What if your watch, reading glasses and other accessories were intelligent devices whose capabilities went beyond their conventional use? That is the idea behind ‘wearable technology’, which tech companies are using to incorporate cutting-edge technology into everyday accessories like watches, glasses (Google Glass), wristbands, fabrics, fitness monitors (Fuelband and FitBit), etc.
The different applications of wearable technology were initially limited to the health, fitness and military sectors; but commercial manufacturers are rapidly catching up with their own ideas on how it can be applied in everyday life, as a result, wearable technology is increasingly being fused into chic accessories.
Intense competition and rapid innovation are the primary drivers accelerating a reduction in consumer technology life spans. Products are evolving at exponential rates, and reaching maturity sooner than their predecessors. For example, it took the desktop PC market 12 years to mature, while the laptop market reached maturity in 10 years. The smartphone and tablet markets are expected to mature by 2015, by which time they will have completed seven and five years of their life cycles, respectively.
Remember the world’s first hard drive? It weighed more than a ton and stored only 5MB (megabytes) of data. At that time, no one could have imagined that a chip a tenth of its size could store a thousand times more data. Similarly, the first phone was the size of a brick, and could do little more than just make and receive calls. No one could have imagined that a phone one fourth its size could do forty times as much.
It can be observed that the evolutionary path of consumer technology follows a simple trend: the devices grow smaller, but the scope of their functionalities is enlarged. The picture below shows the Osborne Executive PC and an iPhone. The Osborne Executive PC had a four megahertz (MHz) processor when it was rolled out, whereas the iPhone has a 412MHz processor in a much smaller body. The Executive also weighed 100 times more than the iPhone, and cost 10 times as much.
Inferring from the trends, when smartphones hit the evolutionary ceiling, even smaller devices will likely take their place. This is where wearable technology comes in. As the name suggests, the next generation of consumer tech devices will be small or versatile enough to be worn on the body; but will they be just as powerful and robust? That is an important question for the tech industry, as it will need to prepare for the future by asking whether wearable technologies will take over completely from the smartphone, or merely complement it.
The wearable technology market, according to research conducted by the Credit Suisse Group AG, will be worth $30-50 billion in the next three to five years, assuming that 15% of wearable devices will be attached to existing smartphones. As per ABI Research, nearly 170 million devices will be sold in the sports and health sectors alone by 2017. According to Citi Research, the global watch industry will be worth $60 billion in 2013; if smartwatches capture only 10% of that market, the smartwatch market will be worth at least $6 billion.
Wearable technologies are expected to be high-tech replacements for personal items like watches, glasses and fabric, which complement the overall fashion statement individuals try to make. Replacing such branded and expensive items with ‘geeky’ gadgets may be an uphill task. The smartwatches available today, for example, resemble toys, and they may not appeal to people with more sophisticated tastes in fashion. However, if wearable technologies are developed as fashionable upgrades to classic items, they do have the potential to attract a lot of buyers.
The demand for these technologies will also depend on their value for money. Galaxy Gear, Samsung Electronics’ (SSNLF) first smartwatch, costs $300 and complements the Samsung Galaxy Note smartphone. On a standalone basis, Galaxy Gear holds no value; therefore, we believe that $300 is a rather prohibitive price for it. If wearable technology is to hit off, devices need to be accompanied by features that make them useful even on a standalone basis.
The hardware and software ecosystem for smartwatches is already present. Special microchips have been developed for these devices, and Google Inc.’s (GOOG) Android and Apple Inc.’s (AAPL) iOS operating systems will most likely be used to run the devices.
Google, with its Google Glass; Samsung, with its Galaxy Gear; and Apple with its rumored iWatch are in position to capitalize on this untapped industry. Alongside these vendors, semiconductor companies are also in a position to innovate and capture the future market with power-efficient chips. Intel Corporation (INTC), for example, launched its Quark chip for wearable technologies on September 10, 2013.
Wearable technology is an exciting new trend in the tech industry. As devices grow smaller and more utilitarian, the tech industry is looking for ways to take them out of our hands and attach them to our bodies for easier and hassle-free access. However, given the limited utility of modern smartwatches and smart glasses, we believe that devices like flexible, wearable smartphones will be the real smartphone killer in the future – but they will take time.
What we also want investors to watch out for, if they’re interested in being really far ahead of the curve, are the nanobiotechnology companies: we believe that once wearable technology attaches devices to the human body, the next step will be to embed them completely in the human anatomy. Sounds far-fetched? Think again: the technology is already in use in the medical sector. It is used to enable paraplegics to control devices like wheelchairs with commands given via thought transference alone. If past trends are anything to go by, that’s where the next big thing is at.