The worldwide smart-watch market cratered under growing pains in the third quarter of 2016, resulting in a whopping 51.6 percent decline in year-over-year shipment volumes.
According to data from IDC’s Worldwide Quarterly Wearable Device Tracker, total smart-watch volumes reached 2.7 million units shipped in Q3, down from 5.6 million units in the year-ago period.
While the decline is significant, it is worth noting the effect of market conditions in Q3 2015, which was the first time Apple's Watch had widespread retail availability after a limited online launch. Meanwhile, the second-generation Apple Watch was only available in the last two weeks of Q3 2016.
"The sharp decline in smart-watch shipment volumes reflects the way platforms and vendors are realigning," noted Ramon Llamas, research manager for IDC's wearables team. "Apple revealed a new look and feel to watchOS that did not arrive until the launch of the second generation watch at the end of September. Google’s decision to hold back Android Wear 2.0 has repercussions for its OEM partners as to whether to launch devices before or after the holidays. Samsung’s Gear S3, announced at IFA in September, has yet to be released. Collectively, this left vendors relying on older, aging devices to satisfy customers."
"It has also become evident that at present smart watches are not for everyone," said Jitesh Ubrani senior research analyst for IDC mobile device trackers. "Having a clear purpose and use case is paramount, hence many vendors are focusing on fitness due to its simplicity. However, moving forward, differentiating the experience of a smart watch from the smartphone will be key and we're starting to see early signs of this as cellular integration is rising and as the commercial audience begins to pilot these devices."
Apple maintained its position as the overall leader of the worldwide market, yet it posted the second largest year-over-year decline among the leading vendors. Its first-generation Watches accounted for the majority of volume during the quarter, leading to the significant downturn for the quarter. Its Series 1 and Series 2 did little to stem that decline, although with lower price points and improved experiences, Apple could be heading for a sequential rebound in Q4, IDC said.
Garmin posted the largest year-over-year increase among the leading vendors, thanks to its growing list of ConnectIQ-enabled smart watches and the addition of the Fenix Chronos. Whereas other smart watches attempt to be multi-purpose devices, Garmin’s smart watches focus on health and fitness, and the applications reflect that strategy. Its total volume helped close the gap further against a declining Apple and extended its lead ahead over Samsung.
Samsung finished Q3 slightly higher from a year ago on the strength of its aging Gear S2 smartwatches. These still remain one of the few smart watches on the market that feature full-time cellular connectivity. The company introduced its follow-up, the Gear S3, with a Bluetooth-only version as well as a cellular version, but it has yet to be released to the market.
Lenovo, from Motorola, suffered the largest year-over-year decline among the leading vendors, with multiple channels selling out of Moto 360 devices (both first- and second-generation) and a scarcity of its recently released Moto 360 Sport smart watch. In addition, Q3 marked the first time in which Motorola did not introduce a new smart watch in time for the holiday quarter, adding to its decline in the market.
Pebble arguably kicked off the smart-watch category with its original Kickstarter campaign in 2012. Since then the company has launched multiple variants of the Pebble watch and also introduced a new timeline-based user interface, though none of them achieved mass success. After another successful Kickstarter campaign in early 2016, Pebble released the Pebble 2 (oddly named, as it is the third generation) late in the third quarter. The new Pebble 2 is the first watch by the company to include a heart-rate sensor and has an overall focus on fitness.