As Smartwatches Abound, Chipmakers Battle to Be the Brains Inside

Photographer: SeongJoon Cho/Bloomberg

A customer compares a Samsung Electronics Co. Galaxy Gear smartwatch with his Casio Computer Co. G-Shock watch. Close

A customer compares a Samsung Electronics Co. Galaxy Gear smartwatch with his Casio... Read More

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Photographer: SeongJoon Cho/Bloomberg

A customer compares a Samsung Electronics Co. Galaxy Gear smartwatch with his Casio Computer Co. G-Shock watch.

At the wireless industry's biggest annual show in Barcelona, executives weren't afraid to ditch their Rolexes for plastic alternatives -- from smartwatches to connected bracelets. Carlo Ferro, finance chief at chipmaker STMicroelectronics, sported two.

"I need more arms to wear more -- two isn't enough," Ferro said at the event this week, where smartphone makers Samsung Electronics and Huawei unveiled new wearable devices. For Ferro, much of the excitement has to do with potential business.

STMicroelectronics and rivals such as NXP Semiconductor and Qualcomm are battling to be picked to provide the brains for the various products in the hot segment. For every function, there's a corresponding piece of miniature electronics: to sense movement, measure pulse or temperature, compute data and send it back to a smartphone.

It's easy to see why chipmakers are psyched up: Global sales of smart watches, glasses, fitness and medical products were about $10 billion last year and are forecast to triple by 2018, according to estimates by researched IHS.

China's Huawei, the world's third-largest smartphone maker, unveiled its first smart bracelet at Mobile World Congress in Barcelona. Its chief, Eric Xu, sported the red band at the event during a meeting with reporters. Samsung introduced updates to its line of wristwatches that connect to smartphones, the first of which were released in September. Sony also sells a similar watch.

"Our smartphone customers struck a vein in wearables," said Paul Grimme, STMicro's head of Europe, the Middle East and Africa. "For us it means we can approach our existing customers to offer different components -- it's a good leverage point to sell them more."

Qualcomm, the biggest maker of chips for mobile phones, unveiled its own connected wristwatch called Toq in September. Qualcomm is using its own watch to show customers like Samsung and Sony what it can offer, as they make a push into wearables.

New releases from smartphone makers will compete with a number of smaller more specialized device makers. Fitbit, a San Francisco-based startup, is number one on Amazon.com's best-seller list for sports gadgets. Ericsson CEO Hans Vestberg wears a fitness band by Jawbone, another startup.

The smart-wearables market can be a low-risk proposition for chipmakers if they already have the technologies needed, STMicro's Grimme said. For STMicro, which makes technology for everything from cars to industrial machinery, it's a way to tap into a growing market with little investment, he said.

NXP CEO Rick Clemmer said his company is trying to leverage some of its knowledge in health care to help spur new applications for wearable devices. Clemmer estimated about 10 to 15 percent of consumers today are potential buyers of wearable devices. As functions are added, the potential audience grows, he said.

"It might be health care that drives it," Clemmer said. "What we're looking for effectively is the killer app."

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