A version of this essay was originally published at Tech.pinions, a website dedicated to informed opinions, insight and perspective on the tech industry.
Politics and religion are supposed to be two hot-button topics you should avoid if you want to prevent arguments with friends, family and co-workers, but I think we can now add a third to that list: Wearables. From the Apple Watch to Microsoft’s HoloLens, the Fitbit to the Pebble, everyone seems to have an opinion on these devices and, in many cases, they aren’t lightly held.
The highly charged nature of people’s views on these devices is at least partially due to all the attention they’ve received. Regardless of the media platform or its primary focus, it seems like nearly every Tom, Dick and Jane wants to weigh in on why these devices are, or are not, the greatest thing since sliced bread.
For those in the tech business, the interest level is even more acute. With the traditional device markets — PCs, tablets and smartphones — all starting to show signs of maturity and saturation, there’s a strong focus on finding the next growth opportunity for device makers, component suppliers and lots of other companies in the technology hardware supply chain. Many are looking to wearables as the next big thing.
Unfortunately, a simple analysis of where the industry stands right now suggests it still has a long way to go in achieving that goal. Yes, we’ve seen some interesting and exciting new products, and it’s clear we’re still in the early days of product evolution for many of these categories. However, it’s also undeniably true that wearables, as a whole, have yet to light the world on fire.
Hope springs eternal, though — especially in the tech business — and the reality is we are starting to see some interesting and compelling applications, which suggest there could be a reasonable opportunity for wearables. What we’re also starting to see, however, is a number of shifts in expectations within the category. Like many new and highly dynamic markets, the wearables business continues to twist and turn, adding new layers of complexity that inspire different ways of viewing and understanding practically every day.
For example, instead of viewing wearables as pure standalone devices, many are starting to see them primarily as accessories to other devices. Even the standalone wearables are increasingly being positioned as devices you wear and use only for certain, relatively short periods of time.
In either case, the perceived value — and, likely, the expected price points — could end up being lower than initially thought. For many people, they will be “nice-to-have” devices instead of “need-to-have.”
Target markets and business models for wearables are also starting to shift. While most of the early focus has been on consumers, there’s an increasing recognition of a good opportunity in business and enterprise, particularly within certain vertical industries. In addition, given the lower cost and power requirements of next-generation cellular radios, there’s a small but increasing opportunity for connected wearables, especially in business.
All of these developments, and many others, helped drive the third iteration of the Technalysis Research Smart Wearables market forecast. In the short term, our view continues to be that the market opportunity remains modest, with total worldwide unit sales of approximately 48.3 million for 2015, and revenues of just under $12.6 billion. By 2020, however, we expect that units will more than triple to 175 million, and revenues will grow to about $31.5 billion. As a point of reference, our forecast for the tablet market in 2020 is about 208 million units and revenues of $50.9 billion.
The chart below shows the total smart wearables unit forecast split by category through 2020. As you can see, smartwatches are expected to remain the largest category through the forecast period, but headworn wearables such as HoloLens and future iterations of Google Glass will grow throughout the forecast period.
On a revenue basis, smart glasses are expected to slightly surpass smartwatches by 2020 because of higher average selling prices. From a consumer/commercial perspective, the consumer market is expected to retain about 89 percent of total units by the end of the forecast period in 2020, but the commercial market is expected to grab more than 34 percent of total revenues by then.
The bottom line is that we’re still in the early days of wearables, and there is still a lot of growth left in front of them. Plus, the market will undoubtedly evolve in a number of exciting new ways by the end of the decade. Nevertheless, it’s also important to bear in mind that wearables aren’t likely to provide the kind of explosive growth many in the tech industry hope they will. It all boils down to having the right set of expectations.
Bob O’Donnell is the founder and chief analyst of Technalysis Research LLC, a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. Reach him @bobodtech.
This article originally appeared on Recode.net.