Take Flextronics International Ltd., for instance. Flex, as it is now called, booked nearly one billion dollars’ worth of wearables revenue in fiscal year (FY) 2016 ending March 31. Though only a fraction of the company's FY 2016's $24.4 billion in net sales, the segment is poised to be a showcase for Flex's sketch-to-scale business and product development strategies.
The idea of moving products through the entire design, supply-chain and manufacturing cycle is not novel, and it has been tried and tested with other products from other industries for many years. But it can be replicated, and it will likely gain importance as the wearables market expands, evolves, moves into different categories, launches new players into the mix, and demands more sophisticated hardware and software technology and integration.
"It was easy to get into the electronics manufacturing business with consumer companies that were making cell phones and tablets," said Lenny Richiuso, Flex's senior director of innovation management, pointing to Flex's longtime strength in producing high-volume, low-margin products for traditional OEMs. "What we are finding now is that many non-traditional companies are coming to us for solutions. It may be someone who makes jewelry or fine time pieces or clothing, and they want to find a way to add sophistication and technology to their products. These customers have no idea what electronic components they need or how to test them or how to add an antennae. They are asking us for help in figuring that out."
Big-name fashion brands such as Fossil and Nike, for example, are among those who came to Flex looking to go beyond what has become the standard wearable: a wristband tracking fitness performance or doing other simple tasks. In July, Flex inked a deal with MAS Holdings to "develop revolutionary new wearable technologies that accelerate and integrate the Intelligence of Things into clothing and enable more natural, intuitive interactions between people and technology," according to the press release.
None of this may come as surprise considering how fast the market is moving. By 2019, unit shipments are forecasted to reach 230 million, fueling $32 billion in revenue, up from nascent figures only a few years ago, according to IHS Markit. Smart clothing alone could grow into a $600 million world market by 2020, exploding from just $15 million in 2015, according to IHS Markit estimates.
Beyond wristbands, smart watches and clothing, wearables are taking a variety of new forms, such as implantable medical devices. And they may soon be the bridge linking technology to other industries, such as fashion, media, insurance, banking, and safety and security, noted Flex vice president of consumer technology, John Dwyer, in this video and website transcription.
Counting on Design and Engineering Know-how
As this happens, Flex, which has been manufacturing wearables for three-and-a-half years, will be looking to its design and engineering teams to creatively tackle the challenges that will come with different form factors and technological demands, said Richiuso.
Some of this has already come to fruition. For example, the introduction of wearables brought with it the need to migrate from rigid circuit boards to flexible and bendable ones, among other things.
"When wearables first came out, there was a lot of competition for [circuit board] real estate and what could go on a person's wrist. There were common challenges early on, and many areas of technology focused on waterproofing, flexibility, miniaturization, connectivity, capsulation, seamless integration and managing complexity," Richiuso added.
Many of those same issues will remain on the table as new devices show up in the market and require even more advanced solutions in these focus areas.
But, Richiuso points out, there will also be many other engineering and design considerations to think about, including answering questions such as: Will the technology embedded in clothing be able to handle a washing machine's spin cycle or a dryer's tumble cycle? Will laundry detergent or bleach damage components? How will electronic parts be packaged for bio-medical applications and ingested and absorbed by humans? How small can a Bluetooth device or connectivity antennae or other component really be? How can the data collected by wearables be used to provide better contextual, customized and predictive information to the user? How can analytics and machine-learning capabilities improve user habits or performance? What other raw materials or resins are available, and what are the advantages, disadvantages and costs of using them?
"There are creative people all over the world looking at these issues, and we are working with partners to co-develop solutions in these areas," Richiuso said.
Flex has an edge in this co-development scenario. It has about 2,500 design engineers thinking not only about next-generation wearable devices, but also in a broader sense about how the Internet of Things and intelligent connectivity will affect people's everyday lives. Additionally, it has worked in various industries and is using that experience and knowledge to fuel innovation in other segments.
"We have manufactured cell phones, computers, car parts, PCBs and have done chip-level design. Our company has evolved as our customers and our customers' products have evolved," said Richiuso. "We're now seeing an explosion of new devices. It will require creativity to design, develop and manufacture these new products."