Kyla Lam (Research Analyst, AR/VR and Wearables, IDC Europe)

We couldn’t have asked for a more eventful 2020 in Europe — Brexit, the COVID-19 pandemic, Sino-EU sanctions, social wokeness, an economic downturn and the 5G breakthrough. It has been a turbulent year, to say the least.

With society changing quickly, it’s a good time to review the year and see how wearable technologies are developing. Given that the world is experiencing a major health crisis, developments in the health-tech industry are more important than ever.

New Vendors

With much of Europe still in lockdown, white-collar operations have been significantly impacted, and the work-from-home phenomenon has led to skyrocketing demand for home office equipment such as earwear and health-tracking devices such as wrist wear.

Many new vendors have entered the wearable market, including Amazfit, Realme, OPPO and Mad Gaze. It’s worth noting that all these brands are Chinese, headquartered in China, and that they are all active in the earwear, watch and wristband sectors.

With Western brands putting even greater focus on inclusivity and innovation, Chinese vendors are also transitioning to becoming more open minded and agile to boost their popularity and competitiveness.

Realme, for instance, tapped into the rapidly growing truly wireless earwear category that grew 53.4% YoY in 3Q20, with its revised audio product portfolio. Truly wireless earwear offers not only built-in smart voice assistance that enables users to take calls and request information without taking out their phone; it also offers a tangle-free user experience that enables users to manoeuvre freely thanks to its cordless design.

OPPO is the only Chinese vendor to have integrated the WearOS operating system, for its new OPPO Watch in 2020. While basic watches (smartwatches with restrictions to third-party apps) implement either RTOS or Android OS as their OS, the OPPO Watch targets users who prefer to engage in personalised apps and take part in online activities such as customising watch faces, rather than just health tracking. It’s also able to pair not only with Android smartphones but also with iOS devices, as well as conducting mobile payments.

Given heightened competition on international markets, companies are looking closely at ways to sustain brand loyalty, which is key to consumer willingness to adapt to product upgrades.

Ecosystem

When it comes to watch form products, common types in the market are tethered to a smartphone via Bluetooth. The exceptions are Apple and Samsung watches, which can function without being connected to a smartphone. They are known as standalone watches that permit non-smartphone interactions, such as taking phone calls. The more interconnected the watch is, the more attractive it is to users within an ecosystem.

Ecosystems assimilate the network effect theory, in which the utility that users derive from goods depends on the number of fellow users from the same network. Companies are trying to create a positive network effect, as this builds a positive feedback loop for improvements.

There is an apparent shift in business strategies in which technology companies are putting more emphasis on the whole package. Wearables are not only a source of profit, but can also be used to build longer-lasting relationships with users.

Huawei, for example, is strengthening its competitiveness through various vertical approaches so that services in mobile communication, retail, healthcare, bill payments and social media presence can be integrated into consumers’ everyday lives. Its new Watch GT 2 Pro can take calls without users needing to reach for their Bluetooth-connected smartphone, and it has a near-field connection (NFC) feature that enables users to seamlessly transfer images from the phone to the watch as a customised watch face.

Similarly, Apple is leveraging its user experience across its own operating systems. From macOS to iPhoneOS to watchOS, Apple continues to expand its market share through its ecosystem. Customer relations and channel penetrations are important to attract and retain stakeholders. Its new Apple Watch Series 6 has a variety of eSIM-enabled and GPS-connected options, and its NFC payment support enables the watch to act as a smart standalone product. Once users get comfortable with such technology, they depend on it.

Huawei and Apple are actively cultivating a more diverse and receptive environment for both employees and users to become more inclusive and innovative. By increasing efforts to minimise the digital divide, such as reduced ASPs, increased cellular connectivity, customer support services, expansion of points of sales, and improved accessibility with advanced biological sensors and functionalities, the two companies are on track to construct a compatible, user-friendly ecosystem.

Connectivity

As the pandemic forced more people to work indoors, the need for mobile connectivity has lessened. Watch form product shipments continued to increase, however, with growth of 30.7% YoY to date in 3Q20. Online connectivity has changed society, and this has created new opportunities for innovation.

With the help of government and telecommunication companies, traditional SIM cards are being upgraded into eSIM cards. This means that the physical cards used to store contacts and enable radio communication are now effortlessly linked to end-user devices. Models such as the Apple Watch Series 6, the Samsung Watch 3 and the TicWatch Pro have adopted this technology, but not all operators across Europe offer such convenience.

Implications

Smart wearables like watches, wristbands, earwear and clothing have become extensions of our human selves, despite it only being an emerging market with a CAGR of 22.5% for 2015–2020. These days we all deal with an immense amount of personal information, but we are often helpless when it comes to protecting that information.

Collection and analysis of health records are the major driving forces for wearables. The wearables trend started with Fitbit, a fitness gadget, in 2013, but privacy and security are ongoing concerns with digitalization. Over 1 billion activities, such as running and cycling routes, recorded by Fitbit users were exposed, including highly confidential US military routes, in 2017. TCL’s MoveTime Family Watch allowed random users of its smartphone app to retrieve personal information such as GPS location, phone numbers, date of birth and communication medium. Earlier this year, Garmin was reportedly hit by a $10 million ransom demand in return for liberation of its system and retainment of customer data.

On the other hand, healthcare has become a significant sector that is promoting longevity and well-being through the use of advanced technology. We have seen the integration of physiological sensors for blood-oxygen saturation (SpO2), electrocardiograms (ECG), electrodermal activity (EDA) and sleep tracking.

Companies such as Samsung have developed an ad hoc Social Distancing Management regime that alerts users when they are standing too close to one another. Oura provides accurate insights into body temperature — in one case alerting a UFC fighter to get treatment for COVID-19. Fitbit has incorporated a Stress Management Experience to track users’ mental health.

Cybersecurity threats, however, have not disappeared. In fact, the risks have increased with the growth in Big Data. These threats speak volumes about what we need to be cautious about in terms of competitiveness of smartware. Apple’s new family setup, for example, encourages surveillance from other family members, but where is the line between privacy and security from a third party?

Conclusion

At a time of increasing virtual social engagement and dependence on smart wearables, we have to be more vigilant on what these technologies bring upon us — and we have to set appropriate expectations.

2020 may be ending, but technological advancement will endure. IDC believes the wearable market has huge potential, given how well the technology aligns with the cultural mentality. The world of technology is shrinking into a smaller physical space, but is taking up an ever-greater virtual space. Therefore, 2021 should be a year of hope.

 

If you want to learn more about this topic or have any questions, please contact Kyla Lam, or head over to https://uk.idc.com and drop your details in the form on the top right.

 

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