I think that there is a separate watch market and "people who need to know the time" market.
There is, of course, some overlap; but the watch market, with it's 70% mechanical watches, exists as a type of jewelry, one that also happens to tell time, but are still purchased because of fashion. Now, there are some cheaper watch purchases in this market, for people who want a watch to tell time, and/or may like the look of a wrist watch, but aren't after the high class/fashion of a top dollar watch.
This later group are the people who switched to using their phones to tell time. (thus taking themselves out of the "watch" market)
I see the Apple watch (and other smartwatches) appealing to this group (many of who aren't currently in the watch market) as well as some in the lower end of the "traditional" watch market, and perhaps just a few in the high dollar watch market.
So, I wouldn't consider the smartwatch as threat to the watch industry.
I don't actually agree with you. I wear mechanical watches for their beauty of their precision engineering, and their design, not as fashion items - in the same way I'd buy a Ferrari for its beauty rather than "to be seen" driving it.
To me an Apple watch may be equally beautiful - though in a different way. I would buy an Apple watch for this reason, but then may find it offers utility greater than my other watches, which may only then get worn occasionally.
In relation to not damaging sales of high-end watches, one should consider the price point of an Apple Watch places it firmly in the same battleground as lower-end mechanical watches - many of which use ETA movements. If ETA's revenues/economies of scale are reduced this will invariably impact on cost to manufacture higher-end time pieces.