Apple just solved its biggest barrier to smartwatch adoption (AAPL)

standalone connectivity apple watch

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The new Apple Watch Series 3 will be the first Apple Watch to include built-in cellular support, Tim Cook said at the Apple Special Event on Tuesday.

This means that Apple Watch owners will be able to make and receive calls and messages, as well as complete other data-necessary tasks, like stream music, while away from their iPhone.

LTE cellular connectivity could help address one of the biggest inhibitors to Apple Watch adoption. Just over 20% of respondents to an Ericsson survey noted that “limited functionality and use” were the primary reasons for abandoning their wearable device. Eliminating the smartwatch's dependence on the smartphone will increase the device's capabilities, which could help fuel demand for it.

Consumers and developers could find heightened value in the Apple Watch.

The LTE-enabled Apple Watch could offer use cases independent from the iPhone. A shortcoming of previous Apple Watch models is shared functionality with the iPhone, which users already carry around in their pockets. Separating the two devices could, in effect, enhance the appeal of the Watch. About 38% of Apple Watch owners said that stand-alone connectivity would be a critical feature for the next iteration of the device, according to a survey run by Fluent.
Developers could be enticed to build more apps for the Apple Watch. An analysis of the Apple Watch found that fewer developers are building apps for the device because they aren't generating much revenue from the form factor. But if LTE connectivity is well-received by Apple Watch owners, developers could be incentivized to build more Watch apps.

Apple has also addressed several challenges vendors have faced when trying to add cellular LTE connectivity to their smartwatches. The extra computing load that SIM integration requires can at times lead to a sluggish experience, bulky form factor, and bigger drain on the device’s battery. However, along with up to 18 hours of battery, the Series 3 Apple Watch comes with a novel dual-core processor with 70% better performance than the Series 2 and a new W2 chip, which will improve Bluetooth and wireless connectivity by 85% and power efficiency by 50%. The Series 3 also features a smaller electronic SIM, and the display itself functions as an antenna. These new additions will likely enhance the user experience and drive wireless cellular LTE connected smartwatches to the mainstream.

In the next few years, the smartwatch market will likely see the addition of new functionality and increased capabilities, which will see the device shipments grow at an annualized rate of 18% through 2021 to reach 70 million units.

However, smartwatches are reliant on a number of factors in order to generate any sort of meaningful consumer demand. Until such a time, adoption of smartwatches will likely be sluggish.

Laurie Beaver, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on smartwatches that:

Forecasts smartwatch shipments through 2021 for both overall device shipments as well as by operating system.
Provides an overview of the main players in both hardware and software, and how they will size up in the future.
Demonstrates the effect of Apple’s entrance into the market, and why it's unlikely to dictate future growth.
Gives insight into what technologies need to be worked on in order to incentivize future growth, the effects they will have on the market, and how they can be used.
And much more.

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