HAMPTON, N.H. — Technology Business Research, Inc.’s (TBR) 2Q15 Devices and Platforms Benchmark illustrates how wearables will disrupt the device landscape as consumer mindshare and revenue shift from PCs and smartphones. The Apple Watch has validated connected device and smartwatch markets, and competition will intensify as vendors stake claims for the nearly $74 billion in new revenue TBR estimates will be available by 2020, with smartwatches accounting for more than $50 billion in revenue.
“Most wearables require a mobile device, PC or both for users to gain the most functionality, helping keep PCs and smartphones in the purchasing conversation, especially in consumer markets,” said Jack Narcotta, an analyst in TBR’s Devices and Internet of Things (IoT) practice.
“However, as component and chipmakers such as Intel, Samsung and Qualcomm innovate in areas such as processors, displays and batteries, wearables will become more advanced and autonomous, relegating PCs and smartphones to supporting roles.”
TBR research shows consumers choose the device they need in the moment or for a specific activity, and they view PCs and smartphones as the information and connectivity hubs of the computing experience. “A winning strategy in these markets will anticipate how wearables will shift consumer, and to a lesser degree commercial, use cases as they become the device most frequently interacted with,” said Narcotta.
TBR believes the influx of smartwatches creates opportunities for PC and mobile device vendors to strengthen the role and appeal of their devices even if they do not participate in the smartwatch market. However, as PC and smartphone users’ attention shifts to smartwatches, revenue and profit growth from these traditional product segments will slow.
Consistent year-to-year revenue declines experienced by nearly all vendors in TBR’s benchmark amplify the emerging opportunity in connected devices. While TBR estimates total device revenue for 2Q15 rose 7.9 percent year-to-year to $109.1 billion, Apple’s iPhone revenue of $31.4 billion accounted for 28.7 percent of total device revenue in 2Q15.
Apple’s 58.8 percent year-to-year revenue growth served as a stark contrast to the cumulative 11.1 percent decline of all remaining vendors and segments.
Companies prepared for changes in customer purchasing behaviors and device use cases will win in these new markets, and companies that capitalize on the wearables opportunity will strike a balance of making quick decisions to enter the market and cultivating longer-term strategies that identify the next steps to protect legacy core businesses.
First-mover advantages will go to vendors that leap headlong into the market, but TBR believes a winning strategy takes greater, albeit measured, risks without losing perspective of how approaches to profitability and market share growth align with corporate revenue and profit objectives.
With connected devices disrupting device markets and outgrowing long-standing business PC and mobile device business models quickly, clearly defined product road maps, profit objectives and plans to expand are imperative for vendors to grow their businesses without overextending themselves.
While broad and aggressive PC and mobile device go-to-market strategies are important for vendors to extend their reach and deflect competition, TBR believes a balanced mix of initiative and caution will fuel vendors’ financial success.
For more information on the Devices and Platforms Benchmark or TBR’s approach to and taxonomy of devices, wearables, connected device and IoT marketplaces, please contact John Spooner, director of TBR’s Devices and IoT Practice, at +1 603.929.1166.
TBR will present high-level findings from the 2Q15 benchmark during its webinar Connected device forecast: When, what and why? Tuesday, Oct. 20, 2015, at 1 p.m. EDT.