Is Intel Losing Its Position In The Wearable Device Market?

-6.88%
Downside
44.17
Market
41.13
Trefis
INTC: Intel logo
INTC
Intel

Wearable devices are a subset of IoT (Internet of Things), and Intel (NASDAQ:INTC) has been aggressively investing to gain a strong foothold in this space. According to a recent report by IDC, the wearable device shipments are expected to reach 101.9 million units by the end of 2016, which translates to a 29% growth over the prior year. Furthermore, IDC forecasts the market for wearable devices to experience a high growth of around 20% through 2020. Intel should be a direct beneficiary of this growth trend, as the company has been an early entrant to this market. However, overheating issues associated with a product line of Intel’s smartwatches can weigh on Intel’s position in the wearable device market going ahead.

Intel Has Been An Early Entrant In Wearable Device Market; Issues With Basis SmartWatches Can Affect Intel’s IoT Revenue Growth

Intel primarily deals in microprocessors for personal computers, the market of which is experiencing a slow down. However, the company has been aggressively expanding its footprint into other adjacent markets such as IoT to offset the decline in its PC microprocessor business. Intel has been one of the early entrants in wearable device market, after it lost an opportunity to tap the smartphone chipset market due to its late entry.

Relevant Articles
  1. Gaining 50% Over The Last 12 Months, Will Intel Stock Rally Further After Q4 Results?
  2. Will Intel Stock Recover To Pre-Inflation Shock Highs?
  3. Up 44% This Year And With Foundry Plans Taking Shape, Will Intel Stock See Further Gains?
  4. What To Expect From Intel’s Q3 Results?
  5. Will Intel Stock Recover To Pre-Inflation Shock Highs?
  6. What To Expect From Intel’s Q2 Earnings?

The company acquired Basis Science, a San Francisco based start-up, back in 2014 to gain entry into the smartwatch segment of the wearable market. Furthermore, the company acquired Recon Instruments and Vuzix to tap the smart eyewear and smart glasses category of wearable device market. All these acquisitions point out towards Intel’s seriousness in expanding its foothold in this market.

However, the company recently faced a setback after it had to recall its Basis peak smartwatches due to overheating issues that affected a relatively small number of devices. The fact that wearable devices market is growing at the fastest rate in the IoT market, the issue with Basis smartwatches can weigh heavy on Intel’s IoT segment revenue growth. Further, Intel’s arch rival Qualcomm has gained a substantial market share in the android wearable device market. Qualcomm claims to have around 80% of the android wearable device market.

A Downside Scenario:

Intel currently garners around $3 billion of revenue from the IoT segment. We forecast the company’s revenue from this  segment to increase to around $7 billion by the end of our review period. However, if Intel’s revenue from this segment remains at the current levels over our review period, we can expect approximately 5% downside in our existing price estimate.

See our complete analysis for Intel

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)


The company recently