Is the smartwatch market in trouble? It depends on whom you talk to. On the one hand, there are manufacturers who don’t seem as bullish about the segment as they did barely a year ago. On the other is Apple, which defiantly insists that all is well. Even that claim is open to scrutiny, though. After all, IDC did say that Apple faced a 70 percent drop in smartwatch shipments for Q3 2016. But on the flip side, the company’s CEO Tim Cook says that the Cupertino giant is likely to have the best ever quarter in terms of Apple Watch sales in the final quarter of the year, thanks to the holiday season.
If Tim Cook is indeed correct then, it’s an Apple Watch market and not a smartwatch market but Apple can’t win in vacuum for a product that’s at such an early stage. While every company would want a monopoly, competition is required. Take the iPhone for example. While Apple was undoubtedly the first in the “touch without stylus” smartphone market, there’s no doubt that competition from Android has helped Apple. If Samsung didn’t dabble in the phablet market with the Galaxy Note, would we really have a Plus variant of the iPhone? If Samsung didn’t pick up OLED and continuously improve it with every generation, would Apple really be able to consider OLED for the iPhone 8 considering that it’s previous attempt to source sapphire for iPhones failed?
Apple can build products in vacuum at its offices in Cupertino but a lot of what goes into building those products is realized only if there’s enough scale to develop a healthy ecosystem of suppliers. I have already mentioned OLED, take another example of modems. iPhones have been using Qualcomm modems for a long time now but what makes
those Qualcomm modems possible is Qualcomm’s business model of integrating those modems along with APs and selling them to Android manufacturers. If there were no Android manufacturers (competition), Qualcomm’s current business model wouldn’t be possible and iPhone’s growth would be stymied.
Take telecom operators as another example. The growth in content consumption because of iPhones and touchscreen smartphones is the reason why so many telecom operators invested in 3G and LTE networks. If there were no Android smartphones (competition) then in certain countries such as India, most telecom operators would have no incentive to set up 3G and LTE networks as the vast majority would still be using feature phones and again, the iPhone’s prospects in India would be stymied considering that Tim Cook himself said that he expects iPhones to do well in India once the LTE networks roll out. It is only and only because we have such a large number of people using Android smartphones that operators in India have invested in 3G and LTE networks, otherwise this investment would have never been possible for iPhones alone as they still account for less than 1 percent of all mobile handsets in India.
Of course, iPhones currently have enough scale for Apple to set up independent supply chains regardless of the competition but the Apple Watch nowhere has that scale and such a scale would be achieved only if the overall smartwatch market remains healthy and grows with enough competition. If competition gets killed so early, then the Apple Watch would have an easy run for the next few years but would eventually face difficulties.