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Canalys: Apple Shipped 3.8 Million Watches in Q1

By Evan Niu, CFA - May 23, 2018 at 5:52PM

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The Mac maker came out on top of the wearables market in the first quarter.

Smartwatches are taking over the wearables market. That product category continues to cannibalize other types of wearable devices like basic fitness trackers, a trend that is expected to continue for the foreseeable future. Apple (AAPL -0.44%) is now the top dog in wearables thanks to the strength of Apple Watch. In fact, the company beat out all competing smartwatch vendors combined in 2017, after excluding other wearables categories.

As Apple obfuscates Watch results, investors still have to rely on third-party estimates to gauge how the device is faring.

Man wearing Apple Watch

Image source: Apple.

Still on top

Canalys estimates that Apple again grabbed the top spot in the wearables market in the first quarter, shipping 3.8 million units. That was good enough to grab 18% of the market, which saw overall unit volumes jump 35% to 20.5 million. China's Xiaomi, which is preparing to go public, came in a close second with 3.7 million units. However, Xiaomi's unit volumes predominantly consist of Mi Bands, the company's low-cost basic fitness trackers. Thanks to the relatively higher prices of smartwatches, they now comprise 80% of global wearables revenue, despite only representing 43% of unit volumes.

Much like other analysts have found, the recent inclusion of cellular connectivity is helping drive demand. "Key to Apple's success with its latest Apple Watch Series 3 is the number of LTE-enabled watches it has been able to push into the hands of consumers," Canalys analyst Jason Low said in the release. "Operators welcome the additional revenue from device sales and the added subscription revenue for data on the Apple Watch, and the list of operators that sell the LTE Apple Watch worldwide is increasing each month." 

For the cellular-equipped subset of the smartwatch market, the Mac maker now enjoys market share of 59%. However, that could be more related to the fact that there simply aren't many other smartwatches out there that feature cellular connectivity. Alphabet subsidiary Google is reportedly working on a Pixel-branded smartwatch that could include cellular connectivity, which has the potential to jump-start competition, as third-party Android Wear manufacturers are shifting their focus away from the platform.

Fitbit (FIT) came in No. 3, with 11% market share (2.2 million devices sold) as that company continues to try navigating the transition to smartwatches, most recently with the Versa, which Fitbit hopes will appeal to mainstream consumers. Fitbit's first smartwatch, the Ionic, fell flat, which Fitbit attributed to it being "more of a performance product." Note that Canalys includes Fitbit's Blaze as a smartwatch, even as Fitbit itself does not consider the Blaze to be a full-fledged smartwatch.

In many ways, Apple Watch is following in the footsteps of the iPod. The iPod wasn't the first MP3 player, but quickly became the most popular product and defined the category. Apple Watch is now doing likewise.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends GOOG, GOOGL, Apple, and Fitbit. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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