The Galaxy Gear will be powered by Google's Android operating system and go on sale this year to beat a potentially competing product from Apple, the people said. The device will be unveiled Sept. 4, two days before the IFA consumer electronics show begins in Berlin, one of the people said, asking not to be identified because the plans are private.
Asia's biggest technology company is racing other electronics makers, including Sony Corp., to create a new industry of wearable devices as the market for top-end handsets nears saturation. The global watch industry will generate more than $60 billion in sales this year, and the first companies to sell devices that multitask could lock customers into their platform, boosting sales of smartphones, tablets and TVs.
"It will carve a niche for sure as this is an initial product in the market," said Chung Chang Won, an analyst at Nomura Holdings Inc. in Seoul. "Wearable devices could be one of the trends in the smartphone market, but I'm not sure yet whether watches or glasses will set the trend."
The Galaxy Gear being released next month won't have a flexible display, though the company is continuing to work on developing a bendable screen, one person said. It will be unveiled the same day as Samsung's Galaxy Note 3, a combination smartphone and tablet computer.
Apple had a team of about 100 designers working on watch-like device, two people familiar with the matter said in February. The company, based in Cupertino, Calif., is seeking to introduce its device this year, one of the people familiar with the matter said at the time.
Samsung became the world's largest smartphone maker last year, overtaking Apple. The company, based in Suwon, South Korea, had about 33 percent of the global smartphone market in the second quarter, while the iPhone maker fell to a three-year low as more consumers chose inexpensive handsets from Chinese makers, according to researcher Strategy Analytics.
Samsung posted second-quarter earnings July 26 that missed analyst estimates as sales growth for the flagship Galaxy S4 was curbed by slowing demand for high-end handsets. Shares have fallen 15 percent this year in Seoul trading, compared with a 4 percent decline in the benchmark Kospi index.
Samsung released the Galaxy S4 smartphone in April and plans at least two other high-end handsets this year, including a device using the Tizen operating system.
Lee Young Hee, executive vice president of Samsung's mobile business, said in a March interview the company was working on a watch device.
IFA runs Sept. 6-11.