The market for wearable electronic devices has been brewing for some time and is poised for some significant growth in the future, but for now, many manufacturers in China are still in “wait and see” mode.

Among 42 manufacturers of wearable devices that responded to a Global Sources survey, all respondents said they are waiting for big players like Apple and Google to grow the wearables market. Earlier this year, Google announced Android Wear for brands to use in their own smart watches and other wearables, but rumors of an Apple smart watch are what have really kept up speculation about a market boom in the near future. Expectations are high given the way Apple changed the smartphone market with the iPhone and reinvented the tablet market with the iPad.

Though speculation is running high online and among certain media outlets, 85 percent of survey respondents said they currently accept a minimum order quantity for wearables valued at less than US$5,000. This suggests that orders are still small in size in spite of growth seen in what is still a nascent market.

Still, suppliers expect a boost in wearables demand after bigger companies start to join in greater numbers. More well-known Chinese brands like Huawei, ZTE and Xiaomi already have smart watches and smart bands available. Motorola Mobility, soon to be a subsidiary of Beijing-based Lenovo, will release later this year the much-anticipated Moto 360, a smart watch running Android Wear with a round display.

With the increasing interest, manufacturers are anticipating more growth by the end of the year.

”I believe that there has never been an industry that has developed so fast like this,” said Neo Wang, CEO of Shenzhen Yingqu Technology, a smart watch company also known by its brand name inWatch.

Wang said features in current wearables products do not maintain users’ interest for long, but he is optimistic about the future.

“I believe the next round of breakout [functions] is not far away from us,” he said.

The market is certainly growing. In February, the analyst group Canalys estimated that shipments of smart watches alone would jump 40 percent to 8 million in 2014 and that wearables would rise to 17 million. Canalys estimated that shipments of smart watches could reach 45 million by 2017. Smaller manufacturers do not expect to be waiting that long, though.

Mifree Technology sales manager Weixin Mei said he believes many Chinese manufacturers will start making wearables in large numbers by December.

For now, there seems to be low acceptance and awareness among the public for wearable devices. While devices might appeal to earlyadopters and athletes, the cost of the devices and limited functionality mean wearables are still niche products.

“So far, there has not been a killer app in the market,” Wang said, referring to the difficulty users have coming up with a reason to buy a smart watch.

It may also be the case, however, that consumers, like manufacturers, are waiting to see what is on the horizon from Apple and other big brands.

Among the Chinese companies that have already entered the wearables field, some are investing in research and development to try to come up with unique functions. One popular trend in smart watches in China, for example, is to give them SIM card slots, allowing them to operate as lone devices with their own wireless connections.

Popular smart watches so far have mostly been supplemental devices that connect to smartphones through Bluetooth. Android Wear is designed explicitly to operate this way.

Still, it might be difficult for Chinese manufacturers to shake its reputation of taking ideas from abroad and making cheaper versions for the local market.

Copycat China
For much of the international community, the term “made in China” is synonymous with “copycat” or “cheap,” and this presents a hurdle for China’s wearables industry. Suppliers often copy products from big companies, competitors or other manufacturers and prefer managing costs to increasing R&D expenditures.

Among the companies surveyed by Global Sources, more than 90 percent responded that they spend less than 3 percent of sales revenue on R&D. By comparison, US computer and electronics companies were spending an average of nearly 10 percent of net sales on R&D in 2007, the last time data was compiled by the US National Science Foundation. However, concentrating on cost translates to lower prices in China, where many consumers are more price-sensitive than those in more developed economies.

There are still many companies in China that care about R&D, though. Dongguan World Tong Electronic Technology, which primarily produces Bluetooth speakers and smart watches,said it spends 120 percent of revenue on R&D, which CEO Hongxin Wu said she believes the company will earn back.

Research and development still seems like an afterthought to most manufacturers in China, though, which means they may not be as forward thinking in their strategies as the market will require. The wearables market is still maturing and the product life cycle could be long, which is something the tablet industry is currently dealing with.This means sustainable profits in wearables could be a long game, but many Chinese companies appear focused on short-term revenue streams by copying and launching new products in quick succession without understanding the market. The result is that many products are lacking in quality and design.

Technical challenges
Besides the local challenges the industry faces, wearable devices still need to mature technologically.

Power consumption is consistently recognized as a big challenge for wearables producers. Many smart watches on the market today barely last a full day of use. This gives consumers yet another device that needs to be charged every day and most people are not accustomed to having to routinely monitor the power gauge on a watch. However, fixing the problem is challenging because smart watches consume much more power than traditional watches without adding a lot more space for larger batteries.

Size can still be a problem, though. Popular smart watches today are still bulky compared with traditional watches. In addition to fitting in rechargeable lithium-ion batteries, smart watches have many other components, including sensors used for pedometers and other kinds of health and exercise monitoring. These sensors will probably have to be further miniaturized in the future to be optimized for wearables.

Another hurdle is deciding on the right version of Bluetooth. Many wearables currently use Bluetooth 3.0, a generation behind the more power efficient Bluetooth 4.0, further exacerbating power woes. Additionally, it has been reported that some wearables coming out of China have trouble pairing with some high-end smartphones like those from Samsung and Apple.

Consumers might also be waiting for a more comfortable input system on smart watches. For now, most smart watches rely on a small touch screen and voice commands. Some Chinese manufacturers have produced smart watches with slide-out alphanumeric keyboards. Dongguan World Tong is trying something a little more advanced by working on a smart watch that contains a mini laser control system.

Converging fashion with tech
Given the bulk of modern smart watches, design is one of the biggest challenges the wearables industry needs to overcome. This is why many manufacturers see fashion as their most pressing concern.

This is what led inWatch’s CEO to call fashion the company’s “killer app”. It is also why Shanghai Geak is producing smart watches with round displays instead of the more common rectangular display of most smart watches today (Motorola and LG have received considerable attention for their own round-faced smart watches, which many consider to be more aesthetically pleasing).

When the time comes that fashion and functionality converge in wearables, the devices will likely be playing an important role in people’s lives. Users will use them to control household appliances, cars and other things used every day. The devicesmight be used tounlock a door or adjust the air conditioning according to a user’s body temperature, according to Mei of Mifree Technology.

For now, though, the functionality of wearables remains limited by size and technology. Some functions do not work well in devices trying to be everything to everyone. Thus, the near future of wearables might see more specialization.

For example, Beijing-based Tenghai Sunwise Network Technology focuses mainly on smart bracelets for sports and fitness uses, and Shenyang-based Neusoft Xikang Technology designs wearables for medical uses. By dividing devices by purpose, manufacturers might be able to better control the quality of the experience.

Industry overview
Living up to its reputation as China’s manufacturing hub, Guangdong province is home to about 90 percent of respondents to the Global Sources survey, with most based in Shenzhen. The percentage of manufacturers involved mostly in OEM, ODB and OBM are 64 percent, 18 percent and 18 percent, respectively.

Most manufacturers have less than 200 personnel on staff, with 64 percent of respondents saying they have between 50 and 200 personnel. Of companies with more than 500 employees, only 13 percent make wearables.

Wearables from China are primarily exported to Europe and North America, with the survey showing that those markets make up 40 percent and 28 percent of wearables exports, respectively.

Currently, wearables manufactures do not expect the category to exceed 30 percent of their products. Many wearables manufacturers have also been involved in smartphone and tablet production for several years. With wearables becoming more popular, more manufacturers have been lured into giving the products a try. However, other mobile devices are still big sellers.