Apple Watch Demand Flattening as 42mm Models Estimated to Represent Over 80% of Orders

KGI Securities analyst Ming-Chi Kuo issued a note to investors today that claims Apple Watch demand may be slowing down, resulting in shipment forecasts being revised down by 20% to 30% to 5-6 million units in the third quarter.

Kuo expects total Apple Watch shipments to fall within the 15 million range for the 2015 fiscal year, lower than the consensus of 20-30 million units, but remains upbeat about the Apple Watch and long-term wearable trends.

KGI Securities conducted a survey that reveals most Apple Watch orders are scheduled to ship in June, and concludes that 2Q15 production output is likely sufficient for the orders placed so far. Kuo also notes that over 80% of orders are for larger 42mm models, implying a male-dominated customer mix based on the assumption that 42mm and 38mm watches are mainly purchased by men and women respectively.

"We have learned that 42mm Apple Watch accounts for 60-70% of production. However, the shipping times of 38mm models are generally earlier than those of 42mm. We believe this is because demand for 38mm watches is significantly below that of 42mm ones. We estimate that 42mm models account for over 80% of sales. Assuming that 42mm and 38mm watches are mainly purchased by men and women respectively, the Apple Watch has attracted mostly men."

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Kuo concludes that the Apple Watch, like the original iPhone, has potential albeit several areas that could be improved. In particular, he says the Apple Watch has a lack of killer apps, not a very useful Digital Crown, insufficient battery life, room for form factor improvement, sometimes sluggish processing and response times and iPhone dependance for most settings and internet access.

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