Wearables Week in Review

Apple hits the brakes on Watch availability

Apple has announced that it will be suspending sales of the Watch Series 9 and Ultra 2 due to an International Trade Commission (ITC) ban. The cause is a patent dispute over Apple’s blood oxygen sensor, which Masimo claims infringes on its patents. In October, the ITC upheld a judge’s ruling that Apple has infringed on these patents and, as a result, the ITC has blocked all Apple watch 9 and Ultra 2 imports to the US after December 25. The case is now sitting on President Biden’s desk and he has the option to veto the commission’s decision. But in the meantime, Apple has pre-emptively complied with the decision.

The Circana Take:

• Apple can still sell the Watches via its retail stores until December 25, and by giving a week’s heads-up that sales will end at that time, Apple is clearly hoping for a pre-holiday bump in sales. It is clearly a case of “while stocks last” that could definitely drive an increase in consumer purchases during the last week of the pre-holiday season.
• Apple’s decision also puts pressure on the White House. The 60-day Presidential Review Period is almost over (one week to go) and there has been no word to date. By pre-emptively announcing a sales suspension, Apple is clearly hoping to force the White House’s indecision on the matter.
• While Apple will pull the Watch 9 and Ultra 2 from its retail stores on December 25, other retailers can continue to sell the watches while they have available stock. The ban, after all, is on importing the devices into the US, not on selling existing inventory. As a result, we could see increased consumer interest in buying the devices, leading to a “buzz” as consumers hunt for available stock once Apple has pulled the devices from its own retail stores.
• With limited inventory ahead, at least in the short term, Apple will not need to concern itself with aggressive promotions to compete against other smartwatch vendors. The goal posts have been moved from a price decision to one of availability.
• Longer term, we expect there will be a resolution in the matter. Either the White house will accede and veto the ban, or Apple will move to mitigate the issue either by removing the sensor (unlikely), winning a rapid appeal or by coming to a resolution with Massimo.
• Lack of inventory of the new Apple Watch 9 and Ultra 2 is a blow to U.S. mobile carriers who have been enjoying a steady revenue stream from their rapidly growing connected Apple Watch user bases. Carriers will not be able to serve the potential upgraders from older generation connected Apple Watch models as well as those first-time connected Apple Watch buyers if the patent issue is not resolved.