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  • Writer's pictureHahn Lee

Wearables: Post Pandemic Growth Industry

July 21, 2020


CliffsNotes

  • The wearables category should see accelerated growth as a result of the pandemic.

  • The global wearables industry was $33 billion in 2019.

  • The industry is expected to grow 16% (CAGR) between 2020 and 2027.

  • 337 million wearable devices were shipped last year (+89% YoY).

  • Apple, Samsung, Xiaomi, Huawei and Fitbit are the leading wearables companies.

  • Google announced in November 2019 that it would acquire Fitbit in a deal valued at $2.1 billion. This followed a $40 million deal to acquire Fossil’s smartwatch technology earlier that same year.

  • VCs poured $457 million into the wearables category in 2019.

  • WHOOP, Oura, Bloomlife and GOQii are just a handful of wearable start-ups that have raised funds.

 
 

In my on-going series written in the spirit of “I-am-curious-about-this-topic, so-let-me-go-learn-more-about-it,” I decided to spend some time researching Wearable Technologies.


Lately, I have been wondering which industries might experience accelerated growth as the result of the pandemic. Wearables is the one that I overlooked, even though it was right there in front of me. Since the pandemic started and the gyms shut down, I have been obsessed about sustaining an exercise routine - not only to maintain some sanity, but also to stay in good physical health. I figured that if I ever test positive for COVID, the better my physical condition, the better chance my body would have to fight off the effects.


The exercise routine that I established beginning in March was a combination of running and swimming. During my runs, I usually track my distance using the iPhone Health app. A previous version of the Health app would measure calories burned, which I thought was useful, but I don’t see that tracked in the current version. Metrics related to swimming are less calculable as I don’t take my phone into the pool even though it is waterproof. However, I know that there are many wearables out there that would suit my use case. Right now, if I wanted to print out a report of all of my metrics related to running and swimming since March, I would have a lot of blank fields on the swimming side… That’s when it hit me that I needed to investigate the wearables space. I was curious what kinds of technologies and gadgets were out there that could, in a perfect world, generate a useful report with no missing data.


Below are the questions that I was curious about and the answers that gathered.

  • What are wearables and how is the industry segmented?

  • How big is the wearables industry and what are the growth expectations?

  • Who are the leading players in the wearables industry?

  • Have there been any noteworthy M&A deals in the wearables space?

  • What are start-ups doing in the wearables space and what kind of money are they raising and from whom?


What are wearables and how is the industry segmented?

According to Wikipedia, wearables are “smart electronic devices (electronic device with micro-controllers) that are worn close to and / or on the surface of the skin, where they detect, analyze, and transmit information concerning e.g. body signals such as vital signs, and / or ambient data and which allow in some cases immediate biofeedback to the wearer.”


Market segmentation can be done in a variety of ways, but I thought the most digestible ones were by:

  • Body location / product (Earwear, wrist-wearables, eyes and head, footwear, neck, body, etc.); and

  • Application (e.g., health and fitness, entertainment / media / gaming, fashion, education and training, etc.)


How big is the wearables industry and what are the growth expectations?

The global wearable technology market size was valued at USD $32.63 billion in 2019 and is projected to expand at a compound annual growth rate (CAGR) of 15.9% from 2020 to 2027. (Source: Grand View Research)


According to IDC, vendors shipped a total of 336.5 million wearable devices worldwide, resulting in an 89.0% increase from the 178.0 million units shipped in 2018.

To add some context to these numbers, worldwide in 2019, 267 million PCs were shipped (Source: IDC), 147 million smart speakers were shipped (Source: Strategy Analytics), and 66 million passenger cars were sold (Source: VDA).


Who are the leading players in the wearables industry?

Apple, Samsung, Xiaomi, Huawei and Fitbit are the leading wearables companies.

  • Apple - Apple led the wearables category by a large margin attributable to the success of its AirPods, AirPods Pro and Apple Watch.

  • Xiaomi - Founded in April 2010 and based in Beijing, Xiaomi is currently the world's fourth-largest smartphone brand that dubs itself an “internet company with smartphones and smart hardware connected by an IoT platform at its core.” The company has shipped more than 100 million of its Mi Sports Bands between 2014 and 2019. Research firm Canalys recently reported that the Mi Smart Band 4 has become the number one best-selling wearable band in the world. Xiaomi is a public company traded on the Hong Kong Stock Exchange (HKEX stock code: 01810) with a market cap of approximately $370 billion.

  • Samsung - Samsung is the Korean conglomerate that posted FY19 revenue of approximately $192 billion (230 trillion KRW). Wearables are a part of Samsung’s IT and Mobile Communications division. The IT and Mobile Communications Division is the company’s largest and posted revenue of $89 billion (107 trillion KRW) and operating profit of $8 billion (9 trillion KRW). The wearables line includes the Galaxy Watch and the Galaxy Fit.

  • Huawei - The Chinese multinational technology company founded in 1987 is a private company owned by some 100k+ of its employees. In 2019, the company had annual revenue of $123 billion (859 billion CNY) and net profits of $9 billion (63 billion CNY).

  • Fitbit - For the full year 2019, Fitbit reported revenue of $1.4 billion and a net loss of ($321) million. The company sold 16 million wearable devices, +15% YoY. New devices introduced in 2019 (Fitbit Versa 2, Fitbit Versa Lite, Fitbit Inspire, Fitbit Inspire HR, Fitbit Ace 2, and Fitbit Aria Air) represented 55% of revenue.


Have there been any noteworthy M&A deals in the wearables space?

  • Google / Fitbit - On November 1, 2019, Google announced that it would acquire Fitbit in an all-cash transaction in which Fitbit stockholders will receive $7.35 per share in cash, valuing the company at a fully diluted equity value of approximately $2.1 billion. Fitbit stockholders approved the transaction on January 3, 2020.

  • Google / Fossil - In January 2019, Google agreed to pay watchmaker Fossil $40 million to buy its smartwatch technology. Fossil builds smart watches that run on Google’s Wear OS.


What are start-ups doing in the wearables space and what kind of money are they raising and from whom?

VC funding for Digital Health companies was $8.9 billion in 2019, according to Mercom’s Q4 and Annual 2019 Funding and M&A Report. Mobile Health (mHealth), which includes wearables, raised $2.2 billion across 198 deals. Wearables specifically raised $457 million.

Below is a short list of wearable start-ups that I thought were interesting...

  • WHOOP - WHOOP is a Boston-based sports analytics company that makes fitness wearables that track your workouts, sleep, recovery and gives you advice on how to improve. It is targeted at elite athletes. In 2017, WHOOP signed a distribution deal with the NFL Players Association. The company closed a $55 million Series D in November 2019 bringing its total raised to more than $100 million. The most recent round was led by Foundry Group with participation from Two Sigma Ventures, Accomplice, Thursday Ventures, Promus Ventures and Silicon Valley Bank.

  • ŌURA - Oura is a sleep tracker ring developed by Finland-based startup Oura Health. The ring contains infrared LEDs that measure your heart rate as you sleep, as well as a temperature sensor to capture variations in body heat and a 3D accelerometer that can track day-time activity too. The company has raised $75.6 million to date.

  • Bloomlife - a women’s health company that combines clinically validated wearables with data analytics to improve birth outcomes. Provides evidence-based solutions combining connected devices with data analytics to increase access to care, provide personalized feedback to moms, and help doctors earlier predict and manage pregnancy complications. $14.4 million raised to date.

  • GOQii - Founded in 2014 and based in Menlo Park, CA, GOQii (pronounced “go-key”) is a digital health and fitness subscription service that combines 1:1 mobile personal coaching and fitness tracking technology. User-selected professional health and fitness coaches are accessed via the GOQii app to drive engagement, motivation and accountability. GOQii has raised $52.6 million to date from investors including Mitsui, NEA, Megadelta, DSG Consumer Partners, Galaxy Digital, Denlow Investment Trust, Edelweiss, Cheetah Mobile and GWC.

If you made it this far, thanks for reading.


More next time…


Hahn.


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