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CCS Insight Market Forecast Market Forecast Wearables, UK 2016-2020 April 2016 Update Content Summary of the wearables forecast Smartphone companions forecast Quantified self forecast Wearable cameras forecast Augmented reality and virtual reality forecast Wearables categorization Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 2 Summary of the Wearables Forecast Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 3 Forecast Coverage CCS Insight's forecast currently covers four main categories of wearable devices: smartphone companions, quantified self, wearable cameras and augmented and virtual reality (AR and VR). – The other categories are at a very early stage of development. For detailed segmentation, please see pages 59-68. Each category is forecast in three scenarios: core, low and high, as the market is still young and has an elevated level of uncertainty. – The core scenario describes the most likely outcome across all categories, given our current understanding. – A change in one category can trigger changes in other categories. The summary presents the core scenario for all four categories. – Low and high scenarios for the different categories cannot be added, as significant cannibalization could happen between segments — a high scenario for one is likely to mean a shift toward the low scenario of another. We have developed a split by device form in the core scenario. – This is a top-down split and subject to a significant uncertainty owing to the very early days of the market; one hugely successful product can greatly change the outlook. The sell-in value forecast is developed at a constant exchange rate of pounds to dollars from April 2016 onward. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 4 Key Messages The segmentation of wearable devices, largely unchanged since 2015, can be found on pages 59-68. We expect 5 million wearable devices to be shipped in the UK in 2016, up 33% from 3.7 million in 2015. The sell-in value will reach £0.55 billion in 2016, up 24% from £0.44 billion in 2015. – Quantified self will remain the largest category by volume with 1.9 million devices. – Smartphone companions will remain the largest by value: 1.5 million units worth £0.29 billion. – AR and VR will see strong growth of adoption in 2016, to reach sales of 0.8 million units. In 2020, 14 million wearable devices will be shipped in the UK, growing at a compound annual growth rate (CAGR) of 30% between 2015 and 2020. The wearables sell-in value will reach £1.09 billion, with a CAGR of 20%. – AR and VR will become the largest category by value in 2020, accounting for 43% of the total wearables value and 30% of the total wearables volume. – Quantified self will still be the largest category by volume, with 4.8 million units, but will account for just 14% of the total value. – Smartphone companions will reach 3.6 million units shipped, at a value of £0.37 billion, accounting for 34% of the total wearables value. Wristwear will remain the dominant form in volume terms until 2020. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 5 Installed Base of Wearables Will Surpass 30 Million in the UK in 2020 Installed base at end of year (M) 35 31.8 Augmented and virtual 30 reality 24.6 9.6 25 Wearable cameras 19.0 6.3 20 3.8 Quantified self 14.4 4.1 3.3 15 2.5 2.9 9.3 Smartphone 10.0 companions 10 2.4 7.7 6.5 1.1 6.3 1.9 5.0 5 3.2 1.5 3.8 9.0 1.0 2.9 5.7 7.3 1.7 3.2 4.6 0 1.7 2014 2015 2016 2017 2018 2019 2020 Quantified self is currently the most adopted category of wearables and will remain such until 2019. Smartphone companions saw a big increase in 2015, and will continue to grow, approaching the level of quantified self devices in 2020. AR and VR will see strong adoption, mostly through smartphone VR devices that use the screen, processing power and some sensors of a smartphone. They will become the largest category in 2020. Wearable cameras will still grow but will be the smallest category by 2017, despite being some of the pioneering wearable devices. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 6 Key Assumptions We expect the smartphone companion market to grow considerably, driven by: – Smartphone companions continuing to offer multiple functions – An emerging clear usage beyond notifications – All key smartphone operating systems supporting wearables – A growing number of apps dedicated to wearables – Proliferation of reference designs – The Apple Watch selling well to the growing number of users with compatible iPhones – Many manufacturers embracing Android Wear – Falling retail prices – Adoption of smartwatches for children The average replacement cycle is now assumed to be three years. – We assumed a replacement cycle of four years in the previous forecast. – Our extensive first-hand experience with smartwatches and expectation of further innovation in the coming years have led us to believe that the replacement cycle will most likely be three years. Battery degradation as well as general wear and tear are key factors that will drive replacement sales. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 11 Smartphone Companions: Split into Subcategories Subcategory Definition Examples of current devices Basic Low-end smartphone companions with basic functionality, mostly smartphone notifications. Fossil Q Grant Cogito Classic Ringly Casio STB-1000 Advanced non- Mid-range and high-end smartphone cellular companions with multiple functions beyond simple smartphone notifications. Apple Watch Moto 360 Pebble Time Samsung Gear S2 Advanced cellular Mid-range and high-end smartphone companions with multiple functions beyond simple smartphone notifications, and featuring cellular connectivity. Samsung LG Watch Intel MICA Doki Watch Gear S Urbane 2nd Edition Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 12 Smartphone Companions in Use Will Reach 9 Million by 2020 Installed base at end of year (M), and as share of smartphone installed base (%), core scenario 10 14% 9 11.9% 12% 8 9.8% 7 10% 7.9% 6 8% 6.5% 5 9.0 4 4.7% 6% 7.3 3 2.7% 5.7 4% 2 4.6 0.9% 3.2 2% 1 1.7 0 0.5 0% 2014 2015 2016 2017 2018 2019 2020 In 2020, almost 12% of smartphones in use in the UK will be connected to a smartphone companion. This is equivalent to 13.7% of the population using a wearable device. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 13 Scenarios: Drivers of Smartphone Companion Adoption LOW SCENARIO CORE SCENARIO HIGH SCENARIO No new uses or value Clear uses beyond only mirroring a smartphone screen Apple Watch drives significant usage scenarios Short battery life puts consumers off Smartphone makers differentiate with wearable accessories High retail price Low retail prices: down to £20 or below, or in bundled offers Less-costly no-name devices flood the market Cultural factors: rudeness of looking at your watch Complex intellectual property rights situation Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 18 Quantified Self: Split into Subcategories Subcategory Definition Examples of current devices Lifestyle fitness Devices designed to be used every day, all or most of the time. They measure everyday behaviours like walking, inactivity, sleep and calories burned. Fitbit Alta Misfit Shine 2 Jawbone Up3 Xiaomi Mi Band 1S Performance fitness Devices designed to measure performance related to specific sports and fitness activities. These are usually running watches, but other examples include models for swimming, golf, weightlifting and Garmin OMsignal Jabra Sport TomTom Spark hiking. Forerunner 225 Smart Shirt Pulse Wireless Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 22 Quantified Self Devices in Use Will Surpass 9 Million in 2020 Installed base at end of year (M) and as share of population (%), core scenario 10 16% 14.2% 14% 8 11.8% 12% 9.6% 6 10% 7.7% 8% 5.9% 9.3 4 7.7 4.6% 6% 6.3 2.6% 5.0 4% 2 3.8 2.9 2% 1.7 0 0% 2014 2015 2016 2017 2018 2019 2020 Almost 3 million devices were estimated to be in use at the end of 2015. By the end of 2020, over 14% of the UK population is expected to own a quantified self device. A clear utility, the growing popularity of an active lifestyle, as well as very affordable retail prices, will drive adoption. Gifting also remains a strong sales driver. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 23 Hearables: Competitive Landscape Included Not Included Motorola Hint Samsung Circle Jabra Sport Pulse Sony Smart Doppler Labs SMS Audio / Intel Wireless B-Trainer Here BioSport Basic Bluetooth headphones and earpieces Definition: a hearable is an ear-centric wearable with at least one additional feature beyond audio (a heart-rate monitor, activity counter, step counter or temperature sensor, for example). – The definition addresses devices targeted at consumers, and does not include medical devices that require regulatory certification, such as hearing aids. – The device needs to be connected to a smartphone by Bluetooth or the headphone jack. Primary uses: – Consumer: music, activity and sports tracking. Key current players: Jabra, SMS Audio (Intel) and Sony. Apple (Beats) may join this category. Market Forecast: Wearables, UK, 2016-2020 © CCS Insight 26 Smartphone Virtual Reality: Competitive Landscape Samsung Gear VR Carl Zeiss VR One View-Master VR Google Cardboard Definition: smartphone VR devices provide a fully immersive virtual reality experience. They use the screen and processing power of a smartphone, which is inserted into the device. – Some advanced, high-end products like the Samsung Gear VR include sensors, a camera and other enhancements.
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