Canalys: a second generation Apple Watch will spur sales of smart watches with cellular connectivity

Canalys forecasts that 7.5 million smart watches with cellular connectivity — including a second generation Apple Watch — will ship in 2016, rising to 53.6 million in 2020. 

This represents a compound annual growth rate of 63% from 2016 to 2020. In the short term, shipments are likely to be driven by a new Apple Watch with cellular connectivity, says the research group. Canals says Samsung and LG have been very aggressive in bringing new cellular technologies to market, with smart watches such as the Gear S2 classic 3G/4G and the Watch Urbane 2nd Edition LTE, and will also play significant roles. Both the Tizen and Android Wear smart watch platforms already support cellular connectivity.

“The phase 2 eSIM specification will enable more independent smart watches with a smoother user experience around cellular connectivity. Users will soon be able to easily choose among cellular providers and pay for monthly service,” says Canalys Analyst Daniel Matte. “Many more smart watches with LTE and GPS/GNSS will also be released this year, thanks to the availability of new LTE Category 1 chipsets.”

He adds that, after a full year of availability, these new technologies will have the biggest impact on shipments in 2017. Integration of additional health and fitness sensors, expanded activity tracking and battery life improvements will further drive smart watch growth over the next few years. Though hardware and software constraints have limited growth until now, the app ecosystems around watchOS and Android Wear will accelerate over the medium term, estimates Canalys.