By Anam Alpenia
Samsung unveiled its sixth new smartwatch in a year this week, as the Korean company looks to build an early share of a new sector. But with Apple’s entrance into the fledgling wearables market rumored to be imminent, Samsung’s head start could mean nothing.
Samsung has had a tough time of late. Last month, the consumer electronics manufacturer reported a third straight quarter of declining profits, while a report by research firm IDC revealed that the company has suffered a 7% decline in smartphone market share over the past year, taking its share down to 25%. The dual concern of decreasing profits and increasing competition in the smartphone space appears to have prompted Samsung to move aggressively into the wearables market.
The wearable technology industry may still be in its infancy, but analysts expect it to grow quickly. A recent forecast from CCS Insights predicted that the market wearable technology shipments will grow from $9.7 million in 2013 to $135 million by 2018. The report also estimated that by 2018, smartwatches and wristbands will account for 87% of the wearable market.
This potential of the wearable technology space has led Samsung, and others, to make a concerted effort to carve out a share of the market early. Samsung’s move into this area has also been boosted by the fact that its curved screen technology fits well into wearable devices. The company’s latest offering, the Gear S, features a curved display and runs on Samsung’s own Tizen operating system, rather than Android Wear. All of Samsung’s major smartphone offerings ran on an Android operating system, and it is telling that the company has embarked on a new sector with a fresh operating system of its own. Using a home-grown operating system should boost profit margins, and make the company’s bottom line less vulnerable to market shifts towards competitors.
However, Samsung’s chief rival in the high-end smartphone space, Apple, is reportedly on the verge of entering into the wearable technology market. Rumors have been circling that the maker of the iPhone and iPad will be unveiling a piece of wearable technology, most likely a smartwatch, at the same time as its new phone on September 9. The validity of those rumors cannot be confirmed, as Apple has always kept product launch information confidential in the past, but should they turn out to be true, Samsung will instantly find the wearables space a lot more competitive.
Apple will almost definitely be launching the iPhone 6 at the September 9 event, and this will put further pressure on Samsung’s smartphone sales. The new iPhone is expected to feature a bigger screen than its predecessors, putting it head to head with the larger Samsung smartphones, such as the Samsung Note, that have performed well for the South Korean manufacturer in the past.
Samsung’s smartphone market share has also been hit hard in Asia, where Huawei, Lenovo and Xiaomi have all made significant inroads into market share over the past year. Counterpoint Technology Market Research recently revealed that Xiaomi’s latest offering, the Redmi Note, was the most sold phone in China during April.
As competition closes on Samsung from all sides, it makes sense that the company has targeted a new market. However, should Apple also enter at this point, the Korean company could find itself facing a familiar scenario as it has with smartphones,. The pressure is already on Samsung to deliver in this new space, as well as with its new smartphone offerings. On September 9, that pressure will be ramped up significantly.