Here's how Apple could boost the smartwatch market (AAPL)

Apple Effect on Global Smartwatch Market

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The next version of the Apple Watch, which will boast LTE connectivity, could reinvigorate the global smartwatch market, according to a new consumer study by NDP.

The study of 5,000 US consumers found that, for the most part, consumers still primarily use the smartwatch for its hands-free notifications, and health and fitness tracking functions. However, outside of these areas, use cases and functionality remain limited. Uncoupling the device from users’ iPhones will help increase the capabilities of the Watch, which could help fuel demand for the devices.

Adding LTE stand-alone connectivity to the Apple Watch would be a boon to the overall smartwatch market. While several smartwatch vendors have added LTE to their devices some time ago, Apple’s easily recognizable brand permeates pop culture, increasing demand not only for its own products, but also for those of competing brands. When the Apple Watch launched in April 2015, the "Apple effect" was largely responsible for the initial mass adoption of smartwatches, lifting shipments from 5 million devices in 2014 to roughly 30 million in 2015. Of those 2014 shipments, Apple Watches accounted for about 12 million units, or more than double the total market for the year.

Still, it’s unlikely that smartwatches will become commonplace in the near future. Their high price points and redundant functionality with smartphones make them more of a nice-to-have than a need-to-have. Instead, long-term growth will likely be driven largely by increased consumer awareness of smartwatches' capabilities, added functionality (especially stand-alone connectivity), cheaper price tags associated with low-end manufacturers joining the market, and the ongoing expansion into emerging markets. BI Intelligence estimates that shipment volumes will grow at a five-year CAGR of 18% through 2021 to reach 70 million units.

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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