Apple Watch 2: Can It Justify the Price Without Having Cellular Connectivity?

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The upcoming Apple Watch 2 may not be the ultimate show stopper that we were earlier expecting. And if you are wondering what could possibly go wrong with Apple Watch 2, here is some food for your thought; Bloomberg technologies reports that Apple might omit its cellular connectivity feature in its upcoming Watch as the component is draining the battery too fast. The company is also trying to make Apple Watch 2 less dependent on iPhone as much as possible. So, how Apple Watch 2 is going to justify the investment in the era of the internet; the Cupertino giant is reportedly planning to incorporate GPS tracking in its upcoming Watch – for the time being.

Cellular connectivity feature is slated to be the major driver of smartwatch sales in the future according to some reports. Therefore, this might be a major setback for Apple as its major rivals in smartwatch sector, including Samsung and LG, are rolling out their next smartwatch with cellular connectivity.

Why much hype about Cellular connectivity? Cellular connectivity and eSIMs are the future of smartwatches as they make them independent of smartphones.

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The primary reason for dropping the cellular connectivity feature in Apple’s upcoming smartwatch is the draining battery issue. The battery has been a nightmare for Apple Watch since the beginning. Apple claimed that when the Watch is fully charged it can last up to 18 hours which is just unsatisfactory when compared to 36 hours of battery backup in Samsung’s Gear S2. Battery problems in smartwatches is an ongoing concern of around 29% customers worldwide. Apple has to work seriously out a way to increase the battery life of its upcoming smartwatch.

Apple is reportedly investing a huge sum in studying the low-power cellular data chips for future Smartwatch generation. However, the process will take time, therefore, Apple may introduce cellular connectivity feature in the Watch slated to be launched next year or earliest by December this year.

The dominance of smartwatches equipped with cellular connectivity in future is highlighted by a report by Canalys. An estimated 7.5 million units of smartwatches stocked by cellular connectivity are expected to flood the global market in 2016.

The upcoming Apple Watch 2, despite the limitations, may still prove its worth as the future is lucrative for the wearable industry especially the smartwatch segment. In Q1 2016, the smartwatch industry recorded an overwhelming 223% year over year growth. The Wearable industry is expected to be $28.7 billion industry by the end of 2016, of which smartwatch alone is expected to account for a whopping 40%.

Android Wear and Tizen Are Eating Into Apple Watch OS Shipment Market

The Android Wear and Samsung’s Tizen OS has started eating into Apple’s smartwatch market according to IDC. Samsung and LG have already tried and tested the cellular connectivity feature in their respective smartwatches, and the results were phenomenal.

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Though Apple dominated the smartwatch market with 52% of the global smartwatch shipments share in 2015, the market share of Apple watch has declined considerably in 1H 2016 to 46.5%. In Q2 2016 alone, Apple’s smartwatch market share fell by 55% year over year to 47% from 72% in the year-ago quarter. In contrast, Samsung strengthened its presence by recording 51% year over year growth in Q2 2016.

Thus, Apple has some serious issues to tackle as soon as possible. Now, the omission of cellular connectivity in the upcoming Apple Watch 2 may lead to serious consequences as a majority of smartwatch manufacturers are banking on cellular connectivity.

Apple Watch 2: The Challenges Ahead

When Apple released its debutant Apple Watch back in April 2015, it became an instant hit globally. Consequently, Apple Watch captured a substantial 52% share of global smartwatch market in 2015.

The shipments numbers of Apple Watch, however, has declined substantially from 3.6 million units in Q2 2015 to 1.6 million units shipped in Q2 2016. While the declining quarterly shipments of Apple Watch can be attributed to many reasons, one of the most compelling reasons is that a number of consumers are waiting for the upcoming Apple Watch in the anticipation of new innovative features that can justify the investment. Therefore, they are not willing to invest in the older version.

Besides, the growing competition from smart bands is another reason that is affecting the shipments of smartwatches. The industry is facing a healthy competition from low-priced pocket-friendly fitness bands. Therefore, Apple has to look into its pricing strategy for Apple Watch 2 as well. As compared to 3.5 million smartwatches, a considerable 9 million units of fitness bands were shipped in Q2 2016. The adoption rate of fitness bands is higher than smartwatches mainly because of the price gap. A fitness band on an average cost around $100 apiece whereas a smartwatch is tagged on an average around $350.

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