Apple Watch still dominates the smartwatch market, but challenges lie ahead

Apple's Watch has taken an early lead but there's still plenty to do.

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Apple's Watch accounts for nearly half of the smartwatch market.

Apple shipped 2.8 million of its Apple Watch wearables in the third quarter of this year, accounting for nearly half the total market for smartwatches.

Analyst group Canalys calculated that total smartwatch shipments stood at 6.1 million for the quarter - an increase of 60 percent on last year.

These new figures are a very different to those published by IDC last month which said that total smartwatch shipments for the third quart of 2016 only reached 2.7 million units - down 51.6 percent from the 5.6 million units shipped in the same quarter in 2015. In contrast IDC said Apple only managed to ship 1.1 million smartwatches in the quarter, a big drop from the 3.9 million shipped in the year-ago quarter.

But Canalys said "despite reports to the contrary" Apple Watch shipments compared favourably to those in the third quarter of 2015, the first full quarter after the original Apple Watch's launch.

However, it's not all good news for Apple: while the new models are selling well, there are still unsold first-generation Apple Watches in the channel, according to Canalys analyst Daniel Matte, and much will depend on how sales go in the fourth quarter.

"Apple needs to make a strong marketing push during the holiday shopping season, especially to highlight new and compelling apps for its platform," he said.

Apple's renewed focus on fitness functionality puts it in more direct competition with Fitbit, while the addition of GPS by Apple and other vendors now poses a big threat to traditional GPS watches and fitness trackers, the researchers said.

But Canalys also warned that slowing iPhone momentum has affected consumer interest in Apple's smartwatch, and the company needs to boost sales of the device outside of the US, especially in China, where smartwatch sales grew 42 percent year on year.

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Image: Canalys

The delays to Android Wear 2.0 and Samsung's Gear S3 have hit 2016 smartwatch shipments, and resulted in lower growth in smartwatch sales.

According to Canalys, Samsung shipped over 1.1 million smartwatches, and Fitbit was still the world's number three smartwatch vendor, shipping one million units.

Garmin rose to fourth place, shipping 200,000 vívoactive smartwatches. Pebble rounded out the top five, shipping over 130,000 units.

Shipments from Huawei, Lenovo and LG all fell, due to a lack of product refreshes, the analysts said.

Canalys defines smartwatches as multi-purpose electronics that serve as accessories to smart devices, are designed to be worn on the body and not carried, run an operating system and are capable of running third-party computing applications.

That's in contrast to what it defines as 'basic bands', which cannot run third-party computing applications. The researchers said the basic band market grew 18 percent to 11.5 million devices.

More on smartwatches

Smartwatch shipments take a nose dive in Q3, says IDC

Before the Apple Watch: A history of smartwatches, in pictures

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