Google announced its acquisition of Fitbit, once a wearable devices giant, for USD 2.1B. The news stole headlines in major Silicon Valley media outlets, and a key question is how Fitbit’s rivals Apple, Huami, and Huawei will respond. We talked to Huami CEO Haung Wang, and he thinks Google’s move will escalate competition in the wearable tech market. He added, however, that the market will be a very tough one for Google to dominate.
“If you look at the track record of Google’s past acquisitions of hardware companies, such as Nest and Motorola, its purchases have never succeeded,” Huang said. “I don’t think [the purchase of Fitbit] will work either.”
Huang said that, despite Google’s ambition to tap into the industry, it has never excelled making hardware. One notable failure was Google Glass, a product into which the company poured millions in R&D that turned out to be unpopular. Google then changed its strategy to buy companies such as Nest and Motorola. But both acquisitions failed to gain traction in the market. “Buying Fitbit won’t change Google’s genes in the hardware-making space,” Huang said. But it does send out an aggressive message to other industry players that Google wants a slice of the pie.
Google has been developing Wear OS, an operating system for wearable tech products, that does not use open source technology. Samsung, however, does not use Wear OS because it fears losing full control of its products by using Google-owned technology. Owning Fitbit will give Google full control of its products, including both software and hardware.
As soon as the news of the acquisition was announced, many Fitbit users said they’d rather use Apple Watch in the future, with some expressing concerns about their personal data. Google responded that it will not use Fitbit users’ data for targeted ads without giving details about how the data will be used.
Huang said that Google’s purchase of Fitbit displayed the former’s ambition to explore the global healthcare market. He added that one positive outcome of Google’s joining the wearables market is that it will grab more market attention and drive innovation that will improve product quality across the board. The global healthcare market is estimated to reach USD 10.059T by 2022, and there is clearly demand for wearable health products. Sales of smartwatches grew the most of any wearable devices, increasing by 54.3% YoY; these watches made up 29.8% of all wearable device shipments in 2018, as IDC reported. The fast growth of smartwatches continues in 2019.
Huami, as a global leading wearable device maker, announced that by the end of this August, it had shipped more than 100 million smartwatches, wristbands, and smart home devices. The company is innovating its main smartwatch brand, Amazfit, by adding health functions including Electrogastrography (EGG) and phonocardiogram ( PCG) analysis that can warn users of signs of heart disease. Huami aims to develop a full range of Amazfit watches with different functions to support customer’s needs related to health, sports, fashion, and business. The watches will range in price from USD40-200.
Once a top market player, Fitbit has seen its global market share decline to No.5 in Q1 2019, according to IDC’s June report. The world’s three largest wearable device makers are Apple, Xiaomi, whose Mi Band was made by Huami, and Huawei. In general, Chinese wearable tech makers have the advantages of low R&D costs, as well as labor and manufacturing prices. Also, China’s market alone provides abundant consumers who can quickly test new products. Fitbit lost its way due to its slow product R&D and limited functionality. This will be a lesson for market players going forward.
(Photos from Huami)