • Kenny

        it does and will come soon

  • Anders CT

    So, you are saying that in the year 2018, there will be a market for 7.5 million earworn wearables? Why not 10 million? Or one million? Just because?

    What really is the difference between forecasts and speculation?

    • Lb

      Speculation will more likely be futile research exercises without evidence leading to a point where the person runs out of ideas. Forecasting is a research process with assumption of evidence leading to an outcome not yet observed.

    • Bob O’Donnell

      Anders, yes, that is what I’m saying. And at the end of the day you could argue that virtually any forecast is speculation, but that doesn’t mean it isn’t an exercise worth doing if you carefully consider what the possible trends are, make comparisons to other similar markets, etc. It’s always more challenging to do forecasts of new markets–and who knows, I may end up laughing at myself a year from now–but that doesn’t mean you shouldn’t make an effort.

  • jfutral

    How much does such a study delve into relevance or sustainability? Seems to me with the current crop of wearables, there is little long term purpose, meaning at some point the novelty will wear off and that market would likely diminish and at best serve some niche markets where pre-smartphone wearables already have importance.

    Joe

    • N.G.W.

      Right, Ben Bajarin said “I have about every health and fitness wearable on the market. However, if you ran into me on the street today I wouldn’t have a single one on me. Why? I simply don’t find them valuable.”

      • Bob O’Donnell

        As mentioned above, yes, a number of challenges, but it’s still early days and I think we will start seeing more compelling products later this year and into 2015.

    • Bob O’Donnell

      For the record, the full report does go relevance, sustainability and other issues. There clearly are serious questions about wearables, but at the same time, purchases are being made and I believe there will continue to be a number of pretty compelling new offerings later this year. So, in my view, now’s the time to put a stake in the ground and make some predictions on where I think this market is going.

      • jfutral

        BTW, thanks for replying. This is one of my favourite aspects of this blog, the interaction with the writers. I appreciate the interaction even with those of us who aren’t insiders to the industry. Definitely adds value to the site, IMHO.

        Joe

  • Andrew F

    We don’t even know what they are or why people will buy them yet, how can we project their growth? More likely wearables go the way of the dodo by 2017 if there isn’t some kind of breakthrough.

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