Apple Watch Remains No. 1, But Its Dwindling Position Puts AAPL in Peril

New figures are out showing global smartwatch shipments for the fourth quarter and for full-year 2018. These numbers show a smartwatch market that surged 56% in Q4 2018 as consumer interest grew in the advanced wearables. Apple (NASDAQ:AAPL) remains the leader, but the Apple Watch is losing its dominance as rivals catch up. In particular, Samsung and Fitbit (NYSE:FIT) are gaining ground on Apple watch sales.

Source: Apple

The stakes are high, especially for Apple and Fitbit. Apple stock is feeling the effect of slowing iPhone sales, while Fitbit has been in a struggle for survival — caught between the Apple Watch and cheap fitness trackers from China’s Xiaomi and others.

2018 Global Smartwatch Market Shows Apple Watch Sales Pace Slowing  

Strategy Analytics released its report on Global smartwatch shipments for Q4 and full-year 2018. They reveal a market showing impressive growth. According to Strategy Analytics’ estimates, global shipments hit a record 45 million units in 2018. In the fourth quarter of 2018 alone, 18.2 million units shipped for a 56% increase compared to Q4 2017.

Apple retained its leadership position in 2018. Shipment estimates are 9.2 million units for Q4 (AAPL doesn’t release actual Apple Watch sales numbers), up from 7.8 million the prior year. The 22.5 million units the company shipped for all of 2018 give it a 51% share of the global smartwatch market for 2018. However, that figure is way down from its 67.2% market share in the year-ago period.

Samsung, Fitbit Gain Ground

The big winners in 2018 are Samsung and Fitbit. Not that long ago Fitbit appeared to be on the ropes when its first smartwatch entry — the Ionic — failed to catch on as hoped, while fitness tracker sales slumped. With the Versa added to the lineup, however, smartwatch revenue surpassed fitness tracker revenue for the company for the first time in Q2 2018.

In fact, Fitbit said that the Versa was its fastest selling product ever. In Q4 2017, Fitbit’s smartwatch shipments were just 500,000 units. But in Q4 2018, Strategy Analytics has the number pegged at 2.3 million, with a total of 5.5 million for the year. That’s just a quarter of Apple Watch sales numbers, but an impressive growth rate and enough to edge out Samsung to take second place in 2018 global smartwatch shipments.

Samsung also saw strong growth, particularly in Q4 where it shipped 2.4 million units compared to 600,000 in Q4 2017. The company continues to offer a strong smartwatch lineup that is frequently refreshed. Its latest — the Galaxy Watch Active — was just announced a week ago.

It seems positioned to be a headache for Apple Watch sales, with integrated blood pressure monitoring (something AAPL can’t yet do) and a $199.99 price tag that’s half the cost of the cheapest Apple Watch Series 4.

The fourth biggest smartwatch vendor is Garmin (NASDAQ:GRMN), which has built a niche selling rugged smartwatches aimed at the fitness and outdoor activity market. The company maintained its fourth place spot, but saw modest growth and ultimately captured 7.1% of the market for 2018. Strategy Analytics says:

“Rising competition from Fitbit, Samsung and others in the sports and music categories is making it harder for Garmin to make headway in smartwatches.”

Smartwatch Market Consolidation

It’s getting tough at this point for companies to break into the smartwatch market. Combined, the top four companies accounted for over 80% of all smartwatches shipped, worldwide.

If you look at that top four, you’ll notice that none are associated with Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google division. Google’s Wear OS continues to be a smartwatch platform that’s failing to gain any momentum.

Wear OS should have a significant advantage because it supports Android — which powers 85% of all smartphones — and can also be used with iOS. Apple Watch sales are limited to consumers who own an iPhone …

Despite the Android numbers advantage, Apple Watch sales remain strong enough for AAPL to be the world’s number one smartwatch vendor in 2018. That’s good news for investors who are looking for other products to take the pressure off iPhone sales and help future Apple stock growth.

However, Apple’s slowing momentum and slipping dominance show the company needs to keep innovating if it wants to hold onto the smartwatch crown it’s worn since the Apple Watch launched in 2015.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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