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.
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
7 responses to “Apple Watch demand not enough for suppliers to break even”
The Apple Watch is a great product, but as a whole it was never expected to gain mass adoption like the iPhone.
There are a lot of cellphone users (including non-smartphones) and the iPhone was expected to not only convert the Blackberry customers but also to lure in standard cellphone users too. The market potential was huge and Apple succeeded.
Compared with regular watch users and luxury watch users, the marketshare is much smaller and Apple Watch doesn’t have much to conquer, which is why the Apple Watch was never intended to follow the pace of the iPhone, but was supposed to create it’s own niche (but profitable) market.
(*I say “as a whole” to encompass the current feature set and price point as determining factors.)
Of course they will fall short if they thought they would sell 18M this year, I dont think anyone projected sales to be that high. Its also hard to imagine that what they are projecting sales of 2M a month when they were supply constrained in the first few months.
So let me get this straight. In 2014, the entire smart watch market was around 7 million units across the board. However, ASE can’t turn a profit on their part unless one company (Apple) sells over 3 times what the other 80-90 companies sold combined. I just want to make sure I have my numbers straight. Also, you specifically stated “some companies” (plural) but only mention the name of one company (singular). I also read the WSJ article and only one company was mentioned. Am I missing something?
Don’t bother with droll facts or logic on this troll website.
Perhaps ASE accepted razor thin margins because they wanted to work with Apple or they needed orders to fill their factory.
Love you guys conversation! Haha
So you think these facts/numbers and statements are bogus?
Its not Apples fault people don’t want to put accessories on their expensive smart watch..