One of the biggest tech stories of 2014 will be the rise of the smartwatch. With virtually all of the other big consumer electronics items already being dominated by one or two mega-corporations, or saturated by a wealth of competition, the smartwatch market offers the opportunity for companies to get their foot in the door if they can produce something of quality.
Of course, the big boys are going to want a slice of this cake as well. It’s hardly surprising, then, that Apple Inc. (NASDAQ:AAPL) has already announced their plans to release a smartwatch in 2014. This is a natural marketplace for Apple Inc. (NASDAQ:AAPL) to enter into, given its vast successes in the other mobile genres.
Deprival Super-Reaction Syndrome And Investing. Part four of a short series on Charlie Munger’s Human Misjudgment Revisited. Charlie Munger On Avoiding Anchoring Bias Charlie Munger On The Power Of Prices The Munger Series - Learning . . . SORRY! This content is exclusively for paying members. SIGN UP HERE If you are subscribed and having an Read More
Apple reportedly struggling with iWatch
Except that not everything appears to be going according to plan for the manufacturing giant at present. There have been reports in the last week that Apple Inc. (NASDAQ:AAPL) is having manufacturing problems with the mooted iWatch. According to TechRadar, sources close to the Apple Inc. (NASDAQ:AAPL) manufacturing facilities have indicated that less than half of the iWatches currently being produced are actually leaving factories as usable devices. This apparently stems from difficulties in applying surface treatments to the metal injection molded watch chassis.
However, one can be certain that a company the size of Apple Inc. (NASDAQ:AAPL) is not going to let some teething troubles derail their plans before they even begin. A resourceful and experienced manufacturing company such as Apple Inc. (NASDAQ:AAPL) has many tricks up their sleeve with regard to solving this problem, and it seems inevitable that the problems with the iWatch will be ironed out sooner or later.
A couple of more pressing questions for Apple Inc. (NASDAQ:AAPL) will be, firstly, can it dominate the smartwatch market as it has with smartphones and tablets? And would it be better advised to concentrate on its iPhone and iPad offerings, given that it’s going to experience a real challenge from Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) this year?
With regard to the latter question, Apple Inc. (NASDAQ:AAPL) will be confident of staying ahead of Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), particularly in Western Europe and North America. The Korean giant is becoming a big name in East Asia, where it more succinctly resonates with the locals, but it would be extremely hard to argue that Samsung has the same cachet in the West, Apple Inc. (NASDAQ:AAPL)’s key marketplace.
One interesting trend which will have an influence on Apple Inc. (NASDAQ:AAPL)’s mobile business moving forward, though, is the shifting economic status of the planet. It is guaranteed that China will become the world’s biggest economy at some point during this decade, and the so-called ‘developing economies’ are becoming an ever more significant marketplace. There probably will be a time that Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) overtakes Apple Inc. (NASDAQ:AAPL) if these trends continue, and that time is probably sooner rather than later, so Apple Inc. (NASDAQ:AAPL) will be well aware of the importance of establishing a big reputation and presence in Asia in particular.
So their mobile business moving forward looks pretty secure, even if there are some issues to resolve, but where are they with regard to the smartwatch market? Well, smartwatches only really received mainstream attention in the last year or so, thus the first assertion that can be made confidently is that there isn’t really an established market leader thus far.
Brand identity for smartwatches still up for grabs
At the ongoing Consumer Electronics Show, the Pebble smartwatch has received a lot of attention, and could be considered the ‘coolest’ smartwatch out there at the moment. But the smartwatch has been very much a niche item thus far, and there is no guarantee that the current market leaders have really established themselves in the public consciousness as of yet. Certainly if you ask the average person what a Pebble is, they will certainly respond that it’s a type of small rock, whereas the connotations of the word ‘apple’ have already been profoundly changed by the success of the iPhone (and iPods, previously) in particular.
Nonetheless, with no firm release date for the iWatch, and a wealth of competition already established in the marketplace, Apple Inc. (NASDAQ:AAPL) clearly has its work cut out to become the biggest smartphone seller during 2014 at least. CES 2014 has seen the introduction of a vast raft of new smartwatches, although those resident at the trade show have stated that the possible appearance of an iWatch has created a buzz in the smartwatch sector all of its own.
Meanwhile major companies such as Qualcomm, Inc. (NASDAQ:QCOM), Sony Corporation (NYSE:SNE) (TYO:6758), and Intel Corporation (NASDAQ:INTC) have already developed smartwatches, although Qualcomm have also been plagued by the manufacturing difficulties which have blighted Apple Inc. (NASDAQ:AAPL). A variety of other companies have also come up with smartwatches, including the computer component manufacturer Intel Corporation (NASDAQ:INTC), with Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) also rumored to follow.
Clearly these are not the sort of competitors who are going to merely roll over and die just because Apple Inc. (NASDAQ:AAPL) puts an iWatch out. However, Apple does have the opportunity to observe some of the initial problems and issues that the early producers have to deal with in this marketplace. It it clear thus far that producing a design which provides necessary functionality, but at the same time is unobtrusive and attractive, has been a significant obstacle, and one that it could be argued that none of the current smartwatch makers have truly circumnavigated.
This is perhaps where Apple Inc. (NASDAQ:AAPL)’s expertise can really come in more than handy. If there is one element of their work which has set the iPad manufacturer apart, it is the unequaled design quality of their devices. Apple Inc. (NASDAQ:AAPL)’s design department will undoubtedly be observing the initial difficulties in this sector with interest, and already contemplating how they can solve these issues with the iWatch. This is something they have achieved continually in the past, it is arguably the entire core of their business, so don’t bet against them in the smartwatch market.