According to the Zhitong Finance APP, Dongfang Securities released a research report stating that as one of the categories of smart devices with a high wearing frequency, the current AI penetration rate in smartwatches is still relatively low. At present, there is a certain expectation gap in the market regarding the future growth potential of the smartwatch industry. The smartwatch industry is expected to open up growth space through AI applications and demand in sports scenarios. It is recommended to pay attention to terminal manufacturers such as Huami Technology ZEPPHEALTH (ZEPP.US), Xiaomi Corporation-W (01810), TRANSSION (688036.SH), and SoC chip suppliers such as BES (688608.SH).
<h2>The main points of Dongfang Securities are as follows:</h2>
The smartwatch industry is expected to open up growth space, mainly driven by AI applications and demand in sports scenarios.
Some investors believe that the slowdown in industry innovation will limit the future growth potential of smartwatches. However, the firm believes that with the overall market recovery and the increase in intelligence levels, the smartwatch market is expected to maintain a growth trend. Currently, the AI features and sports functionalities of smartwatches are expected to become important factors of concern for consumers, with manufacturers increasingly positioning AI and sports features as core selling points. In terms of penetration rate, Luotu Technology predicts that the AI smartwatch penetration rate will reach 15% by 2025, up from 2.3% in Q1 2025; Canalys data indicates that the shipment share of sports watches in Q1 2024 will be 7%, a year-on-year increase of 2 percentage points. From a pricing perspective, AI smartwatches and sports watch products are positioned relatively high-end, which is expected to drive an increase in the industry average price in the future. Looking ahead, the increasing shipment volume and penetration rate of AI smartwatches and sports watches are expected to become important driving factors for the future growth of the smartwatch industry, helping to open up growth space.
The addition of AI features continues to drive the intelligence and high-end nature of smartwatches.
AI applications are gradually being implemented in smartwatches. In terms of interaction methods, smartwatches equipped with AI voice assistant functions significantly enhance user interaction experiences. In health/sports experiences, AI significantly improves the intelligence and professionalism of health/sports monitoring, responding to user needs. In the field of children's smartwatches, AI can empower children's safety. AI applications are expected to drive the growth of high-end smartwatch demand. According to Canalys data, the shipment volume of smartwatches equipped with advanced operating systems continues to grow, and it is expected that shipments will reach 100 million units by 2027, with a compound annual growth rate of 14% from 2024 to 2027. As the intelligence level of the smartwatch industry continues to rise, the overall average price of the industry is expected to increase, opening up growth space.
Demand for sports watches is positive, opening up growth space.
The functionality of sports watches is clearly differentiated. Sports watches are highly adaptable to outdoor and other special scenarios, possessing more specialized functions for health indicator monitoring, as well as stronger battery life, addressing the pain points of sports enthusiasts. The revenue growth and strong performance of sports watch giant Garmin in recent years reflect the continuous growth of the sports watch market. The overall average price of sports watches is relatively high; according to Canalys data, the global average price of sports watches in Q1 2024 is approximately $514, far exceeding the overall average of about $190 in the wearable wristband market. Looking ahead, as demand for sports watches continues to improve, the overall high-end process of the smartwatch industry is expected to continue, opening up future growth space
Risk Warning
Consumer electronics demand is below expectations, AI implementation is not as anticipated, changes in the competitive landscape, and changes in assumptions affect the calculation results

688608

ZEPP

XIACY

01810

688036

Dongfang Securities released a research report indicating that the smartwatch industry is expected to open up growth space through AI applications and sports demand. Although there are certain expectations for future growth potential in the market, the smartwatch market is expected to maintain a growth trend with market recovery and increased intelligence. AI features and sports functions will become the core focus for consumers, with an estimated AI smartwatch penetration rate reaching 15% by 2025. It is recommended to pay attention to terminal manufacturers such as Huami Technology, Xiaomi Corporation, TRANSSION, and SoC chip suppliers like BES

- Dongfang Securities reports that the current AI penetration in smartwatches is low, despite high wear frequency.  
- The smartwatch industry is expected to grow through AI applications and demand for sports features, with companies like Huami Technology and Xiaomi highlighted as key players.  
- As AI functionalities enhance user experience and health monitoring, the market for high-end smartwatches is projected to expand, with significant growth anticipated by 2027.

Dongfang Securities: The smartwatch industry continues to grow, with AI features and sports demand opening up opportunities