TrendForce Says Smart Bracelets to Remain Dominant in the 2016 Wearables Market but VR Devices Will Become Main Growth Driver

The market for wearable devices (also known as wearables) has maintained a certain growth level in recent years, though device vendors have not experienced a boom in demand as they would hope. The total wearable device shipments in 2015 are estimated at 68.1 million units, according to global market research firm TrendForce. In 2016, annual wearable shipments are expected to grow 64% to above 112 million units. This projected growth rate mainly reflects the short base period.

“Apple Watch has not been able to significantly lift the overall demand for smartwatches,” said Jason Tsai, TrendForce wearable device analyst. “Smart bracelet remains dominant in the wearables market. The industry is betting on wearable virtual reality (VR) technologies to be the main growth driver for next year. Hence, a lot of attention has been paid to several VR devices that are set to launch at the start of 2016.”

Smart bracelets focus on functionality whereas smartwatches rely on brand names

Smartwatch vendors so far have only been able to leverage their brand names to sell their devices. The market positioning of smartwatches is still unclear and provides too few reasons for consumers to buy them. Apple Watch is currently the only smartwatch that has exceeded 10 million sets shipped this year. Nonetheless, Tsai noted that sales of Apple Watch have fallen short of expectations since its launch over six months ago. TrendForce therefore has lowered the projected annual shipments of Apple Watch for 2015 from 15 million to 12 million sets. Next year’s annual shipments are expected to reach 20 million sets.

“Smartwatches will become more appealing if vendors can aggressively market two or three device-specific features that consumers would find valuable,” Tsai pointed out. “Apple, for instance, has successfully used its brand name to build an initial user base for its smartwatch. The next step is to capture consumers who want value for their money, or else Apple’s smartwatches will remain only as collectibles for Apple fans.”

Smart bracelets, on the other hand, have staked out a clear position in the wearables market as fitness and sleep trackers. “Consumers buy them because of their functionality,” said Tsai. “And this is why Fitbit, which is a lesser-known brand, is able to pull ahead of the pack of competing wearable vendors and beat several major brands in market share.”

TrendForce estimates that annual smart bracelet shipments for 2016 will grow to 45 million units, greatly surpassing projected shipment figure of smartwatches for the same period, which will be around 32 million units.

VR devices will drive the wearables market next year and become the focus of the industry

The shares of smartwatches and smart bracelets in the overall wearable market will unlikely change significantly in 2016 even if vendors such as Apple, Fitbit and Xiaomi are able ship tens of millions of their respective devices. The next hot application segment in the wearables market will be VR devices. Tsai noted that the annual shipments of smart headwear is set to hit 8 million units this year and will soar to 27 million units next year. This explosive growth is heavily attributed to the rising demand for wearable VR technologies.

At the start of next year, major vendors such as HTC, Oculus and Sony will launch their VR devices, which are expected to bring over US$60 billion in annual sales. As this market rapidly emerges, it draws in powerful players in the tech industry. For example, Samsung has already invested in FOVE, which develops VR devices that can track eye movements. Chinese tech giant Tencent has also recently announced its own VR project. TrendForce anticipates that the competition will become very heated next year with the entries of new participants and products.