A product line that has proven to be a huge success for Apple (NASDAQ: AAPL) is the Apple watch. Many competitors had launched several generations of smartwatch before the launch of the first, but it nevertheless managed to develop the total market of addressable addresses (TAM) and, over time, to become the leading manufacturer of smartwatch in terms of shipments and income.
According to a press release from Strategy Analytics, Apple sold 22.5 million smart watches in 2018, up 27.1 percent from a year earlier. However, Strategy Analytics data also shows that Apple's share of the global smartwatch market has increased from 60% in 2017 to 50% in 2018.
Should investors worry that Apple will lose its grip on this market? Here's why I do not think so.
A significant distortion
According to Strategy Analytics, the loss of Apple's shares is the Fitbit (NYSE: FIT) its share rose from 1.7% in 2017 to 12.2% in 2018. Samsung (NASDAQOTH: SSNLF) sees its smartwatch share rise from 10.6% the previous year to 11.8%. The data from Strategy Analytics shows that all other smartwatch manufacturers have seen their shares fall somewhat.
Now, based only on these numbers, you might ask yourself, "Does Fitbit crush Apple in the smartwatch market?"
The answer to this question is: "No, not really."
For its 2018 fiscal year – which ended December 31, 2018 – Fitbit recorded a business turnover of $ 1.51 billion, a significant decrease from $ 1.62 billion. 39, previous year. The company lost money ($ 185.8 million, to be more precise) and saw an overall reduction in unit shipments of $ 15.3 million to $ 13.9 million.
What's happening here is simple: sales of the company's fitness trackers – devices that are less functional and cheaper than conventional smartwatches – are declining, and this drop in shipments has been partially offset by sales of smartwatch products of the society. Indeed, the company said that in 2018, 44% of its revenue came from smartwatches, compared with just 8% the year before.
So since Fitbit essentially replaces the lost sales of fitness trackers (which do not like smartwatches for Strategy Analytics), with its smartwatch, Fitbit has seen its share of the smartwatch market soar. The share of the company in the wearables On the other hand, the market is probably down because the total number of its shipments of appliances has dropped from one year to the next.
Does Fitbit even compete with Apple?
If you go to the Fitbit website, you'll find that the company's cheapest Fitbit, the Versa, sells for $ 199.95; the most expensive Ionic is $ 269.95.
The least expensive Apple Watch Apple, an Apple Watch Series 3 GPS only, starts at $ 279.99. Apple is introducing new variants of the Apple Watch with features such as stainless steel enclosures and cellular connectivity of up to $ 849.
Apple also sells bands for its watches for $ 149, which undoubtedly helps to increase the company's overall watch revenue.
The reality is that it does not seem that Fitbit actually hinders the watchmaking activity of Apple. Indeed, as the data from Strategy Analytics show, the Apple Watch continues to benefit from strong growth in unit shipments, even in an increasingly competitive market. And, frankly, the sharp drop in Apple's smartwatch seems to be more a function of the significant increase in the TAM following the move from Fitbit's product line of fitness trackers to smartwatches, rather than a fundamental disruption. Apple's activities.
It is also telling that while the total business figure of Fitbit in 2018 was only $ 1.51 billion, Luca Maestri, Apple's chief financial officer, said during his last call for results that the business of Apple wearables "approaching the size of a fortune 200 company." (That is, it means that it generates nearly $ 14.6 billion in annual revenues.)
All revenues come from the Apple Watch (the wearables also include the company's line of AirPods wireless headphones as well as the Beats headphones family), but I'd bet that the share Apple's revenue in smartwatch compared to Fitbit is far greater than its share of unity.
So, relax, Apple shareholders: Apple's smartwatch business continues to grow phenomenally, and the seemingly large drop in the number of units sold is not not a cause for worry or even concern.