25M cellular-capable smartwatches will be sold globally this year, CCS Insight says

CCS Insight offered a forecast of worldwide unit shipments in wearable devices by category. (CCS Insight)

As wireless network operators look to connect devices beyond smartphones, the Apple Watch and other smartwatches are becoming a major potential opportunity. And that opportunity is set to grow in the coming years, according to research firm CCS Insight.

“Basic cellular-enabled devices continue to represent a large portion of the smartwatch market in 2018,” the firm wrote in a new report. “These devices are mostly location-tracking watches with basic communication functions, designed for children and primarily sold in China. We expect 25 million units will sell this year, up from 20 million in 2017.”

The firm added that it expects 117 million total "smart wearable devices"—gadgets that stretch from fitness trackers to noncellular smartwatches to cellular-capable smartwatches—to be shipped in 2018, at a value of $13.2 billion. The firm added that it expects 233 million wearable devices to be shipped globally in 2022, with a sell-in value of $27.1 billion.

However, the firm cautioned that the opportunity for cellular-capable smartwatch sales in the United States remains relatively tepid. “Despite their massive appeal in China, these products have largely failed to resonate with consumers in other countries. We are seeing some early signs of adoption in a handful of markets such as the U.S., Japan and Korea, and initiatives such as V by Vodafone are exploring the opportunity in Europe, albeit very carefully,” the firm wrote. “Many of those involved in this area are concerned about the potential for privacy problems associated with technology targeted at children.”

Not surprisingly, CCS Insight pointed to the Apple Watch as a main driver of this trend, although the firm said Google’s Wear OS, alongside support from vendors like Qualcomm, will also help add to the mix.

Apple released its first cellular-capable Apple Watch last year, and last month the company introduced a newer version of the gadget.

Already, wireless operators are pointing to the cellular-capable Apple Watch as a noteworthy trend in their quarterly earnings. “In the third quarter, equipment revenue increased 13.7% on a year-over-year basis driven by higher-priced handsets and increased sales of wearables,” Verizon CFO Matt Ellis said this week during the operator’s quarterly conference call with analysts, according to a Seeking Alpha transcript of the event. Ellis said that Verizon recorded the addition of 300,000 connected devices during the third quarter, a figure he said was “led by wearables.”

Further, BayStreet Research found earlier this year that the nation’s wireless network operators collectively are selling tens of thousands of Apple Watch devices every month, and the vast majority of those sales include a new line of wireless service.

The growth of the smartwatch opportunity is key for the nation’s wireless carriers, considering they generally charge an extra $10 a month for Apple Watch cellular service. And though many carriers are offering a free month or three of service for the gadgets, BayStreet found that, at least so far, most Apple Watch customers are electing to pay the $10 per month to keep their watch activated.

“The adoption of advanced smartwatches will continue to increase between 2019 and 2022,” wrote CCS Insight in its recent report, pointing to both cellular-capable and noncellular smartwatches. “Apple will be responsible for some of the growth, but an important factor will be Wear OS. We expect traditional watchmakers and Chinese smartphone manufacturers to continue to improve their products, supported by developments in Google's operating system and efforts by chip-maker Qualcomm. They will target the huge underserved mass of Android smartphone owners, particularly as Apple's success with its Watch product has raised consumer awareness and interest in smartwatches. We expect unit sales of Wear OS watches to eventually surpass those of the Apple Watch.”