Intel has dominated the computer chip industry. Beginning with the iconic advertising campaign “Intel Inside,” the company has created a large market for powerful processors. This has allowed Intel to charge high prices to computer manufacturers (e.g., Dell, HP) who needed the best processor chips for personal computers and industrial mainframe servers to meet buyers’ expectations.

Along with Microsoft, Intel has captured a large percentage of profits in the modern computer revolution. But Intel, enjoying its success in PCs and mainframes, missed the rise of smartphones, where companies like Qualcomm and Samsung placed their mobile communication chips.

The latest astronomical rise in computer chips has come from graphics processing units (GPUs), which were originally designed by companies such as Nvidia for high-powered visual requirements in applications like video games. Now GPUs are being put to use for deep learning, artificial intelligence and computer vision, machine learning, and self-driving cars. In 2016, with Argo AI and Tesla placing multiple GPUs in every car manufactured, Nvidia’s stock price more than tripled. During the same period, Intel’s stock price increased by only 8%.

To look for growth, Intel has set its sights on the forthcoming “Internet of things” market in which previously ordinary items (e.g., refrigerators, factory machinery) will be full of sensors and connected to the Internet. One such category is the smartwatch, an advancement that replaces the traditional wristwatch with capabilities far beyond functional timekeeping. While the origin of computer interfacing wristwatches can be traced to the Pulsar brand in the 1970s, retail markets have been negligible due to limitations of data, storage, battery, and connectivity. It was not until 2013 that the True Smart watch by startup Omate reached the full operational capability of the present-day smartwatch. Smartwatch sales are rapidly increasing. More than 69 million were sold in 2019, and 2023 sales projections surpass 109 million units worldwide. Samsung and Apple entered the market in 2014 and 2015, respectively, largely targeting their smartphone customers. In addition, Google, Microsoft, Sony, and Toshiba have joined at least 30 other companies currently of earing smartwatches.

Opportunities for the modern smartwatch include products that act as companions or standalone alternatives to smartphones, fitness tracking and enhancement monitors, and diagnostic and medical health reporting devices.

In 2014, as part of an early exploration of connected devices loaded with sensors, Intel acquired Basis Science, a smartwatch manufacturer employing high-quality heart-rate sensors and algorithms to track activity and monitor sleep patterns. The Basis Peak was released in 2015, but the waterproof watch that emphasized quality sensors and algorithms failed to catch on with the wider public. In 2016, reports that the Basis Peak battery caused burns from overheating prompted Intel to recall the watch and issue customer refunds.

Imagine Intel has fixed the battery issue with the Basis Peak and is now considering another run in the smartwatch space. This time, they plan to partner with another company to launch a new product. Potential partners include Aetna, Amazon, and Google.

Google would offer integration with Android Wear for full-function smartphone communication synthesis and access to apps. Health insurer Aetna could be a valuable partner by promoting the watches to businesses concerned with employee well-being. Periodic reminders (e.g., breathe, stand up, walk) would encourage healthier living and save money on company-sponsored healthcare premiums. Amazon is an alternative to Google, with access to the “Alexa” artificial intelligence voice interface. A partnership with Amazon could provide a voice-based interface that might pair well with Bluetooth earbuds. The firm also has an obvious advantage in promotion and distribution, as it can utilize its own retail platform.  

As Intel executives ponder their next move, it becomes clear they need a systematic approach to revisit the current state of the smartwatch industry and their customers, given the changes in the last five years......

QUESTIONS

1. Determine the number of distinct segments present in the market as represented in the current respondent sample.

2. After determining the number of segments, describe each using the segmentation and descriptor variables. Based on the characteristics, create a name for each segment that captures the essence of what makes it unique.