Smartwatches to help drive 17% growth in wearables this year, Gartner predicts

Apple Watch Series 2 (apple)
Apple's share of the smartwatch market will decline as the overall segment gets legs, Gartner predicts. Image: Apple

Smartwatches will help drive a wearables market that will enjoy 16.7% growth this year over 2016, according to new estimates from Gartner.

The market research firm said 41.5 million smartwatches will sell worldwide this year, up from 34.8 million in 2016. Smartwatches are on pace to account for the largest categories of wearables other than Bluetooth headsets from 2019 to 2021, with sales predicted to reach 80.96 million in 2021, Gartner predicted.

The smartwatch segment has fallen far short of the expectations of some industry onlookers who predicted early sales could mirror those of smartphones or tablets. Analysts say a lack of compelling apps and use cases are a major problem for the market, which is why simple fitness trackers have dominated their more sophisticated counterparts.

But Gartner’s estimates come just days after a similarly optimistic forecast from NPD Group, which predicted the U.S. smartwatch market will see 60% growth by the end of 2018.

“Smartwatches are on pace to achieve the greatest revenue potential among all wearables through 2021, reaching $17.4 billion,” said Angela McIntyre, a research director at Gartner, in the firm’s press release. “The overall ASP (average selling price) of the smartwatch category will drop from $223.25 to $214.99 in 2021 as higher volumes lead to slight reductions in manufacturing and component costs, but strong brands such as Apple and Fossil will keep pricing consistent with price bands of traditional watches.”

Apple will continue to dominate the smartwatch market, Gartner predicted, but its market share will shrink from one third this year to roughly 25% in 2021. Consumer electronics brands such as Asus, Huawei, LG, Samsung and Sony will combine to sell only 15% of smartwatches in 2021 “because their brands do not have as strong an appeal as lifestyle brands for personal technologies.”

But smartwatches targeted at children will perform well in the coming years, Gartner said, as the gadgets serve as a kind of gateway to smartphones for users under the age of 14. And fashion and traditional watch brands will gain traction as the overall market begins to go mainstream in the next few years.

“Luxury and fashion watch brands will offer smartwatches in an attempt to attract younger consumers,” McIntyre said.

Meanwhile, head-mounted displays (HMDs) will continue to struggle in the short term, according to Gartner, although the market is promising over the long term. HMDs will account for only 7% of all wearable devices shipped in 2017 and won’t see mainstream adoption with consumers or enterprise users through 2021.