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CNBC

Wearables are the way forward for US electronics company

Despite accounting for only US$1 billion of the company's US$25 billion revenue last year, Flex's CEO stresses the importance of innovation.

PUBLISHED : Tuesday, 19 April, 2016, 12:20pm
UPDATED : Tuesday, 19 April, 2016, 1:50pm

One of the world's largest electronics manufacturers, Flex, is betting on wearables technology to create new opportunities for growth, according to its chief executive officer.

Flex, which was previously known as Flextronics, provides the technology that powers wearable devices from makers such as Fitbit .

Flex's Mike McNamara says that entailed making sure the device was durable, waterproof, could absorb shock, was able to connect wirelessly and more.

From simple fitness bands that track day-to-day activities to devices that can simulate a virtual environment, the applications for wearable technology are endless.

McNamara said these new, connected technologies were enabling traditional companies to come up with new business models.

One example he cited was the evolution of digital healthcare technology, with the emergence of fitness trackers.

These trackers monitor the wearer's heart rate, the number of steps that have been taken throughout the day and the number of calories expended, among other things. They allow the wearer to then analyze the data to get a better understanding of how their body progressed throughout the day.

"We work very, very hard for wearable technology," he said. "We try to work on the underlying core process technologies that enables wearables to happen."

Data from IDC showed worldwide shipments of wearable devices were expected to reach 110 million by the end of 2016, a 38.2 per cent increase over the previous year. In March, IDC said a combination of an expanding line up of vendors and fast-growing consumer awareness would see demand "generate double-digit growth throughout the 2015-2020 forecast period."

For 2020, IDC predicts 237.1 million wearable devices will be shipped.

The expansion of wearable technology puts pressure on companies operating in the space to innovate, according to McNamara.

"The burden is on our customers to constantly innovate," he said, highlighting the importance of creating new value. "They have this new data, this new technology, new innovation ... what do they do with it to actually create value?"

Though the potential is there for wearables, McNamara acknowledged it was still not a major money spinner for Flex, accounting for only US$1 billion of its US$25 billion revenue in 2015.

But McNamara was optimistic. He said for a category that did not exist three years ago to be worth a billion dollars was exciting.

"There is just so many different use cases for wearables that I think it will continue to grow."