Samsung seeks 'iPod moment' with smartwatch launch
Samsung is set to launch its much anticipated smartwatch on Wednesday, marking a major milestone in the emerging product category amid concerns that the smartphone market has reached its peak.
The watch, thought to be called "Galaxy Gear," is expected to be revealed at IFA (Internationale Funkausstellung Berlin) - a global innovations show in Berlin - on Wednesday evening. A report in the Korean Times, which cited comments from a senior Samsung executive, boosted hopes of the launch, but event organizers would not confirm the release, stating only that the presentation should "not be missed."
It will be the first smartwatch release from one of the world's top two smartphone manufacturers, in a new but blossoming product category that is currently dominated by unknown startup firms. A smartwatch is a computerized wristwatch with functionality beyond simple timekeeping and Samsung's device is expected to be an accompaniment to a smartphone, rather than a standalone device with its own sim card.
Perhaps inevitably, there have been a number of apparent leaks about Samsung's Galaxy Gear. EV Leaks, which specializes in tech information, tweeted a picture of what it said was the device's application menu. The screenshot indicated that the watch would have NFC (Near Field Communications) - rival technology to Bluetooth which enables the device to easily "pair" with a smartphone.
Tech website Venturebeat appeared to go one better, publishing a picture of a chunky, 3-inch, wrist-mounted accessory that the website said was a prototype given to app developers ahead of Wednesday's' release.
"Somehow I don't think LVMH (parent company of Louis Vuitton and Dior) is worried," Benedict Evans of consultancy Enders Analysis said after the leak.
Design patents filed in Korea have also fueled rumors that the watch will feature a flexible glass screen, using up all available space on a user's wrist. However these claims were downplayed by the Samsung executive quoted in the Korean press.
Joshua Flood, a senior analyst at tech research firm ABI Research, told CNBC that if the device did feature a flex-screen, it would be the first smartwatch to include such technology. Samsung may then look to roll this out across its whole Galaxy range of smartphones.
Annette Zimmermann, a principal analyst at research firm Gartner, described this screen as a "differentiator" for the South Korean tech giant, but still predicted that volumes for smartwatches would remain comparably low.
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"In Gartner's device forecast we have an assumption built into our model that says that less than 3 percent of consumers replacing their smartphone will replace it with a smartwatch in 2017," she told CNBC.
Many analysts share Zimmerman's views that the uptake of smartwatches will be muted. Flood sees Samsung selling between 300,000 and 500,000 units before the end of the year; in contrast, Samsung's Galaxy S4 smartphone hit 10 million shipments within one month of its release. Demand would come from early adopters who enthusiastically buy "must-have" gadgets, he added.
Jonathan Gaw, research manager at analysis firm IDC, said the market for smartwatches was still waiting for an "iPod moment." Only the right combination of hardware, software, services, design and platform support would see it gather momentum, and show that it was not just a "phone on a wrist", he said.
And although Samsung is expected to release its smartwatch before Apple, many analysts believe the "iPod moment" will come from its U.S. rival - despite claims that Apple has lost its ability to innovate since the death of former CEO Steve Jobs. An Apple product - currently being touted as the iWatch - is not expected before Spring 2014, but analysts predict the company will do for the market what it did for the MP3 player, the mobile phone and the tablet computer.
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But there would still be positives for Samsung following the Galaxy Gear release, even if Apple overshadows it in the long run, according to ABI Research's Flood. He said the speed with which Samsung has brought the watch to market, from its initial announcement, shows how far the company has come.
Cosmin Laslau and Jonathan Melnick, analysts at Lux Research, told CNBC that Samsung should see this as a stepping stone to greater products further down the road.
"Samsung does not have to release the perfect smart watch (on Wednesday), and it won't. The first generations of these devices will slowly build up functionality, and at first will likely be just glorified accompaniments to smartphones, appealing to a small subset of buyers," they said. "However, the long-term trend is definitely towards more wearable and ever-smaller consumer electronics devices."
—By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81