Smartwatches are still a product in search of a mass market. Vendors, even market leader Apple, are hoping to reach a larger audience following disappointing sales in 2015, leading them to disparate directions in the latest designs.
On the one hand, "shrink it and pink it" was the design mandate at the CES 2016 trade show last week for some vendors which hope to attract women to pick up a smartwatch in a market heavily dominated by male buyers. On the other hand, there is also a robust interest in rugged designs, including waterproofing, that primarily will appeal to outdoorsmen.
The best evidence of that disparity is how Samsung and Casio separately announced very different smartwatches at CES.
Samsung emphasized elegance with its latest platinum and rose gold Gear S2 Classic smartwatches running on Tizen that are set to go on sale in February. Casio, meanwhile, announced the WSD-F10 Smart Outdoor Watch running Android Wear that is built to military standard specs and is set to go on sale in April in the U.S.
Samsung hasn't set pricing yet, although its earlier Gear S2 models announced in the fall have sold for $300 to $350. The Casio model is priced at $500.
Apple, the clear smartwatch market leader, could be announcing its second-generation Apple Watch as early as March for release later in the spring.
Analysts predict the new smartwatch won't be a round-faced model like the latest from Samsung and Casio, but it could have better battery life than the first edition released in April 2015, as well as new cellular connectivity, to allow independent operation, separating it from its current Bluetooth connectivity with a smartphone.
Disappointing sales so far
Vendors are clearly trying out new approaches in smartwatch hardware and software features to help improve on their 2015 sales.
Apple, once expected by some to sell 30 million to 40 million of the first-generation Apple Watch, shipped 13 million in 2015, IDC said last month. That 13 million was well below IDC's earlier projection of 21 million Apple Watches for 2015. Overall, IDC said 21.3 million smartwatches shipped in 2015, giving Apple 61% of the market and Android Wear, in second, 15%.
"We had higher expectations, but the result was nowhere near that," said Ramon Llamas, an IDC analyst. "With few exceptions, smartwatches depend on the smartphone connection [via Bluetooth], and as long as that relationship exists, the software will struggle to make its case within the market… Should the smartwatch be more computer-centric or more of a watch? There's a lot of gray area between those two, and vendors are trying to find what's the right spot."
So far, there really isn't a solid use case for the smartwatch, he added. "There's no silver bullet yet that will bring smartwatches to the mass market," Llamas said. "People are even still trying to figure out whether a smartwatch should be round or square: the square is easier to use but the round looks more like a watch."
Another IDC analyst, Jitesh Ubrani, said IDC lowered its forecast for smartwatches in December mainly because of disappointing results for Apple Watch, although numbers were also slightly down for other makers.
"There's been a lack of demand because people don't really see the value in smartwatches," Ubrani said. "Most smartwatches, including Apple's, are merely notification centers and most people don't see a need for that."
Ubrani added, "Women aren't really interested in smartwatches and in my opinion that's not changing that fast." If a vendor raises the price by $150 to add gold or jewels, approaching a total price of $400 to $500, then many women women are priced out of the market and will instead buy a Fitbit fitness tracker for $150, he said. IDC calls devices like the Fitbit "basic wearables" because they can't run third-party apps like a smartwatch can.
Even Samsung admitted at CES that smartwatch sales were lagging. The smartwatch market is "moving slower than a lot of people [expected] and certainly than we have," Eric McCarty, vice president of mobile product marketing for Samsung business products in the U.S., told Computerworld.
Samsung decided to use the Tizen OS in its latest models, with just 1,400 apps so far, but with the added ability to connect to Android smartphones, and, later this year, to iOS devices.
Business and industrial use cases emerge
Samsung is working with Red Hat to provide application modules for smartwatches that would provide work flow, time management and expense management, McCarty said.
"There's a bright future for wearables on the business side," said Ubrani, although he added that it isn't clear whether smartwatches will be the dominant wearable. It could be that smart glasses or another device gains steam in the wearable industry. "Biometrics could be used as a security feature where your watch or wearable recognizes who you are and possibly sets up your desktop as you get closer," he said.
Llamas said it will be possible in a few years for a smartwatch to automatically turn on a car when the driver is 100 yards away and then turn on the heater, if needed, at 50 yards. When within proximity of the car door, the smartwatch could then unlock it. Or, with biometric information, a smartwatch could know a user arriving at home could feel cold or warm, then use that information to tell a smart thermostat to adjust the temperature in the home accordingly.
Pilot projects of smartwatches used in business and industry applications are emerging. For example, in June, air transport IT vendor SITA and Quebec City Jean Lesage International Airport announced use of Apple Watches for the airport's workforce. Duty managers are able to get flight updates and gate changes delivered right to their wrists, which is quicker than consulting a tablet.
Focus on new features: camera and cellular
Samsung has dropped its use of a camera that appeared in earlier versions of its Gear smartwatches running on Android, which first appeared in late 2013.
McCarty said the camera functionality wasn't popular, but didn't elaborate.
Llamas said the camera on original Gear smartwatches didn't function well and didn't take good photos. There were also privacy concerns with the smartwatch camera, since the smartwatch was small and could be easily hidden.
"You could take pictures when nobody knew so there were negative reactions," Llamas said. "It was regarded as creepy, and the pictures didn't look that great anyway."
Given Samsung's decision to drop the camera, it's interesting that some rumors have suggested Apple will add a FaceTime camera to the second-generation Apple Watch. A FaceTime camera might not need to be high quality and might not pose the same privacy concerns as Samsung's camera did, some analysts said.
The potential addition of cellular connectivity to the next Apple Watch could be big selling point. At Samsung, McCarty said that business users are especially eager to separate the smartwatch from the smartphone via cellular, as long as they can pay for just one phone number for all their devices, including smartphones, tablets and smartwatches.
AT&T has focused heavily on such technology, announcing NumberSync in October which lets users assign their primary phone number to wearables and other devices. Other U.S. carriers are expected to follow suit, but Samsung can already use its own servers to provide a single phone number for Verizon and T-Mobile users with multiple Samsung devices, McCarty said.
The future for smartwatches
While IDC sees 42% annual growth for smartwatches through 2019, the market will probably only reach 88 million smartwatches shipped in 2019 — a small fraction of the overall smartphone market.
Part of the problem with judging the smartwatch market is that so many people expected Apple, especially, to see big smartwatch successes like it had with its iPhones. But Llamas and Ubrani noted that even Apple's first iPhone didn't have all the features that later generations had, which led to escalating sales.
"It's going to take a couple of generations for smartwatches to catch on, with better sensors and batteries," Ubrani said. "Most important, the smartwatch developers aren't there yet."
James Moar, an analyst at Juniper Research, said the future is iffy for smartwatches in a business context. "With many smartwatch apps focused on productivity, there will be some use for it in the business world, but the growth won't be huge. Price is a factor … but even at the right price, the benefits aren't particularly clear for business."
Red Hat released its own mobile business survey on Wednesday that was more upbeat. In a survey of IT decision makers at 200 large private sector businesses in the U.S. and Western Europe, it found that 90% plan to increase their mobile app development investments in 2016. The survey, conducted for Red Hat by Vanson Bourne, didn't specifically ask about smartwatch apps, just the overall category of mobile apps.