UPDATE 1-Samsung unveils smartwatch to power Galaxy Note sales

Wed Sep 4, 2013 2:38pm EDT

* Makes calls, display messages, record videos, snaps photos

* Smartwatches market potential seen at $50 bln by 2017

* Hopes smartwatch will increase appeal of its smartphones

By Harro Ten Wolde and Miyoung Kim

BERLIN/SEOUL, Sept 4 (Reuters) - Samsung Electronics Co Ltd unveiled a smartwatch on Wednesday that works as an accessory to its market-leading Galaxy smartphone, with a small screen offering basic functions like photos, hands-free calls and instant messaging.

The world's top handset maker hopes the Galaxy Gear will boost the appeal of its range of Android-powered smartphones, as it battles to maintain supremacy in the rapidly saturating high-end mobile market against arch rival Apple Inc.

Its launch, timed to coincide with the start of the IFA consumer electronics trade show in Berlin, also signals the South Korean giant is more than just a fast follower in innovation behind Apple, which is preparing to release a new iPhone next week but is yet to go public with any wearable devices.

"I believe it will become a new fashion icon in the world," said J.K. Shin, Samsung's co-chief executive and head of mobile business.

The market potential for wearable devices is significant. Leveraging advances in voice technology, biometrics, communications, cloud storage and power consumption, smartwatches and other wearable devices could be a $50 billion market by 2017, according to Credit Suisse.

The companion device will keep users constantly connected, Samsung Executive Vice President of Marketing Lee Young-hee said.

The smartwatch features a 1.63-inch (4.14-cm) screen as well as a basic camera, and will connect to Samsung's latest Galaxy Note 3 smartphone via wireless Bluetooth technology. It will make calls, display messages, record videos and snap photos, all while the user's phone stays in their pocket or handbag.

The success of Samsung's latest smartwatch - clunky earlier versions in 1999 and 2009 didn't go down well with consumers - will be measured as much in how it affects sales of high-end Galaxy smartphones as in sales of the device itself.

But it is also a shot across the bows of Apple and Google Inc, which are widely believed to be working on their own wrist-worn devices in what analysts expect to be the next phase of the mobile communications boom.

"We had smartwatch-type products before, but they were mainly for making phone calls. What's different with the Gear is it's got far more useful functions. It's usability has increased significantly and design is not bulky," Shin said.

NOT REVOLUTIONARY

The Gear, which will go on sale later this month for $299, doesn't have a flexible or curved display that some industry watchers had hoped to see on Samsung's newest products.

Instead, its OLED touch screen features half the picture quality of high-end smartphone displays and the camera nestling in the strap has only 1.9 megapixels - compared with a 13-megapixel rear camera on the Galaxy S4.

"People are really ready for flexible. Companies have shored up their technology development in flexible displays and it is really exciting, but the technology is not ready for the mass market because it is too expensive," said Sweta Dash, director Display Research and Strategy at IHS Electronics and Media.

The watch has up to 70 dedicated applications including some basic fitness apps such as a step-counting passometer, although Samsung hopes this number will grow as developers get on board.

Battery life, a key challenge for most wearable devices, has improved to over 27 hours under Samsung's normal-use tests.

Samsung's smartwatch will not be a game changer, CCS Insight analyst Ben Wood.

"Samsung will do a great job in raising the profile of this new category, but I don't think we will see a massive shift."

"I think it will only really come alive if Apple would push into it real hard because they would than make it a fashionable item. Because a watch is a fashion item. It really is."

Samsung also unveiled the latest version of the Galaxy Note phone-cum-tablet at its Galaxy unpacked event in Berlin, before the opening of IFA, Europe's biggest consumer electronics trade fair.

It features an even bigger 5.7-inch, high-definition screen, improved stylus functions, a 13-megapixel rear camera and faster data connection than the conventional 4G network.

Samsung added enhanced security solution KNOX to the phone, setting its eyes on corporate users, a niche long dominated by Canadian smartphone maker BlackBerry Ltd .

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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