Wonderful world of kids wearables

Nifty smart gadgets for youngsters spawn multibillion yuan market for Chinese firms

"Let's press closer," Bao Yuxuan, a 9-year-old boy from Beijing, tells his two new young friends conspiratorially.

Acting as if on a secret signal, the three primary school tykes walk closer toward each other, stretch their arms, put their smart watches next to each other.

"Dingding!" The watches synch. The three boys are now friends, and connected.

Scanning WeChat QR code to be added as a contact is passe. Smart watches are replacing smartphones as the top tech gadgets among young Chinese consumers such as Bao, who had just met his two new pals at a picnic of three families.

They were on their first outing in months, having been confined indoors for much of this year due to COVID-19-related lockdowns.

While there were restrictions on outdoor movements, China emerged as one of the largest markets for kids smart watches. A latest report from market consultancy Counterpoint said that the country is dominating the global market in the segment by accounting for more than three out of every five devices sold.

Although last year's kids smart watch shipment data has not been disclosed, some industry insiders believe a staggering 15 million units may have been shipped to local markets in China. If that figure pans out, it would mean a spike from sales of 9 million units in 2018.

Among the global leaders, Chinese brand Imoo topped the kids smart watches segment with a 26-percent market share last year. Huawei wrested the second position with a 9-percent market share, while Xiaomi took the third spot with a 4-percent share. For all of them, consumers such as Bao are key to success.

"My mom doesn't allow me to use a smartphone due to age concerns. Having to depend on her WeChat account to connect with my friends was not convenient at all," said Bao complainingly.

The smart watch came to his rescue. Smart watches sell for 1,000 ($140) apiece on average in China. Usually, they allow children to receive certain phone calls and tag their locations. Some advanced devices also enable them to take selfies, join friends in a group chat online and even pay for goods and services.

"It's not an exaggeration to say that nearly all of my classmates own a smart watch. We consider it as an indispensable tool," said Bao.

With the newly affluent young parents in the middle-income group willing to spend on their children's tech needs, sales of personal-tech devices are rising. Also responsible for rising sales is the fact that such gadgets help parents to stay connected with their kids and track the latter's movements. This helps them to deal with anxiety related to kids' safety.

Qin Zetian, a 38-year-old technical engineer at a Shenzhen-based internet-based company, said he does feel somewhat at ease now, having bought a smart watch recently for his 8-year-old daughter, who goes to school on her own.

"Both my wife and I used to feel concerned about the safety of our daughter during her walks to and from her school, even though it's just a 10-minute walk. With a smart watch, we are able to know her exact location always," said Qin.

He said his daughter's smart watch also has an emergency call function that allows the user to just press a button to call the police in case of any unexpected accidents.

"Smartphones remain the best way to communicate. However, providing an expensive smartphone to a child is risky. Kids smart watches are not just communication devices; they also gather a child's exact location and record movements," said Ethan Qi, a senior analyst with Counterpoint.

Up to 71 percent of kids smart watches shipped in 2019 had cellular phone functions. Hence, apart from calling, features like an SOS button for emergency communication, geofencing with SMS alerts on entry and exit, and the ability to hear what is happening next to the child are possible, Qi said.

The COVID-19 pandemic has now prompted a string of smart watch companies to add new functions related to health management to their gadgets. For instance, some watches enable children to measure body temperature in real time.

As COVID-19 led to postponement of the normal school semester, more than 300 million students found themselves pursuing their studies at home. This again turned out to be an opportunity for tech firms.

For instance, Xiaoxun, a Xiaomi Corp subsidiary specializing in products that complete the Xiaomi tech ecosystem, recently launched its upgraded Y1 kids smart watch at 899 yuan apiece. It enables teachers to offer video classes and helps students to study using the gadget.

In China alone, more than 400 companies, including tech giants such as Huawei Technologies, Xiaomi, Sogou and Qihoo 360, have ventured into the sector.

Huawei has unveiled smart watches for fashion or sports purposes and hopes to grab a firm foothold in the market. Dongguan-based Imoo, another leading brand and also one of the earliest vendors in the field, is proud of its Xiaotiancai smart watch, whose sales volume hit 1.5 million units in a quarter last year. By comparison, up to 2 million Apple watches were shipped in China during the same period.

Besides Chinese firms, foreign companies and telecom service providers are eyeing what is now perceived as a potentially lucrative market: kids smart gadgets.

US tech giant Qualcomm, which mainly creates and offers technology used in cellphones and computers, announced its Qualcomm Snapdragon Wear 2500 platform designed specifically for the manufacturers of kids smart watches.

Its chipset comes with artificial intelligence-enabled voice assistant and includes the latest near field communications gear so children could make school purchases by credit card without carrying a wallet.

Anthony Murray, Qualcomm's senior vice-president and general manager of its voice, music and wearables business, said in a note: "If you look at the targeted kid watch and tracker segment, the growth in these designed-for-kids but highly capable devices is very exciting, and customers are seeing widespread global demand."

Agreed Satyajit Sinha, an analyst with Counterpoint. "There are significant net additions by operators like China Mobile, Vodafone, Verizon, AIS Thailand and Maxis in Malaysia. All have added kids smart watches to their portfolios to boost new connections and additional revenue streams."

Some industry insiders also believe that bright prospects for the kids smart watch segment may well drive sales in the rest of smart wearable segments. Popular smart wearables include fancy voice-activated wireless earbuds and watches that can access smartphone apps, make calls and monitor heart rates.

China's wearables market registered shipment of 99.2 million units last year, up more than 37 percent year-on-year, according to market consultancy IDC.

However, the smart gadget market faces numerous problems and challenges. Some parents and teachers complain that the increasing number of functions of smart watches may distract children from their studies. Others worry about information security and data privacy.

Qi from Counterpoint said a few countries in Europe have been scrutinizing kids smart watches that have tracking features like GPS, following security concerns.

"It's especially the case in the new GDPR environment. So, robust security and user experience will be key to success in this segment," Qi said.

GDPR refers to General Data Protection Regulations, a protocol that requires businesses to protect personal data of European Union citizens for transactions that occur within the EU member states.