The Future of the Smartwatch Supply Chain

Posted in: Sector and Company Insights, Fitbit, industry, investing, pebble, samsung, sector, smartwatches, wearables

Smartwatches

The smartwatch industry: Sony and Samsung aren’t the only ways to bet on this rising tide.

We’re in a new world, where groundbreaking technologies come out of a Silicon Valley basement, are funded on Kickstarter, announced on TechCrunch, just as quickly – if not faster – than out of GE’s lab, funded by stockholders, announced on CNN.

At DataFox we map and join together signals from all over the online and offline world to uncover nascent trends, industries, product categories, and companies in real-time, helping our clients better align their resources.

On the weekends, we like diving into niche areas that we think could explode in a matter of years. Today we’re taking a look at smartwatches. Are these time-telling, Internet-connected wrist-screens reserved for water-cooler conversation about the latest Apple rumors, or is there a real industry on the rise?

As reported by Ariel Adams on Forbes, the Smartwatch Group (SG), a niche consulting firm, pegged the total market for smartwatches at $700M in 2013, led by Samsung Electronics with 34% market share, Nike with 9%, and Garmin with 8%.

Here's a look at the key players with our exclusive DataFox quality, finance, HR and influence scores:

SG claims that the market grew 900% in 2013, and will grow another 260% in 2014, with continued triple-digit growth in the next few years. Apple and Google are expected to be the big players, even though they haven’t released their first (anticipated) smartwatches yet.

In the private markets, Fitbit and Pebble have raised $66M and $25M, respectively. Pebble was one of the highest-funded Kickstarter projects to date.

Basis was acquired by Intel for a reported $100-150M.

So, as public market investors, where could we place our bets to play into this growing product category? Assuming pro-rata growth, Garmin's $60M market share could grow to ~$250M in 2014, just shy of 10% of Garmin's total revenues in 2013. At these growth rates, a company like Garmin can see its product and customer mix totally change in the next 5 years, with substantial growth outside of its traditional aviation, marine, and auto segments.

In other parts of the supply chain, consider Corning, the manufacturer of Gorilla Glass, widely considered the market leader in glass used in smartphones. Corning’s prospects as market leader will depend on the emergence of sapphire as a competing technology.

On the platform side – will Google benefit from Android’s prominence on multiple manufacturers’ devices?

We will be keeping this Watchlist updated as more companies enter or grow within the space – highly likely given that a full 28% of the market in 2013 consisted of over 30 players, including large companies such as Casio, Adidas, and Polar.

You can also download our Google Spreadsheet to conduct your own proprietary analysis on this space. This data in this spreadsheet is courtesy of DataFox and The Smartwatch Group.

Investment Advice Disclaimer The information contained in this post, while intended to interest investors, does not constitute investing advice or services. Future trends and predictions contained herein are derived from industry news and public information. These "forward looking-statements" are speculative, subject to risks and uncertainties, and are not guaranteed. Actual results may vary. Potential investing decisions should be made by consulting a professional legal, tax, investing or accounting professional, where risks and suitability can be throughly evaluated. DataFox makes no obligation to update or revise any of the statements contained herein.