Samsung Preparing Wristwatch as It Races Apple for Sales

Samsung Preparing Wristwatch as It Races Apple for Sales

Samsung Electronics Co. (005930) is developing a wristwatch as Asia’s biggest technology company races against Apple Inc. (AAPL) to create a new industry of wearable devices that perform similar tasks as smartphones.

“We’ve been preparing the watch product for so long,” Lee Young Hee, executive vice president of Samsung’s mobile business, said during an interview in Seoul. “We are working very hard to get ready for it. We are preparing products for the future, and the watch is definitely one of them.”

Lee had no comment on what features the watch may have, how much it would cost and when it would go on sale. The Suwon, South Korea-based company already plans to release three high- end smartphones this year — including the Galaxy S4 unveiled last week and one using the Tizen operating system — as it competes with Apple for customers in a slowing global market.

Samsung’s disclosure comes after people familiar with Apple’s plans said last month the U.S. company has about 100 product designers working on a wristwatch-like device that may perform similar functions to the iPhone and iPad. The global watch industry will generate more than $60 billion in sales this year, and the first companies to sell devices that multitask could lock customers into their platform, boosting sales of phones, tablets and TVs.

“The race is on to redesign the mobile phone into something that you wear,” said Marshal Cohen, an analyst at NPD Group in Port Washington, New York. “We’re going to see formidable competition coming from many different directions — from device makers, accessory makers, even fashion designers.”

Smartphone Saturation

Samsung and Apple are looking for new product lines as the $358 billion global market for handsets approaches saturation. Growth is projected to slow to 9.8 percent in 2017 from 27 percent this year, according to data compiled by Bloomberg Industries. Apple’s sales growth last quarter was the slowest in more than two years, and Samsung in January warned of slowing demand.

“The issue here is who will first commercialize it so consumers can use it meaningfully,” Samsung’s Lee said.

Samsung became the world’s largest smartphone maker last year, overtaking Apple. Samsung had 29 percent of global smartphone unit shipments in the fourth quarter, compared with 21 percent for Apple, according to data compiled by Bloomberg.

Price Advantage

Apple seeks to introduce its wristwatch device as soon as this year, said one of the people familiar, who asked not to be identified because the plans aren’t public.

The features under consideration by the Cupertino, California-based company include letting users make calls, see the identity of incoming callers and check map coordinates, one of the people said. It would also house a pedometer for counting steps and sensors for monitoring health-related data, such as heart rates, this person said.

The global watch industry will generate more than $60 billion in sales in 2013, said Citigroup Inc. analyst Oliver Chen.

Samsung may be able to undercut Apple on price because the Korean company makes its own displays and chips, said Will Stofega, program director at International Data Corp. in Framingham, Massachusetts. Samsung also is the world’s largest maker of TVs and memory chips.

Pricing wristwatch-like devices under $200 will be one of the keys for developers, said Laurence Balter, chief investment strategist at Oracle Investment Research in Fox Island, Washington. He estimated that one-quarter of existing users of Samsung smartphones and tablets would be interested in using a watch-like device.

“This is a new category that Apple is trailblazing that will see competition from Samsung,” he said. “If I were Apple, I’d strategically price the watch as low as possible to bring as many as possible into the ecosystem. Samsung is going to be there for many years to come and try to cut them off.”

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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