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I would imagine it would have to do with less with bandwidth consumption doing it via cellular and more to do with the processing needed to uncompres/unpackage the downloaded update
 
correct me if i'm wrong but doesn't the phone have to be in 5G to update over cellular?

Nope, I’ve done it on LTE before (although it was with my old XR which didn’t have 5G capability so maybe they’ve changed that with newer models?)
 
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The Apple watch CPU is really made to sip power from the battery and is not near the ability to do an OS upgrade. Not even close.
 
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