Global Smartwatch Sales Dive 32%, Apple Watch Plummets 55%

The global market for smartwatches tumbled 32% in the second quarter of 2016, from 5.1 million units in the year-ago quarter to 3.5 million units. Apple Inc.’s (NASDAQ: AAPL) Apple Watch saw its share drop from 72% a year ago to 47% and unit sales fell from 3.6 million to 1.6 million.

What’s obvious from those few data points is that as Apple goes so goes the smartwatch business. In fact, if any of the remaining four top vendors — Samsung Electronics, Lenovo, LG Electronics and Garmin Ltd. (NASDAQ: GRMN) — were to stop selling smartwatches altogether, the market size wouldn’t drop appreciably, even if no other manufacturer picked up the sales.

The data were reported Thursday by research firm International Data, and researchers noted that Apple was the only one of the top five vendors to experience a decline in unit sales.

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Senior research analyst Jitesh Ubrani said:

Consumers have held off on smartwatch purchases since early 2016 in anticipation of a hardware refresh, and improvements in [Apple’s] WatchOS are not expected until later this year, effectively stalling existing Apple Watch sales. Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market. 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.

Earlier this year IDC forecast that sales of wearables would reach 110 million units in 2016, with smartwatches accounting for about 28.3 million of those units. Apple was pegged to sell 14 million units. Combined with IDC’s estimated sales of 1.5 million units in the first quarter, the company’s sales for the first half of the year total just 3.1 million. Apple does not report Apple Watch sales separately.

A new version of watchOS was released recently, and Apple Watch 2 could be released in September. That might help push sales higher in the fourth calendar quarter. Apple sold 4.1 million watches in the holiday quarter last year, the first full quarter after its introduction. Until a new Apple Watch is released, sales of the existing product will sag as consumers wait for the latest and greatest.

For its part, IDC is uncertain about the future of the smartwatch market. Ramon Llamas, research manager for the wearables group, said:

What will bear close observation is how the smartwatch market evolves from here. 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.

IDC anticipates that the market for smartwatches will grow in 2017, driven by new entrants from the world of traditional watchmakers like Fossil, Casio and Tag Heuer.

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