For Apple enthusiasts, the festive period typically means exploring the brand’s newest technological marvels. However, this year’s end-of-season sale might bring a dose of unexpected disappointment. Apple has quietly removed its Series 9 and Ultra 2 smartwatches from its online showcase, creating a noticeable void in its digital offerings. These state-of-the-art wearables are now labelled “currently unavailable” and have disappeared from Apple’s flagship promotional campaigns on its homepage.
Apple has already halted the sales of Apple Watch 9 and Ultra 2 models, and by the eve of December 24, 2023, the company’s flagship retail outlets will cease offering these newly introduced watch variants to consumers.
What Exactly Happedned?
The abrupt ban on Apple Watch sales is a direct consequence of a recent verdict from the International Trade Commission (ITC). This decision was a continuation of an October ruling by the ITC, which determined that several Apple Watch models infringed upon patents owned by Masimo, a prominent medical technology firm based in Irvine, California.
During the legal proceedings, Masimo presented evidence alleging that Apple had strategically recruited its key executives and numerous other employees. Subsequently, Apple launched a watch featuring pulse oximeter capabilities, a technology that Masimo claims to have patented. This technology measures the oxygen saturation level in blood, specifically gauging the oxygen percentage that red blood cells transport from the lungs to other parts of the body.
In a bid to circumvent a sweeping sales ban, Apple was granted a two-month window to either negotiate a licensing agreement with Masimo or seek intervention from the Biden administration to overturn the ITC’s verdict. However, Joe Kiani, the CEO of Masimo, revealed in an interview that Apple had bypassed licensing discussions altogether. Instead, Apple directly approached President Joe Biden’s administration, appealing for a reversal of the ITC’s decision. Kiani further disclosed that the administration had reached out to Masimo regarding Apple’s appeal. He expressed concerns over Apple’s motives, accusing the tech giant of attempting to discredit the ITC by insinuating its alignment with what Apple portrays as “patent trolls.”
“This is not an accidental infringement. This is a deliberate taking of our intellectual property,” said Joe Kiani, the CEO and founder of Masimo.
Just two months prior, Apple faced a legal setback concerning the pulse rate detection technology embedded in its smartwatches. Consequently, the company received a directive to discontinue sales of the Apple Watch Series 9 and Watch Ultra 2 post-Christmas. This development have triggered a last-minute surge in consumer demand for Apple’s latest smartwatches.
Revenue Impact of Apple Watch Sales Ban
The Apple Watch has been a significant contributor to Apple’s overall revenue, generating close to $20 billion out of the company’s $383.29 billion in sales for the year 2023, according to data from Bernstein Research. However, a recent ban on the sale of Apple Watch 9 and Ultra 2 models could lead to a significant financial dent, estimating potential losses to hover between $300 to $400 million. This projection specifically accounts for the lucrative holiday sales period. Although this figure represents a substantial amount, it’s relatively modest in the context of Apple’s expansive financial portfolio. Analysts are anticipating that Apple will generate nearly $120 billion in sales during the October-December period, known as holiday shopping season.
Despite the potential setback, Apple’s scale and diverse revenue streams position it to weather such challenges in the broader context of its financial performance.
In an effort to address the concerns raised by the ITC ruling, Apple is reportedly implementing corrective measures. Bloomberg reports that the tech behemoth is actively working on software updates aimed at resolving issues related to the blood oxygen monitoring feature. Additionally, Apple has expressed its intent to challenge the ITC’s decision.
In a related development, Apple has reportedly decided to cease its practice of replacing out-of-warranty watches. This policy shift extends to older models, including those from the Apple Watch Series 6 lineup, which feature the blood oxygen monitoring functionality that was the subject of the recent patent dispute.
In a Nutshell
Apple’s presence in the global smartwatch landscape has been commandable, consistently holding a market share exceeding 30% in recent years. A particularly notable surge was observed during the fourth quarter of 2022, where Apple’s market share in the smartwatch segment catapulted to 37%, a significant jump from a comparatively modest 22% in the preceding quarter, Q3 2022. This substantial increase underscores the profound impact and heightened consumer demand typically associated with the holiday shopping season.
However, the recent decision to halt sales of the Apple Watch 9 and Ultra 2 series casts a shadow over the company’s smartwatch trajectory. The repercussions are expected to ripple beyond just the affected models, potentially dampening the sales performance of older Apple Watch variants. Consequently, this strategic pause could exert downward pressure on Apple’s overall smartwatch revenue, posing challenges for the tech giant in maintaining its dominant position in the global smartwatch market.
This isn’t the first time Apple has faced significant regulatory or legal challenges. Historically, the company has showcased a knack for leveraging its influence at the highest echelons of government. A case in point is the 2013 intervention by the Obama administration, which effectively nullified an impending International Trade Commission (ITC) ban on the sale of specific iPhone and iPad versions. This historical context underscores Apple’s strategic acumen in navigating complex regulatory landscapes.
The absence of latest Apple Watches this holiday season may be a pause, but it’s unlikely to be the end of its revolutionary journey.
