Trump takes next step in Chinese trade war

The United States Trade Representative will place a second round of tariffs on roughly $200 billion of imports from China, effective September 24, though it looks like Apple is passing through unscathed for the moment.

The 10% tariffs will be introduced on September 24, rising to 25% on January 1. Should China take retaliatory action, President Trump has promised to move onto phase three of the strategy, placing tariffs on an additional $267 billion of imports. While these tariffs are thought to spread to consumer goods, it seems some tech companies will escape any financial burdens, at least for the moment.

“After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts,” said Trump. “These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy.”

While the White House has attempted to shield the consumer from the negative impacts of the tariff strategy, it was only going to be a matter of time. Not only would the domino effect of the initial tariffs eventually spread through various ecosystems, the US only imports so much from China. Two rounds of tariffs worth $250 billion was bound to hit the consumer pocket before too long. That said, certain products feature on the 300-list of exempt products.

You can see the full list of products on the tariff list here. It is of course incredibly wide ranging, it’s 192 pages long, though the consumer’s back pocket will almost certainly be hit. Seafood features heavily to start, and fans of frogs legs will also suffer. Vegetables are there, as is vinegar. Suitcases, golf bags, baseball mitts, bible paper, carpets, hats and car seats will also be included.

Looking at the technology industry, smart watches, wireless headphones and smart speakers are believed to be on an exempt list, though this is only from the US side. US heavyweights such as Apple might be largely free of collateral damage for the moment, though China will hit back before too long.

Trump might be looking to protect industries and consumers which will largely be in his support camp, though this is not to say Beijing won’t look to inflict damage here. In response to the tariffs imposed in June, China hit back against the farmers, and while iLifers might have been protected thus far it would certainly be a big scalp to claim. Considering the reliance Apple has on China, this would certainly be an effective move.

So far the consumer may not be that concerned about the escalating trade war, as the short-term benefits are a PR win for Trump. Presidential speeches can focus on driving more jobs back onto US shores and the bank accounts are bulging thanks to the tariffs. But this round of tariffs will certainly make life more expensive day to day.

In excluding certain products from tariffs, the Trump administration has simply pointed towards products which it believes could cause political damage. With such an open goal, we imagine the Chinese government will take an incredibly long run up at the consumer technology industry. Look out Apple, Beijing might be eying you up.

The FDA certified Apple Watch is still not a medical device

The new Apple Watch has been cleared by the FDA to sell as a low-grade health tracking device but is not producing medical grade data.

At the event where the new iPhones were launched, Apple also launched the 4th iteration Apple Watch. Though it was not the focus of the event, Apple deservedly prided itself for being the first smart watch to pass FDA test. One feature highlighted at the presentation is, by combining the readings from the gyroscope and the accelerometer the Watch can tell when a user has tripped or fallen. If the user stays static after the fall for more than a minute, the cellular equipped Watch can automatically call for help from emergency service or reach out to the family or friend. This can turn out very helpful for the aging population.

Another function of the Apple Watch being marketed is its capability to detect and alert the user irregular heartbeats which can be a symptom of a heart condition called atrial fibrillation, or AFib. This can also be a meaningful feature for a large user group: according to estimates by the US Centers for Disease Control, between 2.7 and 6.1 million people in the US have AFib, many of whom may not be even aware of it.

Apple has conducted an “Apple Heart Study” with Stanford University, the findings of which became the basis on which it gained the FDA clearance. However the total sample size was small (few than 600) and the match rate with professional medical devices was not extremely high. But the data was good enough to convince FDA that the solution worked and it was safe. Apple Watch was given a Class II risk device category, meaning it will not be life threatening even if it does not work. In contrast, if a pacemaker stops working the patient will die, therefore it is classified Class III.

In its approval file to Apple, the FDA demanded Apple to explicitly spell out the possibility of inaccurate reading as well as warn users that the is not a replacement for medical care, although the worst that can happen when the Watch reading is wrong is to cause scare for a healthy user.

Therefore, the new Apple Watch can do the job of a low to mid-range electrocardiogram reader, but it is not a medical device. In a typical professional situation, a patient will have 12 reading leads attached to different parts of the body, including the chest and the limbs, to provide accurate reading. What Apple Watch can give is equivalent to one of them, on the wrist.

No professional physicians will make judgement based on the reading on the Apple Watch. Any sensible users had better not either.

Fitbit fights back at Apple in the smart watch market

The latest smart watch numbers from analyst firm Counterpoint reveal Apple is still the dominant player but Fitbit is giving it a run for its money.

Total global smart watch shipments grew 37% year-on-year but it’s rapidly turning into a two horse race. Apple hijacked the market as soon as it took the segment seriously but its initial success seemed to stall. Meanwhile Fitbit more recently made the strategic decision to diversify beyond fitness bands and that move seems to have paid dividends.

Apple still dominates with a 41% of global shipments, but that’s down from 48% a year ago. Meanwhile Fitbit has managed to propel its share from 8% a year ago to 21% in Q2 2018, thanks to the apparently popular Versa smart. Everyone else is miles behind, with one-time leader Samsung now bordering on irrelevance.

Counterpoint smartwatch Q2 2018 1

“Back in Q4 2017, Apple stepped up its strategy in the smartwatch segment by enhancing the features of smart watches into broad-based functionalities, including some health and fitness tracking capabilities,” said Satyajit Sinha of Counterpoint. “Moreover, Apple is catalysing the trend of ‘smart watch as a standalone wearable device’ with adoption of cellular connectivity, which is driving the new wave of cellular connected wearables globally, great news for mobile operators.”

It doesn’t look like the market got the memo about standalone smart watches, however. As Sinha’s colleague Neil Shah notes, people seem reluctant to pay the premium just for the opportunity to talk to their wrist like a nut-case.

“Despite initial hype and traction of cellular based Apple Watch Series 3 in the first two quarters, Apple iPhone users are actually choosing the Series 1 as a non-cellular option over Series 3 non-cellular model which is surprising to many industry watchers,” said Shah. Not all industry watchers mate. The strong inference here is that Apple hasn’t done much to improve on the Series 1 other than whack in an expensive and largely redundant modem.

As indicated the Apple Watch Series 1 is the best selling model, followed by the Fitbit Versa. Given that Chinese vendor Amazfit has the third best selling brand despite only having a 4% total market share, that implies these two models are by far the biggest sellers. Unsurprisingly the Fitbit Versa is significantly cheaper than any Amazon Watch, so it wouldn’t be surprising to see it continue to grab share in the coming quarters.

Counterpoint smartwatch Q2 2018 2

Maybe Fitbit can be more than just a niche exercise product

Fitbit might not be turning in the results of yesteryear, but riding the wave of Versa to beat analyst expectations demonstrates there might be mass-market appeal for the brand.

Total revenues stood at $299.3 million for the three months ending June 30, and while this is still considerably down on the $353.3 produced in the same period for 2017, it beats expectations from analysts. The success for this period has been attributed to Versa, the team’s attempt to break away from the fitness-tracking niche and enter into the mainstream smartwatch market.

“Our performance in Q2 represents the sixth consecutive quarter that we have delivered on our financial commitments, made important progress in transforming our business, and continued to adapt to the changing wearables market,” said CEO James Park.

“Demand for Versa, our first ‘mass-appeal’ smartwatch, is very strong. Within the second quarter, Versa outsold Samsung, Garmin and Fossil smartwatches combined in North America, improving our position with retailers, solidifying shelf space for the Fitbit brand and providing a halo effect to our other product offerings.”

Overall, Fitbit sold 2.7 million wearable devices across the quarter, with the average unit price increasing 6% year-on-year, primarily down to the newer product releases. Those devices released in the last twelve months accounted for 59% of total revenues, providing confidence in the brands ability to diversify from the niche which has served it so well through the underwhelming years for wearable devices.

Fitbit launched the Versa on 16 April and boasted about selling one million devices just over one month later. The product is more in-line with what you would have expected from a smartwatch device, moving beyond the fitness tracking niche Fitbit has become known for. Just looking at the device demonstrates the shift, though what’s on the device is what counts, as it features all the apps we have become accustomed to. It is a big move from Fitbit, and it looks to have worked.

Perhaps this is a positive sign for the wearables industry on the whole. For years, Fitbit appeared to be the only wearables brand which could survive as devices failed to meet the expectations of consumers. Maybe the consumer was not ready for the wearables craze, but the simplicity of Fitbits fitness trackers worked. In being able to move out of the niche and into mass-market appeal, this might be a sign the general public is ready to embrace wearables on the whole.

Looking at the share price, it is still way down on the peak from 2015, some 87%, but there have been signs of recovery across 2018. There is a notable dip in the last 5-6 weeks, though should Fitbit be able to maintain this venture into the mainstream market, we can only see the share price going up.

Fitbit Shareprice

LVMH has a crack at the smart watch market

The smart watch euphoria never took off, so logic surely dictates the price point was just too low… Hang on a sec.

LVMH, which owns such brands as Louis Vuitton, Hennessy and Lady Dior, has told Bloomberg of plans to launch a luxury smart watch product line under the Hublot brand. We’ve never been convinced by the segment on the whole, and when Apple can’t convince it cult-like following to buy the products it is never a good sign. But LVMH is clearly confident in the $5,200 product…

“It’s a unique one-shot,” said Jean-Claude Biver, LVMH’s watch boss. “It will be a collector’s watch in 20 years.”

Sure it will Jean-Claude.

There is a theory in the marketing world that the more expensive you make something, the more people will want it. Once it is out of reach it is desirable because it shows you are someone who can afford something which is out of the ordinary. It becomes a status symbol. This is essentially the philosophy which companies like LVMH, who specialise in luxury goods, are built upon. But we can’t see it working here.

The practicalities of smart watches are simple, therefore the basic brands, such as Fitbit, have been the most successful. Others have taken up the challenge of proving the technology is useful, Apple is persisting with this mission, but little success has been shown. It isn’t a product which will replace the smartphone, therefore upping the price shows little justification, and it certainly isn’t a fashionable symbol.

Just like Vertu smartphones, Kanye West-designed clothes, carbon fiber toilet seats or Kevin Bacon adverts, this device will probably just go down as pointlessly expensive.