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KGI lowers Apple Watch forecast significantly, says over 80% of sales are larger 42mm version

taptic

A new KGI research note predicts that production of the Apple Watch’s Taptic Engine component will begin to improve later this month, but slow demand has led to a downward revision of estimated shipments by 20-30%. The new estimate comes in at 5-6 million units shipped in the third quarter.

Combining that estimate with the data from last quarter has caused KGI to cut its annual shipment estimate in half. Where the general consensus previously predicted that Apple should ship 20-30 million smartwatches, the firm’s new number comes in at under 15 million.

The note also says that Apple Watch demand seems to be slowing down. Right after the device debuted, shipment dates dropped all the way back to June. Since then, there hasn’t been a substantial downgrade in shipment times, leading KGI to believe that the units produced in Q2 are keeping up with the current demand (while slowly catching up with the demand from launch). Since Taptic Engine output has not yet picked up, this “flattening” of demand is not likely to be due to increased production.

One final interesting tidbit in the note claims that as much as 80% of orders placed are for the larger 42mm version of the Apple Watch, based on shipping times for each size. The note assumes that men mostly buy the 42mm model, while women mostly opt for the 38mm and concludes that the watch may be selling better with men, but drawing any conclusions on buyer gender based on the sizes of the watches sold seems dubious at best.

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Comments

  1. Having no supply available is killing this item. I wonder how many canceled orders attribute to this falling number. Personally I’ve come close to canceling mine several times. I waited to try mine on before ordering. I ordered mine the first Sunday after pre-orders. That gave me a June shipping. This week that was updated to 22-June – 29-June. If this is their new business plan for new products I assume the market share will be at risk. I can’t imagine we would have this kind of patience with any other company.

    • It is crazy – IF the estimates is accurate of course. The 9to5mac regulars are a fickle bunch though and this estimate will be dismissed as garbage by the same folk who claimed that KGI’s pre-order estimates was highly accurate and brilliant.

      Until Apple get their pre-orders shipped and have regular stock available, nobody will be able get a handle on accurate(ish) figures so like all estimates, this is from someone with their finger in the air.

    • rogifan - 9 years ago

      And yet there’s still those who say Apple is purposely limiting supply to create demand.

      • chrisl84 - 9 years ago

        They are, if it was readily available even less people would want it…..the only desirable aspect of the Apple Watch is owning it is an exclusive club at this point….cutting estimates in half is a major blow to Apple. It has been reduced to nothing but a toy for the HARDCORE Apple fans to spot each other. Apple wont recoup R&D costs making products just for them.

      • geoffreyspencer - 9 years ago

        I hear what you are saying but at this point it is backfiring on them big time. I love Apple products over the others especially that garbage O/S from Google. I was annoyed with this rollout and the iPhone 6/6+ rollout. I almost cancelled my order a couple of times especially after reading reports that others were getting their Apple Watches before me and learning that they ordered theirs hours after me.

      • rnc - 9 years ago

        “he only desirable aspect of the Apple Watch is owning it is an exclusive club at this point…”

        These comments make my day…

        I love the watch aesthetics and top build quality;

        I use the fitness capabilities every single time I exercise;

        I swap my white rubber band (gym/informal) to my milanese (formal) in a couple of seconds, effortlessly;

        The always-on health monitoring puts a good activation effect on you, just today, I climbed 5 stair floors instead of using the elevator for the move goal;

        The notifications are so handy, the voice recognition (Portuguese) is the first time in History that I talked to a computer in my mother tongue and it understood what I said, and Portuguese is one of the most difficult western languages for a computer;

        I receive Mail from work all day, most of the messages don’t interest me, having the possibility to read them (completely) and achieve them on my wrist is spectacular;

        Speakerphone on the watch means I never stop what I’m doing and rush to my phone when I’m at home cooking, on the stationary bike, cleaning, doing random tasks…

        But that’s normal…

        Only a small portion of people are early adopters like me and many other people…

        Most of people will buy one anyway when they see other people wearing it and using it…

        I still remember when most dismissed the iPhone precisely because it didn’t have hardware keys… nowadays every single phone doesn’t have QWERTY, only niche phones from some near-dead manufacturers…

      • jrox16 - 9 years ago

        Purposefully limiting supply, LOL! Good story bro.
        chrisl84 should put his aluminum hat back on and go back to his mother’s basement.

    • andrewwaite2013 - 9 years ago

      I work for an enterprise system developer with many mobile apps. Here is what I know and its more than encouraging. I have two cases to quote: I have a colleague who was most skeptical although his wife had ordered a watch for his birthday. We had a couple in the development department so he borrowed one to understand it from a development point of view. Within two weeks and understanding the ergonomic and process improvements he has become a total fan boy. Another colleague also technologist had exactly the same revelation. People this ain’t jewelry or a fad and once adoption takes off this platform will change the way companies and people work. I will be ordering in a couple of months so I suspect my traditional watch may be reduced for black tie events. Andrew Waite, Nitro Mobile Solutions.

    • ryanvaldezzz - 9 years ago

      Also preordered mine on that Sunday. Got the same shipping estate too. Hang in there buddy, I feel your pain and stress.

    • drhalftone - 9 years ago

      Really guys, I think you are making too much out of the shipping times issue. Would you have preferred Apple simply push back the launch date of the product to July 1 but let you pre-order the device? Isn’t that really the issue that you, “purchased” a watch on back-order instead of “pre-ordering” it?

      • macnificentseven48 - 9 years ago

        These people think they’re going to die if they don’t get their AppleWatch on time. Wow. Imagine if it was something really critical in their lives.

  2. Thats because they dont have the freakin’ 38 mm.
    Ordered both.
    Currently I have on the Sport 42 which I got at Maxfield WHICH was the last one, WHICH I hate ..
    Seconds after midnight I ordered SS 38 mm and it hasnt shipped yet
    5 days after I ordered SS 42 Leather Look and SS 38 Modern Buckle (which God only knows when it’ll ship)

    Was notified this morning that the SS 42 that I ordered 5 days after is preparing for shipping.

    AND THE 38 mm I ORDERED SECONDS AFTER MIDNIGHT IS SHOWING AS PROCESSING!
    Unbelievable.

  3. Jason Kyle (@jasonkyle) - 9 years ago

    I dont understand how these numbers could possibly have any merit… I have read the horror stories of people waiting and waiting that ordered 2 mins after pre-order came online, errors in the process, etc. all to have an estimated ship date of June… June. I am waiting til I walk into the store, put it on my arm, and take it home. To say that demand is slow seems to me like saying its definitely going to rain 3 weeks from now. Its absurd at best. Everyone wants one… Nobody can get one. They can’t make em / ship em fast enough… Which… Thats on Apple… As a fanboy, Im getting real tired of this (Apples) shit.

    • Mike Beasley - 9 years ago

      Right, so if EVERYONE has an estimated ship date of June, then that means people ordering today and people ordering on launch day are getting their devices shipped at around the same time. Since supply is constrained, you’d think all of the June stock would be purchased and shipping dates would slip again to July or later, but they haven’t.

      Ergo, the units being shipped out in June must still be enough to keep up with the demand that started on launch day and continued until now, which means that demand must be decreasing or supply must be increasing. However, we know that due to faulty Taptic Engines, Apple has not yet been able to get production up to speed. Therefore, we can assume that supply is not increasing at a rate greater than demand is decreasing.

      The problem isn’t so much massive demand as it is extremely limited supply that’s unable to keep up with even average demand. That’s what the numbers are saying.

      • kpom1 - 9 years ago

        Not necessarily. Quanta claimed that it had labor issues that are now resolved. Maybe the taptic issue wasn’t as big a bottleneck as the labor issues. Remember that the MacBook was also supply constrained, which is highly unusual for the Mac line in general.

        I think the issue with the analyst reports is that they all went a little loopy and issued sky-high estimates for the first year based on some dubious surveys of percentages of iPhone users who expressed interest in the watch. My guess is Apple would be thrilled with 15-20 million sales in the first year. I also think that once it is available in stores we’ll see a steadier stream of sales as they’ll get more impulse buys, particularly with the new iPhone launch and holiday shopping season later this year.

      • Gaurav (@HorizonZwinger) - 9 years ago

        Lets clarify a few things. The numbers aren’t saying anything because no one has the numbers. These are estimates, based on estimates that are themselves based on certain assumptions. Assumptions such as, the Taptic Engine is the culprit of the supply constraint. We don’t know that to be the case, some folks somewhere think or have sources that have sources that have told them that it may be a culprit. That may or may not be the case. It could also mean that the T Engine was initially lagging the rest of the production due to QC issues but caught up faster than KGI predicts or assumes. Furthermore, it could also be the case that the collective production ramp up was much more significant than is being predicted because Apple wanted its industry partners to deliver a decent amount of product by say a date in JUNE where they could comfortably meet the initial surge in demand that follows a first of a kind apple product, provide a reasonable ship time for those purchasing say a few weeks from launch and still have a decent amount to offer in store sales as has been reported. That is one hypothesis.

        Additionally, the bit about -” The problem isn’t so much massive demand as it is extremely limited supply that’s unable to keep up with even average demand”. Would you mind clarifying what AVERAGE DEMAND is for a wearable device? Are you going to start to peg a first of a kind apple wearable, first generation device to a mature iPhone or an iPad product line? Lets say Apple sells 15 Million, how does that compare to the industry as a whole? If some analyst somewhere runs his/her math on faulty or questionable assumptions and gets his predictions off by say 50%, is the product to be blamed? If I predict that apple should have sold 100 Million Watches in the first 3 months and they end up selling say 20 Million, is the product an average product in terms of sales? or is my estimate totally out of line?

  4. galley99 - 9 years ago

    I ordered a 42mm SS BSB on 04/13 and it is still processing.
    I ordered the 32mm version on Friday and it shipped in two days.

  5. Matt Byers - 9 years ago

    my wife ordered the 42…also got the regular one with a nicer band…don’t think you can read gender into the size or cost

    • Mike Beasley - 9 years ago

      Yeah, exactly. Seems like an odd way to try to determine that data point. People have wrists in a variety of sizes.

  6. Joe Dodson - 9 years ago

    The excitement I had about this product when I put in my pre-order on April 10 has been almost entirely replaced by resentment and a feeling of being manipulated by Apple. Glad Tim Cook thinks the roll-out couldn’t have gone better, but he’d be hard-pressed to find many customers who agree.

    Minimally, Apple owes us an explanation. I’m considering cancelling mine as well and just picking up a new Garmin gps watch at half the cost.

    • jrox16 - 9 years ago

      How were you manipulated by Apple? Did they give you a delivery date window after you placed your order? Has that window passed and still no Watch?

      This isn’t an Android Wear device, people actually want this and it’s in the millions of sales already, far beyond what any competitor has to deal with individually. It’s a new product so the supply chain and logistics haven’t been completely and perfectly developed yet. That takes time. Plus they couldn’t be sure how many they would sell initially and one always plays cautious with that. Apple, like most successful companies, works on JIT principles (just in time). That means you never have more than a few days of stock on hand. Stock on hand costs a company big time, sometimes kills companies.
      But with a new product it’s impossible to accurately forecast that. People need to stop thinking that just because Apple is the biggest richest company on Earth that it somehow doesn’t have to operate within fundamental principles of best practices and are all still only humans doing their best. They don’t actually have magical pixie dust there. You try to manage something like an Apple Watch rollout, see how well you do. Just sayin. :)

    • kpom1 - 9 years ago

      The delivery windows were pretty accurate. I ordered evidently one of the less popular models (38mm Stainless Steel with Classic Band) a few hours after pre-orders started and got mine on 4/24. I ordered some extra bands that came earlier this month, also within the delivery window that Apple promised.

  7. William Volk - 9 years ago

    One issue is that there is NO WAY for users to browse apps in the Apple Watch Companion app. You can go to ‘categories’, pick games (as an example) and all you’ll see is the 15 or so featured titles.

    There are 1000’s of cool apps and watch owners aren’t seeing them, unless they type in search strings.

    • kategladstone - 9 years ago

      If you go to iPhone’s App Store, and type “Apple Watch” as the search string, you will see ALL the Apple Watch apps.

  8. dam1999sam - 9 years ago

    There was no way for Apple to know what to stock for the watch launch. This should have been expected. Now that they are getting a handle of what configs are selling vs others then supply at the stores will start to be the norm. I don’t get how this isn’t just plain common sense.

  9. Pierre Calixte - 9 years ago

    This goes to show that the watches are too small. for the next version they should drop the 38mm. They should go with 42mm and 46mm.