Investors have known for some time that Apple's (NASDAQ:AAPL) future growth wouldn't come courtesy of the iPhone. Worldwide smartphone shipments fell by more than 4% in 2018, and when the final tally is done, it's expected to show that the declines continued into 2019, falling an additional 1.4%, according to market intelligence company IDC. The growing penetration of the smartphone and incremental technological innovations are simply prompting users to keep their devices longer.
There's also been little doubt that a large chunk of Apple's future growth will come from wearables, which is especially true regarding the Apple Watch and AirPods.
New data reveals that in 2019, the Apple Watch outsold the entire Swiss watch industry -- combined.
The Apple Watch sold nearly 31 million units last year, up 36% year over year, and selling far more timepieces than the whole Swiss Watch industry, which sold about 21 million units, according to a report by research and consulting firm Strategy Analytics. The data suggests that Apple continues to steal market share from the traditional timepiece industry, as sales of Swiss watches slipped 13%.
A previous report shows that Apple also controls nearly half of global smartwatch shipments, with 48% of the market, more than its next two competitors combined. Samsung accounts for 13% of sales, while Fitbit (NYSE:FIT) represents about 11%.
"A blend of attractive design, user-friendly tech and sticky apps makes the Apple Watch wildly popular in North America, Western Europe and Asia," said Steven Waltzer, senior analyst at Strategy Analytics. The Apple Watch has been a fan favorite since it was first released in early 2015, radically changing what consumers expect from a smartwatch.
Not just the Apple Watch
Global shipments of wearable devices -- of which the Apple Watch is a component -- climbed to 84.5 million units in the third quarter of 2019, posting year-over-year growth of nearly 95%, while also breaking the record for shipments in a single quarter, according to data from IDC. This was an acceleration from the 29% growth in the second quarter and 55% increase in the first quarter. The majority of the growth was driven by new ear-worn wearables, or hearables (which include wireless headphones and earbuds) -- which accounted for nearly half the market in the third quarter.
Apple represented a disproportionate share of growth in the category, shipping 29.5 million units, up a mind-boggling 196% year over year, and controlling 35% of the market.
Poised to continue
All signs point to Apple continuing its dominance in the wearables category for the foreseeable future. In Apple's fiscal first quarter (which ended Dec. 28), the company reported record sales of wearables. During the conference call, CEO Tim Cook said that the Apple Watch set "an all-time revenue record during the quarter," while revealing that over 75% of customers who bought the device were new to the Apple Watch, having never purchased one before. The company also set an all-time record for AirPod sales.
These records helped Apple generate more than $10 billion in sales in its wearables, home, and accessories segment, up 37% year over year, with "very strong double-digit performance across all five geographic segments," according to Cook. He broke that down even further, saying that "wearables as a category... grew 44%."
The data shared above and Apple's recent results illustrate just how dominant the company is in the wearables market and its momentum shows no signs of slowing.
It also doesn't hurt that Apple has an installed base on more than 1.5 billion devices, and more than 900 million of those are iPhones. Evercore ISI analyst Amit Daryanani estimated in November that there were about 75 million Apple Watches and 50 million AirPods currently in use, representing less than 10% of the installed base of iPhones. This gives Apple a vast target market and a long runway for wearables growth. It also gives the stock plenty of room for future gains.