I honestly don’t think so. The fallout from this will be fairly minimal, IMO. Disable the feature first to get around the import ban and buy time while Apple continues to work on a technical workaround.
iPhone users will likely continue to get an Apple Watch because that’s the best smartwatch which works with an iPhone, even without a blood oxygen sensor.
Meanwhile, either wait out the patent (March 2028), or continue to try and prove that the patents held by Masimo have zero merit.
If Apple succeeds, which I think they believe they will, in getting all of Masimo’s claims invalidated some time later in 2024, Masimo will face a potentially massive claim for lost revenue from Apple due to the ITC ban. Masimo’s CEO’s surprise and dismay at Apple’s announcement to stop selling the watches tells the story, in my opinion.
Assuming the above is true, the way Apple is letting this play out puts Masimo in a quite perilous position. This could end up very costly, even ruinous, for Masimo.
The real battle is still far from over.
I think it's a solid 50/50 that this particular patent sticks, and Apple doesn't get it invalidated.