opportunities and challenges - trendforce

Opportunities and Challenges

of Wearable Devices

June.5, 2015

Jason TsaiIndustry Analyst

jason_tsai@topology.com.tw

4 June 2015 | Page 2

Prologue

Market & Consumer Survey

Trend & Dilemma

Summary

Outline

4 June 2015 | Page 3

It started from here…..

Wearable devices are becoming more popular

4 June 2015 | Page 4

People Became Excited about Wearable

Response %

Watches 30%

Clothing 22%

Glasses 19%

Shoes 9%

Jewelry 9%

Other 1%

None/nothing 8%

Don't know/refused 1%

Quick Facts

Exited about wearable tech(net) 91%

Source：Wakefield Research，2013

.Wearable devices will replace smartphone in 3-4 years.

Total shipment will reach 485 million units in 2018.

~ABI Research,2013

Wearable Research in U.S.

4 June 2015 | Page 5

Manufacturers were over-optimistic about

the wearable market

0

100

200

300

400

500

600

2012 2013 2014 2015(E) 2016(F) 2017(F) 2018(F)

2013Forecast

2015forecast

Over-optimistic in 2013

(Million Units)Worldwide Wearable Consumer Electronics Forecast

We know it’s an important future market

4 June 2015 | Page 6

Prologue

Market & Consumer Survey

Trend & Dilemma

Summary

Outline

4 June 2015 | Page 7

What are Consumers Thinking About

70%of U.S. consumers

have heard of wearable devices

But only

15%of them used

wearable devices

84%of respondents currently don’t

have any wearable devices

42%Users gave up using

the wearable devices within

60 days

23%people are likely to buy

a smart watch in the future

Most people have heard about the wearable device but only a few of them actually use it regularly.

4 June 2015 | Page 8

Shipment of smart watches will surpass

fitness bands in 2015

(Million Units)Smart Watch & Band Shipments

0

25

50

75

100

2011 2012 2013 2014 2015(E) 2016(F) 2017(F) 2018(F)

Smart Watch

Smart Band

Sports & fitness bands

Apple Watch

4 June 2015 | Page 9

Apple will dominate the smart watch market

(Million Units)

2012 2013 2014 2015(E) 2016(F)

Non-Apple brand 0.33 2.82 6 11 15

Apple Watch 0 0 0 15 26

0

10

20

30

40

50

4 June 2015 | Page 10

Prologue

Market & Consumer Survey

Trend & Dilemma

Summary

Outline

4 June 2015 | Page 11

With many uncertainties in the wearable market, enterprises are following Apple’s steps to avoid major risks.

Waiting for Apple to Become the Beacon

4 June 2015 | Page 12

Because it did not introduce any new hardware.

Apple Watch will be hard to imitate

Material

Case Aluminum、Stainless steel、18-karat gold

Cover Ion-X glass、Sapphire

Back Composite materials、Ceramic

Band Fluoroelastomer、Stainless steel、Leather

Clasp Stainless steel、18-karat gold

Hardware Spec

Display AMOLED

SensorsAccelerometer, gyroscope, ambient light sensor, and heart rate sensor

Connections Wi-Fi and Bluetooth 4.0

Other Speaker and microphone

Not much difference

4 June 2015 | Page 13

Wearable Device is Just a Springboard

4 June 2015 | Page 14

It’s Two-Part Tariff

Platform

Publisher

Content Provider

Brands

Makers

Platform

Publisher

Content Provider

Brands

Makers

Hardware

Software

100

100

>100

<100

Devices’ price down

Raise ARPU and pay ratios30

45

25

30

10

4 June 2015 | Page 15

Monkey and Banana Problem

The most important thing is The Monkey Wants to Eat Bananas, so he Use the Chair and Stick to get banana.

4 June 2015 | Page 16

Just like jamming wares in warehouse. The limited power cannot support the complex functions and applications of the wearable devices.

Power consumption is a big issue of

wearable devices

4 June 2015 | Page 17

Two possible solutions

◊Increase the capacity(Power)

◊Limit the components and applications

So How Can We Solve This Problem?

Yet it’s hard to have a breakthrough technology in the coming years.

But consumers always want better specs and as much functions as possible..

We should change consumer behavior. And that's what Apple is doing NOW.

4 June 2015 | Page 18

If you use wearable devices the same way you use your phone, the power will not able to last long.

Information explosion led people to become attached to their phones without knowing that most of the information received is not important.

How often do you check your phone?

Information Explosion Devices Users

filter

Makes the information valuableSaves power

4 June 2015 | Page 19

When we change consumer behavior, the new behavior will create new business opportunities.

And it's an incentive to make them change by providing more convenience.

Changing behavior by offering more

convenience

Can be used to board planes and unlock the hotel room

4 June 2015 | Page 20

Prologue

Market & Consumer Survey

Trend & Dilemma

Summary

Outline

4 June 2015 | Page 21

There are Two Questions

Why should I buy this?

How to make people buy the wearable device and use it

regularly?

4 June 2015 | Page 22

What Benefit Does It Provide to Me

It has AMOLED display , Memory, 1.9M camera ,

Wi-Fi… etc

It can detect your sleep habit then improve your

quality of sleep.

Which one?

4 June 2015 | Page 23

Having people to buy the wearable devices is just the first step towards the success. How to make people adopt them into their daily lives is the real challenge.

Two Barriers to Wearable Device

Topicality

Lower Price

Brand Value

AppearancePurchase

First Barrier

Regular usage

Second Barrier

Value in use

Convenient Services

4 June 2015 | Page 24

Trend 1:

Apple will dominate the market in coming years, and change the competitive advantage from hardware to software (services).

Trend 2:

Major profits will be generated from selling services instead of the hardware.

Trend 3:

Wearable device is just a springboard. The key point is not what the enterprises do with the devices but the collateral services that are provided by the devices.

Trend 4:

By offering more convenience, new business opportunities will arise from the change of consumer behaviors.

Summary

4 June 2015 | Page 25

Thank You