Smartwatch Demand Drops for First Time; Apple Watch Shipments Down 55%

Demand for smartwatches appears to have peaked, at least in the short-term. For the first time since smartwatches came out, shipments from vendors are down from the year before, according to a new report released by International Data Corporation, a market intelligence firm.

Smartwatch shipments were down 32 per cent during the second quarter of 2016, when compared to the same period last year.

A total of 3.5 million smartwatches were shipped during second quarter of 2016, down from 5.1 million during the same period last year.

That decline was driven by 55 per cent drop in Apple Watch shipments.

“Consumers have held off on smartwatch purchases since early 2016 in anticipation of a hardware refresh, and improvements in WatchOS are not expected until later this year, effectively stalling existing Apple Watch sales,” Jitesh Ubrani, a senior research analyst for IDC Mobile Device Trackers, said in a release.

Still, the Apple Watch remains the most popular brand of smartwatch, with a 47 per cent market share.

“Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market,” Ubrani said. “Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted.”

In the second quarter of 2015, Apple shipped 3.6 million smartwatches, during the same period this year it shipped 1.6 million watches.

Its competitors are starting to catch up—Samsung, Lenovo and LG Electronics all saw their shipments and market share grow year-over-year. However, none of those companies shipped over one million watches.

Samsung holds the number two spot – its market share during the second quarter grew from seven per cent in 2015 to 16 per cent in 2016.

Its shipments were up 400,000 watches to 600,000 watches.

While the numbers may suggest that the smartwatch market has peaked and that, having failed to connect with a mainstream audience, the segment will continue to decline, IDC is a little more optimistic.

“What will bear close observation is how the smartwatch market evolves from here,” said Ramon T. Llamas, research manager for IDC’s Wearables team. “Continued platform development, cellular connectivity and an increasing number of applications all point to a smartwatch market that will be constantly changing. These will appeal to a broader market, ultimately leading to a growing market.”