I read the note from Piper Jaffray analyst Gene Munster earlier this week in which he plots Apple’s upcoming year.
It revolves around tweaks to existing products – iPhone 5S, a cheaper iPhone and an upgraded iPad and iPad mini.
Munster believes that Apple will leave the innovation until the end of the year when it will unveil its core new product – the iWatch.
If Munster is right then I think that the iWatch could be a very important project for Apple this year and here is why they, along with Samsung, LG and lots of start ups, are eagerly eyeing up the smart watch market.
1 It is a market with huge potential
The phone may have replaced the watch for many people but it is still a massive market. If you are going to break into a new market then it is best to break into one (and even better innovate) where there is already a huge amount of business.
2 Smartphone sales are flattening
One of the reasons why Apple shares have tanked a little recently is that there is a fear that smartphone sales are starting to flatten. If you live in the western world and you wanted a smartphone chances are you would have bought one by now. The future is all about upgrades. With sales starting to slow to keep investors on board Apple, and to a lesser degree Samsung, need to be looking at a new market.
3 Locking people into platforms
With the sales of smartphones slowing it is imperative that Apple doesn’t hemorrhage customers to Samsung and vice versa. It is important to lock people into using an operating system so that when it comes to an upgrade they don’t desert your brand. If you create a watch that only works with one kind of platform and someone invests in it, then they are even more likely to stay with that platform in the future. The interesting question is whether the Samsung watch will be Android only. In theory they could produce a watch that worked with Apple iOS and Windows handsets.
4 Possibility of new rivals establishing themselves
If we accept that the smart watch is going to be an important area moving forwards – as is the wearable gadget sphere – then Samsung and Apple both need to watch their backs.
They could face all kinds of competition in the space. Off the top of my head – Nike and other sports brands could deliver watches that work with handsets in a similar way to the Samsung/Apple offerings, but that major on fitness/health items.
Casio already has a smart watch on the go and has innovated in this space several times before. Who know what they have up their sleeves. Sony could produce a watch that majors on entertainment features as could Amazon. Then of course there are the watches that are onsale already from Pebble etc some of which are very good.
If Apple and Samsung want to dominate the smart watch space they need to move quickly
5 A need to innovate
As I mentioned in the intro this is essential, especially for Apple. With this year dominated by upgrade products it needs to show that it can still create something magical and new to wow the cynics and give its fan people something to brag about.
Samsung could in theory drive a road through Apple’s 2013 strategy by getting there first with an impressive smart watch. Imagine if the watch went on sale before the iWatch, was better specified and more stylish and worked with iPhones as well as Android devices. Apple could look like an also ran.
Conversely if Apple can get the smart watch right and deliver somethign that is significantly in advance of what Samsung offers it will reclaim its crown as consumer electronics’ key innovator.
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