iPhone has a primary function being a phone.
This might be a reinvention of the watch but also a reinvention of the purpose of a watch. What is really being co-opted is the location and idea of having something on the wrist. Is that enough to take the name watch?
I'd wager that the average iPhone is used less for talking than other actions. And I see lots of posts from people who want 100 minute plans with unlimited fast data. Now, I talk about 1,000 minutes a month but I still use more apps and web browsing and messaging than phone calling. So yes, it can be called an I watch.