Apple Seeking New Supplier to Help Manufacture Apple Watch 2

[MacRumors]

Apple is currently searching for an additional supplier of next year's rumored Apple Watch 2, according to a new report from supply chain sources (via DigiTimes). The company is speaking with Inventec, Wistron and Foxconn Electronics to join Quanta Computer in the manufacturing of the next generation of the Apple Watch. The report cites a "weaker than expected" profit return for Quanta in regards to the first generation Apple Watch, which is causing a few of the targeted manufacturers to voice concern about supporting the long-term investment in the future device.

Quanta has invested heavily in equipment for Apple Watch's manufacturing, but its profit return from the device has been weaker than expected. This is a concern for the ODMs that have been approached as a secondary supply partner, the paper added.

Also mentioned in the report is Apple's ordering of 4 million Apple Watch units for the fourth quarter of 2015, slightly down from the original 6 million planned in preparation for the holiday season since demand is "not as strong as expected." Still, the company expects sales for the wearable device to surpass 10 million units by the end of the year, before leading into the rumored launch period of the Apple Watch 2 sometime in the second quarter of 2016.

Today's news comes after Quanta Computer's chairman Barry Lam was reported to have commented on the impending manufacturing process of the Apple Watch 2, giving the device a launch window sometime late in Q2 2016 and higher volume shipments beginning in Q3. Little is known about the second generation Apple Watch, besides a few rumors that pointed to the possibility of a thinner device, integrated FaceTime camera, and a growing independence from the iPhone.

Article Link: Apple Seeking New Supplier to Help Manufacture Apple Watch 2

 

[appleguy123]

I doubt that the watch will be thinner for awhile.

Thinner=less gold=less valuable.

 

[Kajje]

A "weaker than expected" profit return item with a "very sattisfying" sales. Welcome to Apple economics!

 

[PinkyMacGodess]

Too soon... The glut of watches in the channel is going to swamp many resellers.

 

[appledefenceforce]

A "weaker than expected" profit return item with a "very sattisfying" sales. Welcome to Apple economics!

That makes sense. Apple's suppliers and analysts just pull figure out of their asses and expect the impossible. This is why Apple is wise to not engage in public discussion about how much they anticipated to sell, and how much they actually sell. It's a first gen product of a new category for Apple. It's gonna take time to mature and then it will boom. Just like the iPod and iPhone and iPad and Apple TV.

 

[ddarko]

Also mentioned in the report is Apple's ordering of 4 million Apple Watch units for the fourth quarter of 2015, slightly down from the original 6 million planned in preparation for the holiday season

6 million -> 4 million is a 33% change. I'm not sure what dictionary Macrumors uses but that's not my understanding of the word "slightly."

 

[2457282]

First point: from 2013 to the beginning of 2015 - let's round that to 2 years - Pebble, the most successfully smartwatch company to that point, had sold a total of 1 million watches. Giving it the benefit of the doubt, let's say that by now it has doubled sales to 2 million (in less than 1 year). Apple is predicted to sell 10 million in its first year (actually only about 6 months). And yet people are calling it a failure.

Second point: with the prices of the watches and an estimated margin of 40-50% I am wondering what is going on at the manufacture that is causing them not to turn over a significant margin? either Apple has another one of those deals where the manufacture was never going to make money or the manufacturer is doing something wrong.

 

[geoffreyspencer]

Apple Watch 2 needs integrated SIM (eSIM), GPS, more health features (i.e. for diabetics), work with hearing-aids w/o iPhone, needs to be thinner (but connect with current bands) and apps should run without the need for iPhone. I do not care about the camera but others do.

 

[Kajje]

This is why Apple is wise to not engage in public discussion about how much they anticipated to sell, and how much they actually sell

I agree with most parts of your post, but not with this.

They have started every keynote speech for the past years with boasting exactly how many million units they've sold of a certain product. With the Apple Watch they don't. I can understand why this raises concerns.

 

[avanpelt]

I'm not surprised that the watch has given suppliers a weaker than expected profit return. A quick search of local Best Buys (Atlanta) showed that nearly every store in the metro area had open box stock of the watch. They might not all be buyer's remorse purchases but I bet many of them are. Imagine how many watches are going unsold period. It would make no sense for Apple to keep having more manufactured.

 

[Quu]

First point: from 2013 to the beginning of 2015 - let's round that to 2 years - Pebble, the most successfully smartwatch company to that point, had sold a total of 1 million watches. Giving it the benefit of the doubt, let's say that by now it has doubled sales to 2 million (in less than 1 year). Apple is predicted to sell 10 million in its first year (actually only about 6 months). And yet people are calling it a failure.

Second point: with the prices of the watches and an estimated margin of 40-50% I am wondering what is going on at the manufacture that is causing them not to turn over a significant margin? either Apple has another one of those deals where the manufacture was never going to make money or the manufacturer is doing something wrong.

If the Pebble had the kind of tight integration with the iPhone that the Apple Watch has I'm sure it would sell better. But also many buyers of the Apple Watch do so because it's Apple not because it's actually a good product and Apple is facing a problem where unsatisfied buyers are abound telling everyone it's only so-so.

You need only look at the reviews when it came out to see that no one was impressed by it, it was just a "eh" product. That reviewers felt most could do without and many have.

Don't forget Apple sell around 55-75 Million iPhones per quarter. 2-4 Million Apple Watches sold in these same quarters shows it's got a lot of people to convince. I'm not saying it's a failure as selling millions of anything is definitely not a failure indicator but it's certainly not in the same ballpark as the iPhone and you must own an iPhone to use the watch at all.

 

[Kajje]

either Apple has another one of those deals where the manufacture was never going to make money or the manufacturer is doing something wrong.

FWIW, CNNs Jobs documentary stated Foxconn receives about $25 for the assembly of one iPhone.

 

[2457282]

If the Pebble had the kind of tight integration with the iPhone that the Apple Watch has I'm sure it would sell better. But also many buyers of the Apple Watch do so because it's Apple not because it's actually a good product and Apple is facing a problem where unsatisfied buyers are abound telling everyone it's only so-so.

You need only look at the reviews when it came out to see that no one was impressed by it, it was just a "eh" product. That reviewers felt most could do without and many have.

Don't forget Apple sell around 55-75 Million iPhones per quarter. 2-4 Million Apple Watches sold in these same quarters shows it's got a lot of people to convince. I'm not saying it's a failure as selling millions of anything is definitely not a failure indicator but it's certainly not in the same ballpark as the iPhone and you must own an iPhone to use the watch at all.

Your comparisons are not appropriate. Instead look at this - http://www.statisticbrain.com/wrist-watch-industry-statistics/. What you will find is that the entire smartwatch industry pumped out 6.8 million in 2014. If Apple is expected to hit 10 million in its first attempt, it has completely eclipsed the entire smartwatch market. Let's not compare the watch to the phone. Let's compare watches to watches. As a matter of fact, in that same report, it states that the entire swiss watchmaking industry pumped out 29 million watches. So Apple is selling about 33% of swiss industry. When I look at these numbers I would say that Apple has a runaway hit in the watch space and if I focus on the smartwatch space then Apple just killed it. The watch is not a phone -- it's a watch -- so please let's make sure we compare, um, apples to apples.

 

[H2SO4]

I agree with most parts of your post, but not with this.

They have started every keynote speech for the past years with boasting exactly how many million units they've sold of a certain product. With the Apple Watch they don't. I can understand why this raises concerns.

Exactly this. They are full of crap - all part of their passive aggressive plan to influence the stock market.
Now whilst it is their prerogative to be full of it, they must understand that if they are not consistent in how they act people will ask questions and behave negatively toward them.

 

[Yuthopia]

Apple Watch 2 needs integrated SIM (eSIM), GPS, more health features (i.e. for diabetics), work with hearing-aids w/o iPhone, needs to be thinner (but connect with current bands) and apps should run without the need for iPhone. I do not care about the camera but others do.

Well .. Why would u need that? I own one i don't need

Sim or e-Sim. Why would u need it? what is the use case? How would u make a call on that small screen?

 

[iConnected]

They have started every keynote speech for the past years with boasting exactly how many million units they've sold of a certain product. With the Apple Watch they don't. I can understand why this raises concerns.

They haven't done that because they stated, before they launched the new product line, that they wouldn't. Compliance with their stated policy on the subject is hardly any cause for concern.

Exactly this. They are full of crap - all part of their passive aggressive plan to influence the stock market. Now whilst it is their prerogative to be full of it, they must understand that if they are not consistent in how they act people will ask questions and behave negatively toward them.

They are acting entirely consistently with how they said they would act.

 

[H2SO4]

They haven't done that because they stated, before they launched the new product line, that they wouldn't. Compliance with their stated policy on the subject is hardly any cause for concern.



They are acting entirely consistently with how they said they would act.

You’ve missed the entire point deliberately and that’s fine. Case closed.

 

[Rocketman]

with the prices of the watches and an estimated margin of 40-50% I am wondering what is going on at the manufacture that is causing them not to turn over a significant margin?

Apple ordered 6m units and took delivery on 4m units. That loss of volume and thus leverage is the entire answer. I suspect like iPhone version 2 will sell a lot more. Quanta would be wise to simply ramp and widen lines to satisfy Apple's known higher version 2 sales.

Apple generally shoots for 6 weeks of channel inventory. Perhaps they will ramp that down to 3 after Christmas given the pent up demand for version 2.

 

[thekeyring]

They haven't done that because they stated, before they launched the new product line, that they wouldn't. Compliance with their stated policy on the subject is hardly any cause for concern.



They are acting entirely consistently with how they said they would act.

It's just so strange!

I understand their wanting to be cautious with a brand new product category, but then why did they introduce is as a new flagship product? Just for hype? But hype with no substance?

The Watch introduction felt a lot more like the iPhone introduction: 'we have a killer product we know you're going to love. Just watch: we're going to make history' than the iPad launch 'we think we've got something that fills this gap in your lives, and we'd like to show it to you'.

 

[iConnected]

It's just so strange!

I understand their wanting to be cautious with a brand new product category, but then why did they introduce is as a new flagship product? Just for hype? But hype with no substance?

The Watch introduction felt a lot more like the iPhone introduction: 'we have a killer product we know you're going to love. Just watch: we're going to make history' than the iPad launch 'we think we've got something that fills this gap in your lives, and we'd like to show it to you'.

Luca Maestri (Senior Vice President and Chief Financial Officer) in the Q3 15 earnings call: "As we've said in the past, we do not plan to disclose Apple Watch metrics because we don't intend to provide insight that could help our competitors."

 

[pika2000]

I hope Apple addresses several things:
1. Battery life. Yeah, in the beginning it might be okay, but Apple is encouraging usage of apps, so battery life must match the usage scenarios.
2. Corrosion concerns.
3. Round face.

 

[sracer]

Well .. Why would u need that? I own one i don't need

Sim or e-Sim. Why would u need it? what is the use case? How would u make a call on that small screen?

It's pretty obvious it is needed to attract new buyers. You already have one, Apple has no incentive to make changes or remain unchanged to suit you. But if they want to increase sales, then they'll need to cater to the people who don't already own one.

 

[Urban Joe]

First point: from 2013 to the beginning of 2015 - let's round that to 2 years - Pebble, the most successfully smartwatch company to that point, had sold a total of 1 million watches. Giving it the benefit of the doubt, let's say that by now it has doubled sales to 2 million (in less than 1 year). Apple is predicted to sell 10 million in its first year (actually only about 6 months). And yet people are calling it a failure.

Technically, Apple is so big that compared to most other companies anything they sell would be a camparative success based on units sold. So, it's probably better to compare Apple performance based on what percentage of the smart watch market they are selling. I don't know the answer to that but I know they haven't sold me yet.

Second point: with the prices of the watches and an estimated margin of 40-50% I am wondering what is going on at the manufacture that is causing them not to turn over a significant margin? either Apple has another one of those deals where the manufacture was never going to make money or the manufacturer is doing something wrong.

. I would lean toward the hypothesis that Apple is such a notoriously greedy business partner that they aren't leaving the businesses much room to make a profit.

Apple seems to have changed from being more product/consumer centric to more profit/stockholder centric. I predict that we will look back at the era of disposable tech and laugh. Hopefully the future is more efficient for the consumer.

 

[2457282]

. I would lean toward the hypothesis that Apple is such a notoriously greedy business partner that they aren't leaving the businesses much room to make a profit.

Apple seems to have changed from being more product/consumer centric to more profit/stockholder centric. I predict that we will look back at the era of disposable tech and laugh. Hopefully the future is more efficient for the consumer.

I don't like that you embedded your response in my quote. even though you changed the color it make it look like I said something I did not.

please look at my response in post #13. I think you will see my more detailed response to the question you posed pretending to be me

 

[Mystic386]

.
Apple seems to have changed from being more product/consumer centric to more profit/stockholder centric.

lololol Apples success is because it creates great products, provides great service, great warranties etc. They're exceptional and head and shoulders above the others. As an Apple user I love the reliability. The stuff just works.