Feature Story

Avoiding Commoditization in Wearable Technology

by: Raghu Das and James Hayward

In 2015 the global wearable technology market will be $24.2 billion, based on surveys conducted by IDTechEx Research. However, the majority of this – 74% - is for already mature wearables – the humble electronic wristwatch, earphones, blood glucose test strips and the like. The last five years has seen significant interest in the topic with new devices launched – mainly fitness trackers - as benchmarked by Google trends, shown below. This has led to an enduring increase in sales revenue and average sales prices as new forms of wearable technology devices arrived.

Source: IDTechEx Research www.IDTechEx.com

Healthcare: the largest opportunity

The largest opportunity for wearable devices is in medical and healthcare applications. With blood glucose monitoring as a key sector, wearable technology for the medical and healthcare sectors will show strong growth in the coming decade. Many of the key advantages offered by emerging new components are highly applicable to healthcare, offering new, comfortable, portable and practical ways to measure the human body from stretchable electronics to thin film flexible batteries. More than any other sector, healthcare applications require data reliability and accuracy. While many of the tests that are currently performed under hospital conditions can be made wearable, the challenge is to achieve equivalent or superior reliability and accuracy at sensible price points. That said, wearable technology solutions offer more practical, comfortable and convenient solutions in many healthcare situations.

Many of the companies looking to commercialize a new wearable technology are searching for partners in the healthcare and medical industries. Medical device manufacturers like Johnson & Johnson and Medtronic invest billions of dollars into new technology research, and these types of companies are usually the primary targets for many SMEs looking to commercialize new components. However, it can also take time. Where the sensor has important health consequences, it will need to be approved by the relevant local regulator body. That means clinical trials and potentially years of undertakings. Then it has to be approved for reimbursement by governments versus the incumbent technology (if there is one). This is similar to the pharmaceutical model: long-term development but potential for blockbuster sales if it all the planets align.

Unregulated devices, such as general fitness trackers, are much faster to get to market as a result but are much more prone to commoditization, which has already been seen as some of the fitness bands are now made for less than $5 in China.

Infotainment applications have generated much hype, driven by the prominence of several very well-known (but not necessarily successful) products such as Google Glass and Oculus VR headsets. Wearable infotainment is already prominent in the form of headphones, including basic headphones produced in their hundreds of millions, through to advanced offerings with connectivity, sensors and interactive operation. This industry alone is already worth billions of dollars, with the market for advanced hardware growing at a double digit rate each year. However, the general trend with wearable infotainment devices is very clear: they are developed, made and used in the USA, Japan and Korea, and then are commoditized by China, where an electronic wristwatch now typically sells for only $3 - in that case about one billion units yearly - and earphones for less.

Beyond basic earphones and electronic wrist watches, many of the use cases for advanced infotainment devices are still not as clearly defined as in healthcare. Some applications have been identified, but consumer uptake has been poor to date, and the use cases are still not completely clear for many proposed products.

Best Use Cases: Commercial, Industrial and Military use: some of the best use cases

The use of wearable technology in both the healthcare and infotainment markets is often a logical step from existing, mature wearable technology and consumer electronic solutions. The incorporation of wearable technology in other sectors such as commercial and industrial settings can represent a larger change or addition to existing wearable technology systems. The existing players in these spaces are not traditionally closely associated with many of the major players making wearable technology, so there is typically an extra degree of separation for established companies targeting this area. However, these sectors are much less prone to commoditization than infotainment, and have much lower barriers to adoption than in healthcare, so many are targeting this sector directly for emerging products.

The sensor variety alone in this sector is large. They vary from using tracking technologies in wearable devices to replacing scanners for warehouse processes, to tracking systems in smart glasses for providing assistance to workers in a hands-free way, to wearable cameras used for quality control. Many of the opportunities using existing sensors are still to be explored, but in many cases components such as sensors would need specific adaptation for these applications. This acts as a barrier that has restricted the number of easy wins so far, but those that have invested heavily will begin to see the rewards in the next 2-5 years.

Learn more about wearables at IDTechEx Wearable USA, November 18-19 in Santa Clara, California.

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