Apple Watch could bring an extra US$16.5b to Apple’s revenues by 2020, says Ovum

-A +A

KUALA LUMPUR (Jan 29): Apple Watch could generate an extra US$16.5 billion to Apple’s revenue by the year 2020 while the wearables market will be worth US$27 billion in 2020, with almost 400 million wearable devices sold in the year, according to Australia-based independent technology analyst firm Ovum.

In a statement today, Ovum said it expects sales of wearable devices to reach 394 million units in 2020, up from 24 million units in 2014, corresponding to a CAGR of 60%.

It said revenues generated from the direct sale of wearable devices to consumers will reach US$26.6 billion in 2020, up from US$3 billion in 2014.

Ovum said multipurpose wearables such as the Apple Watch would account for 31% of the installed base, with simple activity trackers and smart clothes making up the rest of the market.

However, it added that volume does not equal value: multipurpose wearables will account for 62.3% of total retail revenues in 2020, equivalent to US$16.5 billion in sales.  

It said wearables also offer additional software revenue opportunities via a dedicated app ecosystem that would serve up to 176 million installed devices by the end of 2020.

The analyst firm said wearables would become much  more capable and “smart” over the next five years.

Ovum said it has designed a smartness index to quantify this evolution, based on whether a wearable features a screen, supports third-party apps, and/or operates autonomously (see definition at the bottom of this release).

It said recent product releases such as Microsoft Band, Fitbit Surge, and Pebble Steel show that activity trackers are becoming smarter.

Ovum said it expects the average smartness index for activity trackers to grow from 1.27 in 2014 to 1.88 in 2020.

It said more than 60% of the installed base of activity trackers in 2020 will have a smartness index above 1.

Meanwhile, Ovum lead analys for consumer technology Ronan de Renesse said affordability and better quality of service for smarter wearable devices would be key drivers in the shift from activity trackers to multipurpose wearables such as the Apple Watch.

“Currently, the market is overcrowded in comparison to demand.

“Supply chains and marketing investments need to be tightly controlled. Larger vendors able to sustain investments for longer stand a better chance of establishing a market lead,” said de Renesse.