Zhou Hongyi, the CEO of Qihoo and an angel investor, wrote a blog post  titled Why I Don’t Think Smartwatches Will Work Out. He doesn’t blame all the smartwatch makers worldwide but those Chinese ones. Smartwatch in general is at an early stage that better ones or services must come out later. I believe some Chinese industry people are reflecting on it and working on better solutions. The problems Mr.Zhou pointed out, most of which I agree on, may be temporary. Hopefully so.

Here are his thoughts,

  • 99 dollars for a consumer electronic product  is an affordable price to average users in the U.S. but not so, more than 600 yuan, to Chinese users. 

Existing brand smartwatches by Chinese companies are sold from over 1000 yuan to over 2000 yuan. To give you an idea of what Mr. Zhou means by affordability: the two wireless routers Qihoo has launched are sold at 99 yuan ($16) and 19.9 yuan ($3).

Those Chinese smartwatch companies, of course, are working on how to reduce costs and then lower prices. The latest announced Z Watch is priced at 699 yuan (a little more than 100 dollars). Also you can find dozens of smartwatches on Taobao, the Chinese e-commerce marketplace, that are sold under 100 dollars, although the intelligence of them varies widely.

There’s no doubt that Chinese manufacturers in Shenzhen area, whom most brand smartwatches partner with, can reduce the costs on manufacturing the hardware part further. And the whole hardware manufacturing industry will then reach a stable level in terms of costs. So to those smartwatch companies, how much they can reduce the prices depends on costs on development of software.

  • In Internet era, you cannot depend on hardware for profits but should sell it at cost and then make profits from software or services.
  • Some Chinese companies are obsessed with adding more functions to a smartwatch, believing that more means additional values and more profits. But it’s even less convenient to check out those must-have apps, text message inbox, calendar, weather, Weibo or WeChat, on a watch with a small screen and short battery life than taking out your smartphone from pocket. It cannot be more competitive than smartphones.

The problem here, I think, is that currently the way some Chinese companies adopt to make a watch-shaped device smart is simply installing an Android system into it and customizing existing apps.

  • Chinese users use smartphones for entertainment, playing games or surfing online, that performs better on bigger screens. 
  • For men, the reason for wearing a watch is public display of social status. The key is fashion design. Chinese companies, big or small, tech-savvy or not, don’t have fashion design skills and are not capable of leading a fashion trend.