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Apple Watch Has 75% Market Share; Here's Why That Matters

By Daniel B. Kline – Jul 27, 2015 at 6:00PM

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Sales may be slow so far, but as the potential audience grows, the product could build into a solid hit.

It's fair to say that Apple (AAPL 1.56%) Watch has struggled out of the gate.

Though the company has not released any sales figures for the new wearable, it's not yet selling by the ten of millions it would take to be considered an instant hit. That's probably not a reflection of the quality of the watch or even public interest in it. Instead, it's likely a reflection of the maturity of the smartwatch/wearable market overall.

People may not be ready for Apple Watch -- or any other smartwatch -- but when they are new research suggests that Apple may be the company to deliver it to them.

A number of different models of Apple Watch are being sold.

The market is growing
The demand for smartwatches is relatively tiny, but it's growing. Global smartwatch shipments grew by  457%  annually to hit a record 5 million units in the second quarter of 2015, according to Strategy Analytics. Of those 5 million watches shipped, Apple accounted for 4 million of them, giving the company 75% market share, the research firm reported.

The rate of growth reflects not only Apple entering the market but an increase in market awareness. The increase in shipments in the quarter was the fastest growth the industry has ever experienced with the volume exceeding the 4.6 million smartwatches shipped in all of 2014.

Apple is setting the tone and crushing competitors including Samsung, which Strategy Analytics estimated shipped 0.4 million smartwatches in the quarter despite having its watches on the market longer.

"Apple Watch has clearly raised the bar for the global smartwatch industry," said Neil Mawston, Executive Director at Strategy Analytics. "The ball is now in the court of rivals, like Samsung, to respond."

Apple has the audience
These early numbers suggest that Apple has captured a healthy majority of the people who want smartwatches. As the category grows, it's unlikely the company will keep a 75% market share due to the relatively high price of its watch, but if the market hits predicted highs, even a 25% share would be significant.

International Data Corporation, which tracks and predicts the wearables market expects shipments to rise 126.1 million units by 2019. Not all of those units will be watches, but wrist-worn devices have so far accounted for the vast majority of wearable devices sold.

If Apple keeps even 25% of that market, it will sell over 30 million smartwatches annually by 2019. If it keeps 50% of the market, which it could, it would have very similar sales to the iPad's 2014 numbers.

Slow growth to a modest hit
While the Apple Watch may never be the mega success that iPhone has been, it's likely the company never expected it to be. Since the device more or less requires an iPhone to work, its ceiling was always below its sister product.

The smartwatch may not be a game changer for Apple, but it looks likely to build into a solid and steady successful product line. Of course, for any other company building to 30 million-60 million units sold in only a few years would be an unquestioned victory.

For Apple, the stakes are higher as are the standards of success, but if these numbers hold up, the company will have a win here. A successful Apple Watch moving 30-plus million units a year also means tens of millions of people buying apps and spending money using the device.

Apple Watch is not there yet, but these numbers suggest it's on its way. It just needs the public's interest to catch up.

Daniel Kline owns shares of Apple. The last time he wore a watch, his hand broke out in a rash. The Motley Fool recommends and owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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