Apple Watch demand not enough for suppliers to break even

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Are Apple Watch expectations just too high?
Are Apple Watch expectations just too high?
Photo: Jim Merithew/Cult of Mac

Apple told investors earlier this month that sales of the Apple Watch have far exceeded its own internal expectations, but some of the companies that are making parts for the new wearable are claiming that they can’t even break even because demand is so weak.

Taiwan’s Advanced Semiconductor Engineering (ASE) which makes the system-in-package case that contains Apple Watch’s array of sensors and chips, told investors during a conference call that it still hasn’t reached “break even volume” of two million units per month.

Bernstein Research analyst Mark Li reported to investors that an ASE subsidiary revealed the weak demand to investors this month, and said that ASE doesn’t even expect to reach the two million units per month level the third quarter, and wouldn’t commit to reaching it during the fourth quarter.

“The shortfall of Apple Watch is a disappointment,” Mr. Li wrote in a note to clients, according to a report from the Wall Street Journal. “We came in with a low expectation but below break-even still surprised us.”

Apple hasn’t revealed any sales data for the Apple Watch, but its recent earnings report revealed that the new wearable has become at least a $1 billion business. Tim Cook said that sales have actually increased since the device’s debut in April, with most units being ordered in June.

Despite Apple’s high praise for the new device, which supposedly outsold the original iPhone and iPad during their first few weeks of launch, ASE is now expecting to fall well short of the 18 million units Li forecasted it would sell this year.