How Apple's iWatch Can Help Wearables

Updated from 9:39 a.m. to include additional information in the last paragraph on the second page.

NEW YORK (TheStreet) -- Wearable devices are supposed to be the next big thing out of technology, yet early adoption so far has been slow. The same issue happened with tablets, MP3 players, and the smartphone, until one company came in and changed everything. Who's that? Apple (AAPL) of course.

The technology industry has been pushing it for a couple of years, be it with Jawbone's various devices, Fitbit's offerings, or Samsung's attempts with its Galaxy Gear smartwatch offerings. Samsung's initial offering was released in Sept. 2013, but received such criticism (including yours truly) that Samsung has already released a second version, as it seeks to break into the market, expected to be worth $60 billion by 2018, according to IHS.

With Apple's rumored device not set until at least the third quarter (more likely a Sept. release), the market and its players have some time to figure it out before Apple comes in and dominates, just as it did with the iPod, iPhone and iPads.

Google (GOOG), perhaps Apple's biggest competitor when it comes to the mobile device market (Google recently sold off its Motorola hardware division to Lenovo), recently announced Android Wear, which will use the Internet giant's mobile operating system, Android, tailored for wearable devices. Initially, like most wearable devices, Android Wear will be used for the health and fitness segment, as companies try to figure out additional marketable uses for smart devices.

The health and fitness market was the initial idea behind Intel's (INTC) purchase of Basis Science, a maker of smart-watches. Mike Bell, general manager of Intel's New Devices Group, said as the market plays out overtime and the technology gets better and looks more like a fashion accessory, we'll begin to see mass adoption.

"No smart-watch device solves anything for people in any good way," Bell said in a March 26 interview. "Over time, in the next couple of years, we're going to see more use cases. The capabilities in the Basis product will make it better, but I do think that biometrics are important on a going forward basis for watches or whatever."

Bell noted that the Basis team, which will report directly to him, has "incredible experience building health and wellness products," something that's very important for the wearables space right now. "The Basis guys have done something useful -- take data and make recommendations or set goals. I believe as we try to turn hype into reality, health and fitness is the reality."

Intel acquired Basis earlier this year for a reported $100 million, but Intel would not confirm that number.

Aside from inputting what you ate, tracking how many calories you've burned and how many steps you've taken, perhaps the biggest reason for wearable technology, at this stage, is health care and medical. Use cases such as Blood Pressure Monitors, Insulin Pumps, Continuous Glucose Monitoring, Defibrillators, Patches, Drug Delivery Products, PERS, ECG Monitors, Pulse Oximetry and Hearing Aids just to name a few will have an increasingly important role for wearable technology as populations get older and health care costs rise.

Preventive health care may be the thought process behind Apple's rumored new app, Healthbook, which stores user health and fitness-related data in one place. It's expected that Healthbook will be shown as part of Apple's newest mobile operating system, iOS 8, due to be unveiled at Apple's Worldwide Developer Conference, June 2-6, in San Francisco.

Whether Healthbook is released as part of iOS 8 or as part of a new hardware (iWatch) remains to be seen, but it's obvious Apple sees some kind of opportunity in the health and fitness market. This could wind up being a huge opportunity for Apple, according to Morgan Stanley analyst Katy Huberty.

"Our working assumption is that iWatch will largely be adopted as an accessory device and therefore sold into the existing customer base like the iPad rather than to new customers like the iPod or iPhone," Huberty wrote in Feb. research note about Apple. "Assuming an ASP of $299 and Apple customer base penetration rate similar to the iPad, we see up to $17.5B of revenue in the first 12 months compared to $12B for the iPad and $2.5B for the iPhone."

Interest in the space is growing, as Apple's rumored iWatch gets closer to being more fact than fiction.

Piper Jaffray analyst Gene Munster surveyed roughly 7,500 teenagers and found 6% of them own a smart-watch. However, 17% of those surveyed would buy an iWatch if Apple launched the product at or below $350. The 17% figure is up from an October 2013 survey, which saw 12% of respondents of the general public considering buying the iWatch, something Munster believes is being driven by the launch date getting closer.

Despite the hype, it's still up to technology companies to convince people to buy wearable technology, something that has been no easy task yet. Even Apple CEO Tim Cook has acknowledged the fact that wearable technology needs to demonstrate why people should buy it, as opposed to just being another gadget.

"The wrist is interesting," Apple's CEO said at 2013 tech conference, speaking with Walt Mossberg and Kara Swisher. "You still have to convince people it is worth wearing."

Cook went on to note that the sensor field, and not just smart watches, but all connected devices, will explode over time. "The whole sensor field is going to explode," Cook said during the conversation. "It's a little all over the place right now. With the arc of time, it will become clearer."

Aside from health and fitness and medical applications, the most obvious use cases right now seem to be industrial and military, as well as infotainment, enhancing people's lifestyles.

In the military, be it on a battle field or in a command center thousands of miles away, smart devices can receive and transmit data in real time, something that may wind up saving a life. The same goes for the industrial use case, where supply chain management and problem solving are becoming more complex, given the global economy.

The infotainment market is a little more ambiguous, and perhaps that's why Samsung's Galaxy Gear has proven to be unsuccessful, so far. Using a device in conjunction with a phone that can already do many, if not all, of the same tasks seems redundant, especially when the device costs roughly $300. Asking consumers to fork over additional money (and likely additional data charges as well), without giving them a good reason to seems like a market destined to die before it takes off.

Apple may be looking at the iWatch in this manner, but in an entirely different way. The company filed a patent it for media to be transferred between devices using GPS data with a separate accessory. It's also interesting to note that the patent shows that you don't need a GPS receiver to push location information to the device. Right now, Apple only builds iOS devices with GPS technology in them, but that could change in the future.


For now, the market as a whole is still taking shape, with consumers tiptoeing into the water, waiting for that one killer product to bring on the avalanche.

As IHS notes, there is a very real fear that the adoption of wearable technology in the broader spectrum becomes limited to early adopters and tech enthusiasts, due to lack of products, poor usage habits, and the sense that the additional time and money spent don't make having a wearable device, be it glasses, a smart-watch or another form, useful.

However, there is still plenty of time for the market to grow into what everyone thinks it will be, and that will be led by companies, such as Apple and others, offering a variety of products, and being able to demonstrate why people should buy them.

"The upside scenario represents a best-case for wearable technology adoption. It assumes significant success of wearable products based on successful introduction of new technology, such as smart glasses, smart watches, non-invasive glucose monitoring, and widespread availability of products from major brands," IHS said in the white paper.

Now all the industry needs is Apple. Just like it has so many times before, and likely will again.

--Written by Chris Ciaccia in New York

>Contact by Email.

More from Technology

Amazon Wants to Use Your Car as a Mobile Warehouse - Here's What That Could Mean

Amazon Wants to Use Your Car as a Mobile Warehouse - Here's What That Could Mean

Twitter's Turnaround Continues but Investors Don't Seem Entirely Convinced

Twitter's Turnaround Continues but Investors Don't Seem Entirely Convinced

Will China Save Tesla?

Will China Save Tesla?

Will Alibaba Be the Next Big Player in Autonomous Driving?

Will Alibaba Be the Next Big Player in Autonomous Driving?

3 Hot Reads From TheStreet's Top Premium Columnists

3 Hot Reads From TheStreet's Top Premium Columnists