ZTE Jumps On Smartwatch Bandwagon
When Samsung Electronics Co.'s Galaxy Gear launch in early September created a hype around the potential market for smartwatches, it was certain that we would soon see cheaper versions from Chinese competitors. — Now, ZTE Corp., mainly known …
Context & Ripple Effects
Samsung's September Galaxy Gear launch opened the smartwatch category — and, per Businessweek's early read, left open the question of what the device was actually for. ZTE's move is the predictable second act: the same fast-follower playbook that took it from the 'other' bin to the world's No. 4 handset maker by Q4 2010, now pointed at wrist-worn hardware.
The company's recent record supports the cheap-hardware bet — an $80 Open smartphone running Firefox OS sold through eBay earlier this year, and a 5.7-inch Grand Memo shown at MWC in February. The pickup here was unusually broad: eight outlets including Engadget, PC Magazine and AllThingsD ran the item on the same day, signaling that the market read ZTE's entry as confirmation the wearable race would go mass-market fast.
First-order effects
- Samsung's Galaxy Gear now faces direct price competition from a vendor whose entire model is undercutting incumbents on cost — pressure on the Gear's premium positioning at exactly the moment critics questioned its purpose.
Second-order effects
- Other Chinese handset makers face a follow-or-cede decision on wearables, just as they did in smartphones where ZTE proved the low-cost entry could displace an Apple-tier incumbent.
- If ZTE prices its watch near its $80-phone territory, component suppliers gain a second, volume-driven demand channel for small displays and sensors beyond the flagship tier.
Third-order effects
- Wearables look set to repeat the smartphone cycle: a premium first mover defining the category, then Chinese vendors compressing margins until the split is between high-end design plays and commodity bands — with the unresolved question being whether anyone finds the use case that justifies either.
The trend: Consumer hardware categories are compressing from premium-first-mover to Chinese-led commoditization within months rather than years, and the smartwatch is the next test case after smartphones.