With talk of Apple unveiling a smartwatch on Tuesday, analysts say it could be the birth of a massive new industry — a $10 billion industry by 2018, according to a new report from Citigroup. That's a sizable figure given the entire watch industry measured $62.8 billion last year.
"Of the $10 billion, we estimate $5 billion is expected to come at the expense of traditional watch wearers and $5 billion from technology trendsetters who are non-watch wearers," a team of analysts led by Oliver Chen wrote in a note published yesterday. The traditional watch industry can sustainably grow along with smartwatches, as makers like Fossil partner with technology companies such as Google, the analysts wrote.
The traditional watch market, which is currently driven by sales from the Asia-Pacific region and Western Europe, may expand to $85.3 billion in 2018, according to Citi, while wearables overall could become a $30 billion market. The firm forecasts the smartwatch industry to expand to 52 million units by 2018, less than half the IDC estimate of 112 million. (A main difference is that IDC expects an iWatch to drop before this Christmas, while Citi doesn't.)
Smartwatches — essentially, tiny computers for the wrist — aren't catching analysts by surprise. In January, KeyBanc cut its recommendation on Fossil shares to the equivalent of a sell, citing potential disruption from smartwatches, and has since alerted clients to the release of such devices out of LG and Samsung.
However, it's much more topical now given "a potential iWatch introduction by Apple could serve as the watershed moment for the industry," KeyBanc analysts said in an Aug. 28 note.
Citi's analysts, who believe an iWatch won't be available for the holiday season this year, said "such anticipation has existed in the investment community for over a year."
"While there is a lot of interest in this product, we firmly believe iPhone 6 launch is what matters the most, and with iWatch the potential financial impact appears quite small," the analysts wrote. "Only time will tell if and when the product comes to market and is successful or not."
The analysts incorporated an average smartwatch price of $230 for this year into their estimates, which they expect will decrease by 5% each year to $197 in 2018.
Sapna Maheshwari is a business reporter for BuzzFeed News and is based in New York. Maheshwari reports on retail and e-commerce.
Contact Sapna Maheshwari at firstname.lastname@example.org.
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