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Samsung Preparing Wristwatch as It Races Apple for Sales

March 19 (Bloomberg) -- Betty Liu reports on the race between Samsung and Apple to be first to bring a smartwatch to market. She speaks on Bloomberg Television's "In The Loop."

Samsung Electronics Co. (005930) is developing a wristwatch as Asia’s biggest technology company races against Apple Inc. (AAPL) to create a new industry of wearable devices that perform similar tasks as smartphones.

“We’ve been preparing the watch product for so long,” Lee Young Hee, executive vice president of Samsung’s mobile business, said during an interview in Seoul. “We are working very hard to get ready for it. We are preparing products for the future, and the watch is definitely one of them.”

Lee had no comment on what features the watch may have, how much it would cost and when it would go on sale. The Suwon, South Korea-based company already plans to release three high- end smartphones this year -- including the Galaxy S4 unveiled last week and one using the Tizen operating system -- as it competes with Apple for customers in a slowing global market.

Samsung’s disclosure comes after people familiar with Apple’s plans said last month the U.S. company has about 100 product designers working on a wristwatch-like device that may perform similar functions to the iPhone and iPad. The global watch industry will generate more than $60 billion in sales this year, and the first companies to sell devices that multitask could lock customers into their platform, boosting sales of phones, tablets and TVs.

Photographer: SeongJoon Cho/Bloomberg

A man using a mobile phone as he walks past a Samsung Electronics Co. advertisement displayed at the company's Seocho office building in Seoul, South Korea. Close

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Photographer: SeongJoon Cho/Bloomberg

A man using a mobile phone as he walks past a Samsung Electronics Co. advertisement displayed at the company's Seocho office building in Seoul, South Korea.

“The race is on to redesign the mobile phone into something that you wear,” said Marshal Cohen, an analyst at NPD Group in Port Washington, New York. “We’re going to see formidable competition coming from many different directions -- from device makers, accessory makers, even fashion designers.”

Smartphone Saturation

Samsung and Apple are looking for new product lines as the $358 billion global market for handsets approaches saturation. Growth is projected to slow to 9.8 percent in 2017 from 27 percent this year, according to data compiled by Bloomberg Industries. Apple’s sales growth last quarter was the slowest in more than two years, and Samsung in January warned of slowing demand.

“The issue here is who will first commercialize it so consumers can use it meaningfully,” Samsung’s Lee said.

Samsung became the world’s largest smartphone maker last year, overtaking Apple. Samsung had 29 percent of global smartphone unit shipments in the fourth quarter, compared with 21 percent for Apple, according to data compiled by Bloomberg.

Price Advantage

Apple seeks to introduce its wristwatch device as soon as this year, said one of the people familiar, who asked not to be identified because the plans aren’t public.

The features under consideration by the Cupertino, California-based company include letting users make calls, see the identity of incoming callers and check map coordinates, one of the people said. It would also house a pedometer for counting steps and sensors for monitoring health-related data, such as heart rates, this person said.

The global watch industry will generate more than $60 billion in sales in 2013, said Citigroup Inc. analyst Oliver Chen.

Samsung may be able to undercut Apple on price because the Korean company makes its own displays and chips, said Will Stofega, program director at International Data Corp. in Framingham, Massachusetts. Samsung also is the world’s largest maker of TVs and memory chips.

Pricing wristwatch-like devices under $200 will be one of the keys for developers, said Laurence Balter, chief investment strategist at Oracle Investment Research in Fox Island, Washington. He estimated that one-quarter of existing users of Samsung smartphones and tablets would be interested in using a watch-like device.

“This is a new category that Apple is trailblazing that will see competition from Samsung,” he said. “If I were Apple, I’d strategically price the watch as low as possible to bring as many as possible into the ecosystem. Samsung is going to be there for many years to come and try to cut them off.”

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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