Peter Nowak: Apple wins the first round of the smartwatch contest. Will there be a second?

The company sold 5.1 million units of the Apple Watch in the fourth quarter of last year, accounting for a commanding 63 per cent of the market, according to the research firm Strategy Analytics.

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That was quick. It looks like the smartwatch battle is over already, less than a year after Apple decided to enter the fray.

The company sold 5.1 million units of the Apple Watch in the fourth quarter of last year, accounting for a commanding 63 per cent of the market, according to the research firm Strategy Analytics.

IDC, another technology analy­sis firm, closely corroborates that estimate with the belief that Apple sold 4.1 million watches in the same quarter. That is less than Strategy Analytics’ overall figure, but still enough to lead the category by a wide margin.

(Apple has not yet officially disclosed how many watches it has sold, hence the guessing game among analysts.)

Coming in second place in both firms' estimates is Samsung, with a smartwatch line-up led by the Gear S2 that sold 1.3 million devices in the fourth quarter, for a 16 per cent share.

Taken together, the two companies are not leaving much room for the horde of other smartwatch makers. Sony, LG, Huawei, Pebble and others are fighting over a small slice of the market.

The situation is beginning to look a lot like how profit lines have broken down in smartphones. While Apple has a small overall global market share compared to Android – 14 per cent versus 82 per cent, according to IDC – it is the only company making any real money in the business.

Apple takes in more than 90 per cent of all smartphone pro­fit, according to the investment company Canaccord Genuity, while Samsung gets the rest. Everyone else is incurring losses, which raises the question of why everyone else is still trying.

It is a safe assumption that with its big lead in smartwatch market share, Apple is probably cleaning up in profit as well.

The quick dominance comes despite the Apple Watch receiving a lukewarm reception since its launch last April. While reviewers and consumers have generally liked the device for its elegance and ease of use, there have been complaints of it having too high a price tag, and that it is too reliant on connecting to an iPhone for many of its functions.

Despite that, the Apple Watch’s performance so far is a testament to how the company can muscle into a market and overpower it.

Apple’s heft has been enough to send its rival Google back to the drawing board.

At the Mobile World Congress in Barcelona this past week, no new smartwatches running the search company’s Android Wear operating system were unveiled. Instead, mobile makers put all their energy into talking up their respective virtual reality headsets at the show.

Google and its hardware partners are holding off until a new version of the software is ready later this year. The new Android Wear will take into account the hard lessons learnt by the likes of Sony and Huawei throughout their early – and evidently failed – stabs at smartwatches.

The US-based chip maker Qualcomm is also preparing new hardware designed for wear­ables. Together with the new software, the hope is that manufacturers will be able to create smaller, always-on de­vices that are capable of packing more than just a few hours of battery life.

And, oh yes, perhaps one or two of them will think up something useful for the devices to do, besides just relaying email notifications from phone to wrist.

The quiet retreat means Apple has time to refine the second version of its watch. While some speculators expect the company to unveil the sequel as soon as next month, others are pegging its launch for the fall.

Apple also has much feedback to incorporate and build off, but its success so far means the company can take its time. Android makers, unfortunately, are working against the clock.

It is also possible that some of Apple’s competitors will back off entirely because of the questionable gains to be had by continuing the fight the second time around.

The global wristwatch market was estimated to be worth about US$60 billion in 2013, a minute one compared to the current $272 billion smartphone market. With those kinds of dollars at stake in the phone business, it is no wonder so many manufacturers are still trying to convince consumers that their devices – not Apple’s or Samsung’s – are worth buying.

Those same vendors are not likely to be as patient when it comes to the significantly smaller smartwatch market. It may just not be worth their effort – or time.

Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species.

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