Wearable Tech World Feature Article
October 07, 2013

How Many Smartwatches Can a Smartwatch Seller Sell if a Seller Sells iWatches?

Apple analyst and long-time Apple prognosticator Gene Munster of Piper Jaffray suggests that Apple might very well be able to sell as many as 10 million iWatches the first year they go out the door. More specifically, Munster predicts that "anywhere from 2 percent to 4 percent of global iPhone users might buy an Apple smartwatch in the first year."

Munster's prognostication effort doesn't come entirely out of the blue, or from Apple parts supplier checkups. Rather it is based on a recent Piper Jaffray-developed survey. The panel for the survey consisted of 799 U.S. consumers - which is a relatively small sample size. The question that Munster is relying on to form his prediction is one that simply and straightforwardly asked respondents whether or not they would buy a $350 iWatch than can be connected to an iPhone.

The panel returned a perhaps surprising result in that only 12 percent of panelists who were iPhone owners said they'd be interested in buying an Apple iWatch. It is certainly easy enough to do the resulting math - it means that a whopping 88 percent or respondents would not jump in and make such a purchase. We need to keep in mind here that the respondent are U.S.-based, meaning that out of a global population the underlying theory would be that American buyers are those that would be most predisposed to buy one.

Image via Shutterstock

That might very well lead one to conclude that a survey that was far-ranging and included panelists on a global basis would likely deliver a far lower number of potential iWatch buyers. For Munster it translates to roughly mean that anywhere from two percent to four percent of global-based iPhone users are actually likely to acquire an iWatch the first year it is offered. That translates to between five and ten million iWatches.

In an investor note related to this likely number of units that might sell, Munster suggests that if we look to use the midpoint estimate - 7.5 million iWatch devices sold - Apple's revenue and gross profits would each rise by just about one percent. Hardly something that will impact Apple's financials in any tangible way - at least not in the first year of sales in that range. Munster also notes that he believes there is a 60 percent chance that Apple will deliver an iWatch in 2014.

We have a different view both on percentages and global implications. First, we ourselves believe the chances of Apple delivering an iWatch in 2014 are closer to 95 percent than 60 percent. Much will depend on Apple itself believing it has been able to create a truly differentiated product that is both high end and highly fashionable. Second, if history is any guide, Apple will deliver a greatly redesigned iPhone 6 in 2014 and there is absolutely no better differentiator to market with it than a fully integrated iWatch experience. We'll definitely stick with 95 percent on this.

Next, as the Chinese and other Asian markets come on line the fact will reveal itself that just as Asian markets have a huge appetite for very high end mechanical watches, they will exhibit the very same appetite for a high end Apple iWatch - rather than global markets serving to depress iWatch sales percentages we believe they will in fact drive greater sales. We would predict double the sales Munster suggests, at the very least.

It will be a powerful combination of both innovation and fashion that will define Apple in 2014 on the smartwatch front.

Edited by Alisen Downey

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