Apple Watch Captures 75% Global Smartwatch Marketshare in Q2

2015

Wearable Device Ecosystem (WDE)

Report Summary
Global smartwatch shipments jumped to a record 5 million units in Q2
2015. Apple Watch was the star performer, taking 75% global
smartwatch marketshare in its very first quarter. Rivals -- such as
Samsung, LG, Sony, Motorola, Asus, Alcatel and Huawei -- are lagging a
long way behind.

July 22 2015
Neil Mawston
Tel: +44 (0) 1908 423 628
Email: nmawston@strategyanalytics.com

www.strategyanalytics.com
Executive Summary
Global smartwatch shipments grew +457% YoY and hit a record 5.3 million units in Q2 2015. It was the
smartwatch industry's fastest ever growth rate. Volumes in this single quarter were higher than for the
whole of 2014 (4.6 million units).

The growth in smartwatch shipments was driven by the introduction of the much-hyped Apple Watch.

APPLE shipped 4.0 million smartwatches and captured a dominant 75% marketshare worldwide in Q2 2015.
The Watch launched commercially in sixteen major countries, such as China, and saw robust takeup from
iPhone loyalists. It generated global revenue well over US$1 billion. Apple has raised the bar for the
smartwatch industry. The ball is now in the court of rivals, like Samsung, to respond. However, we note the
Watch launch has NOT been completely smooth for Apple. We believe there were some manufacturing
issues that capped output in the second quarter (shipments could have been much higher), while rumors
have started to swirl of possible price-cuts to spur additional growth in the third or fourth quarters.

SAMSUNG shipped 0.4 million smartwatches and captured 8% marketshare worldwide in Q2 2015. This is
down sharply from 74% share a year ago. After two years in the top spot, Samsung has dipped to second
place in the rankings. Its slowdown is partly due to Apple Watch, and partly due to a "wait and see"
approach to its new-model launches. The ball is now firmly in Samsung's court to respond to Apple's threat
with a refreshed portfolio of Gear devices using Tizen or Android OS during Q3 and Q4 of this year. The
"smartwatch wars" between the “big two” brands are underway.

PEBBLE shipped 0.2 million smartwatches and captured 4% marketshare worldwide in Q2 2015. This is
down sharply from 30% share in Q2 2013. Pebble remains a top-5 player, but it is steadily losing traction on
a global basis due to its limited distribution networks, modest brand awareness, small marketing budget,
and low model diversity. Pebble will inevitably struggle to "play with the big boys" as more and more
vendors like Apple enter the market.

MOTOROLA reached 2% smartwatch marketshare globally in Q2 2015, up from 1% a year ago. The firm
updated its portfolio with the sleek Moto 360 model in the final quarter of last year -- but a modest battery
life for the device and limited distribution channels in US, Europe and worldwide means the first-gen 360
has NOT become a blockbuster product.

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SONY shipped 0.1 million smartwatches worldwide in Q2 2015, taking 2% share. It is the fifth largest
smartwatch player, globally. Sony's smartwatch volumes globally have been historically driven mostly by
Micrium OS models, but this is changing as the company switched to Android Wear for Smartwatch 3 in the
second half of 2014. We continue to reiterate that the limited retail presence the company has in the US
and China smartwatch markets -- two of the world's most important countries for the category -- will
hamper its future growth if not addressed by 2016.

LG shipped 0.1 million smartwatches for 2% share worldwide in Q2 2015. It is the sixth largest smartwatch
player, globally. The firm is finally attacking hard the smartwatch category, with models like the G Watch R
and Urbane in markets such as South Korea and the UK. However, LG clearly still has a long way to go to
catch the "big two" of Apple and Samsung and it will need more models and extra retail presence to grow in
2016.

The "LONG TAIL" of Other smartwatch vendors -- including Asus, TCL-Alcatel, Huawei, Omate, Basis, Burg
and numerous others -- has grown again this quarter, in annual terms, illustrating the ongoing vendor
interest and competition in the category (despite moderate volumes so far). For example, Asus (2% share)
has gathered some steam with its ZenWatch range, due to a reasonable pricepoint and decent design. By
contrast, TCL-Alcatel (<1% share) is delivering a mixed performance and its low-cost Watch series is not yet
making major headway.

We continue to expect competition to ramp up in H2 2015, with new-entrants from Asia, such as Huawei,
expanding into the market. We also expect one or more wristwatch makers to break cover with a new
smartwatch model / models later this year (e.g. Fossil).

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 Exhibit 1: Global Smartwatch Shipments & Vendor Marketshare in Q2 2015

Global Smartwatch Vendor Shipments (Milions of Units) Q1 '14 Q2'14 Q3'14 Q4'14 2014 Q1 '15 Q2 '15
Apple ~ ~ ~ ~ ~ ~ 4.0
Samsung 0.5 0.7 0.7 0.9 2.8 0.4 0.4
Pebble 0.1 0.1 0.1 0.4 0.7 0.2 0.2
Motorola 0.0 0.0 0.1 0.2 0.3 0.2 0.1
Sony 0.1 0.1 0.1 0.2 0.4 0.1 0.1
LG ~ ~ ~ ~ ~ 0.1 0.1
Asus ~ ~ ~ ~ ~ ~ 0.1
Others 0.0 0.0 0.1 0.3 0.4 0.3 0.3
Total 0.7 1.0 1.0 1.9 4.6 1.3 5.3

Global Smartwatch Vendor Marketshare % Q1 '14 Q2'14 Q3'14 Q4'14 2014 Q1 '15 Q2 '15
Apple ~ ~ ~ ~ ~ ~ 75.5%
Samsung 71.4% 73.6% 70.0% 46.2% 60.9% 30.8% 7.5%
Pebble 11.4% 13.1% 10.0% 20.3% 15.2% 15.4% 3.8%
Motorola 1.4% 1.1% 5.0% 11.8% 6.5% 15.4% 1.9%
Sony 11.4% 8.4% 8.0% 8.2% 8.7% 7.7% 1.9%
LG ~ ~ ~ ~ ~ 7.7% 1.9%
Asus ~ ~ ~ ~ ~ ~ 1.9%
Others 4.3% 3.8% 7.0% 13.5% 8.7% 23.1% 5.7%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source: Strategy Analytics

Summary & Conclusions

Global smartwatch shipments grew +457% YoY and hit a record 5.3 million units in Q2 2015. It was the
smartwatch industry's fastest ever growth rate. Volumes in this single quarter were higher than for the
whole of 2014.

The growth in smartwatch shipments during the quarter was driven by the introduction of the much-hyped
Apple Watch. With 75% global smartwatch marketshare, Apple Watch is looking unassailable right now.
Clearly, 2015 is the year of Apple Watch.

However, we note there were some manufacturing issues for Apple that capped Watch output in the second
quarter -- shipments in Q2 2014 could have been 1 to 2 million units HIGHER. And rumors have started to
swirl of possible price-cuts to spur additional Watch growth in the third or fourth quarters of 2015.

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Analyst Contacts:

Rajeev Nair +44 1908 423 629 RNair@strategyanalytics.com

Cliff Raskind +1 617 614 0700 Craskind@strategyanalytics.com

Steven Waltzer : +1 617 614 0758 SWaltzer@strategyanalytics.com

Woody Oh +44 1908 423 665 WOh@strategyanalytics.com

Linda Sui: +1 617 614 0735 LSui@strategyanalytics.com

Ken Hyers: +1 617 614 0757 KHyers@strategyanalytics.com

Peter Lin +1 1908 423 634 Plin@strategyanalytics.com

David Kerr: +1 617 614 0720 DKerr@strategyanalytics.com

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