Apple’s iWatch Production May Be Delayed, But Hype Continues

BORIS HORVAT/AFP/Getty Images

BORIS HORVAT/AFP/Getty Images

Although Apple (NASDAQ:AAPL) has yet to even confirm the existence of its long-rumored iWatch, a new research note issued by a well-connected analyst suggests that the device will debut a little later than originally predicted. In April, KGI Securities analyst Ming-Chi Kuo predicted that the mass production of the iWatch would kick off in September, with an expected launch date in October. However, according to Kuo’s latest research note obtained by 9to5Mac, Apple’s wrist-worn wearable tech device will likely not begin production until at least November.

“We have pushed back our estimated time of iWatch mass production from late-September to mid-/ late- November,” wrote Kuo according to 9to5Mac. “We also lower our forecast of iWatch 2014 shipments by 40% to 3mn units.”

According to the analyst, the production delay is due to difficulties related to the novelty and complexity of the device’s hardware and software. Apple typically reuses components across its product lines in order to save development and production costs. For example, the original iPad mini was made with a display that had the same pixel density as the iPhone, which allowed Apple to reuse existing display components and similar production methods for a new product. However, since the iWatch is so radically different from the other products that Apple has previously made, it requires entirely new components and manufacturing methods.

Kuo also offered a glimpse of what he believes some of the new iWatch components may be in his research note. According to 9to5Mac, Kuo believes that Apple’s iWatch will feature a flexible AMOLED (active-matrix organic light-emitting diode) display, a sapphire-covered screen, new system-on-a-chip components, and higher waterproofing standards.

Source: iWatch Concept by Todd Hamilton

Source: iWatch Concept by Todd Hamilton

A flexible AMOLED display for the iWatch has been previously predicted by other analysts, including DisplaySearch’s David Hsieh. The possibility of a sapphire-covered iWatch has also already been explored by Matt Margolis, a PTT Research analyst who is well-known for his investigative research on Apple’s partnership with sapphire manufacturer GT Advanced Technologies (NASDAQ:GTAT).

Kuo previously predicted that multiple models of the iWatch would be released with various screen sizes. According to sources cited by Reuters, one of the models will have a slightly rectangular 2.5-inch screen. Based on these size estimates, it is no surprise that Apple would need to develop new system-on-a-chip components for the iWatch. While Kuo didn’t specify which company might be making the chip components for the device, a recent report from The Wall Street Journal claimed that chipmaker Taiwan Semiconductor Manufacturing Company (NYSE:TSM) would be handling some of Apple’s A8 processor orders this year as the iPhone maker looks to reduce its reliance on Samsung (SSNLF.PK). It is quite possible that one of those chipmakers will also be making the chip components for Apple’s iWatch. While Apple’s iPhones are not as waterproof as mobile phones made by rivals like Samsung and Sony (NYSE:SNE), it stands to reason that Apple would implement higher waterproofing standards for a wrist-worn device that will presumably be more likely to get wet.

Unfortunately, Kuo’s revised iWatch production dates suggest that the device will be in short supply when it debuts toward the end of this year. Analysts’ estimates on how many iWatch units Apple will sell have varied widely. Last month, RBC Capital Markets analysts Amit Daryanani and Mark Sue estimated that Apple could generate an additional $9 billion to $11 billion in revenue during the first year if the company sold approximately 50 million devices that cost around $175 to $225 apiece, according to a research note obtained by the Financial Post. On the other hand, Evercore Partners’ Rob Cihra predicted that Apple will sell 18 million iWatch units priced at $249 in the first year of availability, according to Barron’s.

While Apple’s iWatch has been rumored to feature everything from voice messaging to wireless charging, most industry speculation has centered on the device’s expected health-monitoring and fitness-tracking capabilities. As noted by 9to5Mac, Apple has hired dozens of medical sensor and fitness experts over the past year and the iWatch is rumored to include multiple biometric sensors that will collect various health-related data, such as calorie consumption, blood sugar levels, oxygen saturation, and sleep activity. Apple’s recently unveiled HealthKit data storage platform and Health app are expected to work in conjunction with the iWatch’s health-related features.

However, despite the inclusion of multiple health-related sensors, the iWatch is expected to be positioned as a fashion accessory, according to 9to5Mac’s unnamed sources. This prediction was bolstered when Reuters reported earlier this month that Apple had hired a sales executive from Swiss luxury watch brand TAG Heuer.

“[W]e’ve got the best product pipeline that I’ve seen at Apple in my twenty-five years at Apple,” stated Apple senior vice president of Internet software and services Eddy Cue at Re/Code’s Code Conference in May. While it remains to be seen if the iWatch lives up to the hype, the prospect of an entirely new product category appears to already be generating Apple investor excitement. Apple’s stock price has surged over 28 percent since April and is currently at $95.33 in midday trading.

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