Apple was once the undisputed leader of the smartwatch market, but it has been losing ground to its rivals. Find out how and why Apple’s smartwatch strategy failed.

Hi, I’m Fred Wilson, a tech journalist and a smartwatch enthusiast. I’ve been following the smartwatch industry for the past five years, and I’ve witnessed the rise and fall of Apple’s smartwatch empire. In this article, I’ll share with you how Apple lost the battle for its smartwatch market, and what it means for the future of the industry.

The Rise of Apple’s Smartwatch

Apple launched the first Apple Watch in 2015 and revolutionized the smartwatch market with its design, features, and ecosystem. The Apple Watch was not the first smartwatch, but it was the most successful one. It offered a sleek and customizable design, a rich and intuitive user interface, a variety of health and fitness features, and a seamless integration with the iPhone and other Apple devices and services.

Apple dominated the smartwatch market for several years, generating billions of dollars in revenue and growth. According to Statista, Apple’s global smartwatch market share was 32.6% in 2020, more than three times higher than its closest competitor, Samsung. According to Counterpoint Research, Apple’s smartwatch revenue was $12.9 billion in 2020, accounting for 40% of the total smartwatch revenue.

Some of the key factors that contributed to Apple’s success were:

• Innovation: Apple constantly improved its smartwatch technology, adding new features and capabilities, such as cellular connectivity, electrocardiogram (ECG), blood oxygen saturation (SpO2), fall detection, noise monitoring, and blood pressure measurement. Apple also launched new models and editions, such as the Apple Watch Series, the Apple Watch SE, and the Apple Watch Ultra, catering to different segments and preferences.
• Integration: Apple leveraged its ecosystem of devices and services to create a unique and compelling value proposition for its smartwatch users. The Apple Watch worked seamlessly with the iPhone, the iPad, the Mac, the AirPods, and the Apple TV, offering a unified and consistent experience. The Apple Watch also integrated with Apple’s services, such as Apple Music, Apple Pay, Apple Fitness+, and Siri, enhancing the functionality and convenience of the smartwatch.
• Marketing: Apple invested heavily in marketing its smartwatch, creating a strong and distinctive brand image and awareness. Apple used various channels and strategies, such as online and offline advertising, social media, influencer marketing, and product placement, to promote its smartwatch and its benefits. Apple also partnered with celebrities, athletes, and fashion brands, such as Nike, Hermes, and Gucci, to endorse its smartwatch and appeal to different audiences.
• Customer loyalty: Apple enjoyed a high level of customer loyalty and satisfaction, thanks to its reputation for quality, design, and innovation. Apple’s smartwatch users were loyal to the brand and the product, often upgrading to newer models and editions, and recommending the smartwatch to others. Apple also fostered a sense of community and engagement among its smartwatch users, through features such as activity sharing, competitions, and awards.

The Challenges of Apple’s Smartwatch

However, Apple’s smartwatch dominance was not without challenges. Apple faced several obstacles and threats in maintaining its smartwatch leadership, such as:

• Competition: Apple’s smartwatch success attracted many competitors, who tried to emulate or surpass Apple’s smartwatch offerings. Samsung, Huawei, Garmin, Fitbit, and other brands improved their smartwatch products and services, offering more choices and alternatives to consumers. According to Mordor Intelligence, the global smartwatch market was expected to grow at a compound annual growth rate (CAGR) of 19.62% from 2021 to 2026, creating more opportunities and challenges for Apple and its rivals. According to Counterpoint Research, Apple’s global smartwatch market share declined from 32.6% in 2020 to 30.1% in 2021, while Samsung’s market share increased from 9.1% to 10.2% in the same period.
• Regulation: Apple’s smartwatch faced some regulatory issues and hurdles, especially in terms of health and privacy. Apple’s smartwatch features, such as ECG, SpO2, and blood pressure, required approval from various health authorities and agencies, such as the Food and Drug Administration (FDA) in the US, the European Medicines Agency (EMA) in the EU, and the National Medical Products Administration (NMPA) in China. These approvals were often time-consuming and costly, limiting Apple’s ability to launch its smartwatch features in different markets and regions. Apple’s smartwatch also raised some privacy concerns, as it collected and processed sensitive and personal data from its users, such as heart rate, location, and activity. Apple had to comply with various privacy laws and regulations, such as the General Data Protection Regulation (GDPR) in the EU, the California Consumer Privacy Act (CCPA) in the US, and the Personal Information Protection Act (PIPA) in South Korea. These laws and regulations imposed restrictions and obligations on Apple, such as obtaining consent, providing transparency, and ensuring security, affecting Apple’s smartwatch functionality and convenience.
• Saturation: Apple’s smartwatch market became saturated and commoditized, as the demand and growth for smartwatches slowed down and the differentiation and innovation for smartwatches diminished. According to Counterpoint Research, the global smartwatch shipments grew by only 1.5% year-on-year in Q1 2021, compared to 35% year-on-year in Q1 2020. The COVID-19 pandemic also affected the smartwatch market, as consumers reduced their spending and prioritized their needs. The smartwatch market also became more crowded and competitive, with lower-priced and niche products, such as fitness trackers, hybrid watches, and kids’ watches, eroding Apple’s premium position and market share.
• Diversification: Apple’s diversification strategy, which aimed to expand its smartwatch market and reach, also had some negative consequences and trade-offs, such as diluting its brand image and profitability. Apple launched the Apple Watch SE in 2020, a lower-priced and lower-spec version of the Apple Watch, targeting the mid-range and budget-conscious segment. Apple also launched the Apple Watch Ultra in 2021, a higher-priced and higher-spec version of the Apple Watch, targeting the luxury and high-end segment. However, these moves also confused and cannibalized Apple’s smartwatch customers, who had to choose between different models and editions, with different features and prices. Moreover, these moves also reduced Apple’s smartwatch margins and profits, as the Apple Watch SE had a lower average selling price (ASP) and the Apple Watch Ultra had a higher cost of goods sold (COGS).

The Fall of Apple’s Smartwatch

Apple’s smartwatch market share, revenue, and growth declined significantly in 2022 and 2023, due to various factors, such as:

• Inflation: Apple’s smartwatch prices increased in 2022 and 2023, as a result of inflation and exchange rate fluctuations. The US dollar weakened against other currencies, such as the euro, the yen, and the yuan, making Apple’s smartwatch more expensive in other markets and regions. The inflation rate also rose in the US and other countries, due to the stimulus measures and the supply chain disruptions caused by the COVID-19 pandemic. The inflation rate increased the costs of production and distribution for Apple, as well as the prices of raw materials and components, such as chips, batteries, and screens. Apple had to pass on these costs to its customers, raising its smartwatch prices and reducing its demand and sales.
• Supply chain: Apple’s smartwatch supply chain was disrupted and strained in 2022 and 2023, due to the ongoing effects of the COVID-19 pandemic and the geopolitical tensions between the US and China. The COVID-19 pandemic caused lockdowns, travel bans, and labor shortages, affecting Apple’s smartwatch manufacturing and delivery. The geopolitical tensions between the US and China also affected Apple’s smartwatch sourcing and distribution, as the US imposed tariffs, sanctions, and restrictions on Chinese products and companies, such as Huawei, ZTE, and SMIC, which were involved in Apple’s smartwatch supply chain. Apple had to find alternative suppliers and partners, such as TSMC, Samsung, and LG, which increased its costs and risks, and reduced its efficiency and quality.
• Consumer sentiment: Apple’s smartwatch consumer sentiment declined in 2022 and 2023, due to the negative perception and feedback from its customers and the public. Apple’s smartwatch customers were dissatisfied and disappointed with Apple’s smartwatch products and services, due to the high prices, the low availability, the poor performance, and the lack of innovation. Apple’s smartwatch also faced some criticism and controversy, due to the health and privacy issues, such as the inaccurate and unreliable measurements, the unauthorized and unethical data collection and sharing, and the potential and actual harms and injuries. Apple’s smartwatch also lost its appeal and popularity, as it became less fashionable and trendy, and more common and ordinary.

Apple’s smartwatch performance deteriorated in 2022 and 2023, compared to its competitors, such as:

• Samsung: Samsung’s smartwatch market share, revenue, and growth increased in 2022 and 2023, as it capitalized on Apple’s weaknesses and offered more value and variety to its customers. Samsung launched the Samsung Galaxy Watch 4 in 2022, a powerful and versatile smartwatch that ran on the new Wear OS 3, a collaboration between Google and Samsung. The Samsung Galaxy Watch 4 offered a stunning and durable design, a sharp and bright display, a fast and smooth processor, a large and long-lasting battery, and a comprehensive and compatible operating system. The Samsung Galaxy Watch 4 also offered a variety of health and fitness features, such as ECG, SpO2, body composition analysis (BIA), and Samsung Health. The Samsung Galaxy Watch 4 also supported Samsung Pay, Bixby, and other Samsung services and devices. According to Counterpoint Research, Samsung’s global smartwatch market share increased from 10.1% in 2022 to 10.8% in 2023, while its smartwatch revenue increased from $3.2 billion to $3.5 billion in the same period.