Apple Inc. (NASDAQ:AAPL) remained the global leader in the smartwatch market during the third quarter, but the segment as a whole saw a massive decline that may indicate waning consumer demand.
The latest report from research firm IDC paints a very bearish picture for smartwatches right now:
The worldwide smartwatch market experienced a round of growing pains in the third quarter of 2016 (3Q16), resulting in a year-over-year decline in shipment volumes. According to data from the International Data Corporation, (IDC) Worldwide Quarterly Wearable Device Tracker, total smartwatch volumes reached 2.7 million units shipped in 3Q16, a decrease of 51.6% from the 5.6 million units shipped in 3Q15. Although the decline is significant, it is worth noting that 3Q15 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 3Q16.
The researchers noted that timing played a big role in the huge smartwatch sales decline. Apple’s new watch and watchOS didn’t appear until late in Q3, and Alphabet’s (NASDAQ:GOOGL) delay of Android Wear 2.0 also didn’t help. Finally, Samsung’s Gear S3 was announced in September but still hasn’t been actually released.
A lack of consumer demand for the devices could also be a major factor, however:
“It has also become evident that at present smartwatches 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 smartwatch 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.”
On a positive note, Apple maintained its dominance in the smartwatch market in Q3, shipping 1.1 million units in the period. That shipment volume represents 41.3% of the overall smartphone shipments in the quarter. Garmin was second in Q3 with 0.6 million shipments (20.5% of total), while Samsung was third with 0.4 million (14.4% of total).
Apple shares rose $0.89 (+0.76%) to $117.49 in Monday morning trading. Year-to-date, AAPL has gained 11.52%, versus a 5.5% rise in the benchmark S&P 500 index during the same period.