Apple May Build 5 Million Smartwatches a Month

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Now that Apple Inc. (NASDAQ: AAPL) has announced its HealthKit heart and health monitoring software and upgraded iOS operating system that will include capabilities for a wearable device, all the company needs is that device. As usual the company is saying nothing about the expected smartwatch that will provide the hardware to run the HealthKit software, but that hasn’t slowed down the speculation on what the Apple device might be.

A report from Japan’s Nikkei.com cites industry sources saying that the new “watch-like” wearable device will include a curved organic LED (OLED) touchscreen and can collect data such as calorie consumption, sleep activity and blood glucose level and blood oxygen levels. Users will also be able to read messages sent by smartphones, according to Nikkei.

An unnamed parts manufacturer cited by the Japanese site claims that Apple plans to produce 3 million to 5 million smartwatches a month in its initial run. That is pretty aggressive considering total global sales of smartwatches in 2013 was around 1.9 million units with most of those running on the Android platform from Google Inc. (NASDAQ: GOOG).

Samsung said it shipped 800,000 of its Galaxy Gear watches in 2013, while Sony Corp. (NYSE: SNE) did not release a sales figure. An analyst’s estimate for Sony sales in 2013 came in at 400,000, and Pebble’s CEO said his company sold 300,000 watches last year.

Research firm Canalys estimates a total of 8 million smartwatches will be sold in 2014, with the number rising to 23 million in 2015 and 45 million by 2017. That does not include 9 million of the fitness-tracking wristbands that Canalys expects to move off shelves in 2014.

If Apple plans to build 36 million to 60 million smartwatches a year, the company must believe that sales will be far higher than the analysts at Canalys do. Of course production at that level will take some time to ramp up, but not three years. Apple’s joint development of a production facility for sapphire glass with GT Advanced Technologies Inc. (NASDAQ: GTAT) is ramping up for production of up to 16 million iPhone glass covers annually. The harder, more scratch-resistant glass is already used on the Galaxy Gear, and Apple uses it to cover the camera lens and fingerprint reader on the iPhone 5S. Some of GTAT’s production could easily be steered toward smartwatches.

It is a bit ironic that Apple let Samsung do some of the heavy lifting in terms of priming the market last year with its Galaxy Gear. Samsung shipped those 800,000 units to retailers, drumming up a lot of interest in the device, but relatively poor sell-through. Thanks to Samsung, Apple will not have to do a lot of the pick-and-shovel work to sell its smartwatches.

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