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Smartwatch Competition Begins – Diversification opp for component supply chain?


September will be here next week and the summertime rumors will now be put to the validity test: who was right and what tantalizing features and capabilities will OEMs present with the much anticipated release of smartwatches for the fall? Samsung kicked off the official (versus rumored) announcements yesterday providing information on the Samsung Gear S wearable (smartwatch) with 3G capability. Apple is rumored to follow with an iWatch unveiling on September 9th.

Component and supply chain opportunities

There are many articles and blogs speculating just who will offer what and how in terms of the upcoming smartwatches and the wave of smart, wearable, Consumer Electronics (CE), that's all fine and fun, but there's an important supply chain moment behind all the speculation that is more concrete than CE dreaming: diversification. We know that the saturation point is fairly well met in the high-end smartphone market, and tablet PCs are seeing a plateau in refresh cycles now too. The initial hubbub of short refresh cycles for the high-end, latest smart wireless devices (SWDs) has slowed and developed market, high-end consumers are extending the periods for buying their replacement devices.

The result of these extended SWD refresh cycles has been both a turn in focus to lower-priced devices for developed market consumers and for emerging and developing market consumers as well. Additionally, there's been a bump in notebook and netbook/Ultrabook sales with consumers refreshing their laptops in the interim cycle of their SWD refresh, recognizing that there is still a use for an array of CE devices.

The market focus on reducing costs for SWDs for lower-priced consumer tiers is providing not only a new market to sell to, but also an increase in demand for previous-generation (versus next-generation) components that have lower ASPs but still provide a rich feature set for CE devices. Among these component opportunities smartwatches could open doors for component sales and supply chain diversification at a time when the high-end, portable (versus wearable) SWDs are slowing. We know that OEMs are looking at wider market options (more models at more pricing levels) for their wearable devices than for their smartphone devices, both based on use (sports, health, fashion, etc.) and on pricing (different price tiers based on materials and capabilities).

Wear your gear

The wearable market is still very new compared to the rest of the CE marketplace. We've been carrying around our smart gear, but not truly wearing it (earbuds don't count here). Smartwatches are being tagged as the current opportunity to pull together the CE demand for wearable devices and for experimenting with consumers' fickle fashion and trend demands that relate to use case and feature demands for components in devices. In the supply chain now are a wide range of previous-generation components available that offer very high-quality user experiences but not at leading edge, next-generation ASPs. The demand for these is picking up but not at the expense of new designs and components for the even smaller footprint that wearables demand.

Smaller and smarter still push the design envelope

There are, of course, still plenty of leading-edge components for the wearable market, supporting the high-end devices that will be rolled out alongside of lower-priced models. For example, leading-edge smartphones in developed markets are 4G compatible and offer 64-bit architectures, when it comes to wearables, we are seeing the roll-out of new designs for 3G chips. This week gave us Intel's unveiling of their new, standalone, "world's smallest" 3G modem:

[…] the XMM™ 6255 modem to provide a wireless solution for the billions of “smart” and connected devices that are expected in the coming years. At about 300 mm2 in size, it is the world’s smallest standalone 3G modem, making it perfect for networked sensors and other IoT applications such as wearables, security devices and industrial equipment.

Along with these smaller chips and SoCs, are also the new materials, flexible displays, and micro architectures in addition to new software applications, of course. There is plenty to be excited about with the real opening of a viable wearable device market this fall. Not only are we seeing an array of models for use and pricing, meaning a diverse set of components and consumers are part of OEMs' strategies, but we are also seeing innovative designs from end-product down into core architectures to maximize a truly shrinking form. The remaining question is which designs and models will be the winners in consumers' eyes and how will those wins direct the new competition and demand we see along the semiconductor and electronics supply chain.

Lisa Ann Cairns, Ph.D.
Written on Friday, 29 August 2014 12:38 by Lisa Ann Cairns, Ph.D.

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