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Apple iWatch: What we know so far

Yoni Heisler | May 29, 2013
Evidence indicates Apple is pouring resources into development of 'snap bracelet' style device with a flexible display.

Another potential problem for Apple's iWatch lies in its rumored elegant curved glass design. Specifically, which company will be supplying the glass?

To that end, Corning, the purveyor of the Gorilla Glass currently used by Apple on the iPhone, recently noted that it will be at least three years before their proprietary flexible glass will be ready for inclusion in shipping products.

So perhaps that leaves room for LG to step up given that CEO Han Sang-beom recently boasted that his company would be more than capable of supplying Apple with flexible OLED displays by late 2013.

Will the iWatch be a success for Apple?
Apple only enters new product categories when it feels it can really add something of value. At the same time, Apple only enters markets where it can generate a significant amount of revenue. It is, after all, why Apple continues to refer to its Apple TV as nothing more than a hobby.

To that end, Citigroup analyst Oliver Chen recently detailed how an iWatch might provide a $6 billion opportunity for Apple.

Chen notes that margins on watches can sometimes be as high as 60%, a figure which is much more attractive to Apple when compared to the razor thin margins often associated with HDTVs.

In 2013 alone, Chen anticipates that the global watch industry will generate over $60 billion in sales. If Apple were to capture just 10% of that market, it would net an addition $6 billion in revenue. Taking gross margins into account, an iWatch for Apple could potentially deliver nearly $3.6 billion in profits. In contrast, if Apple were to capture 10% of the HDTV market, Chen calculates that Apple would net about $1.79 billion in profits.

In short, watches may be where the money is.

DETRACTORS and COMPETITORS
While analysts and consumers are undoubtedly looking forward to Apple's next big thing, not everyone is optimistic about Cupertino's chances to disrupt yet another product category.

In early March, Swatch CEO Nick Hayek expressed skepticism that an Apple iWatch would be able to kickstart a smartwatch revolution.

"Personally, I don't believe it's the next revolution," Hayek said. "Replacing an iPhone with an interactive terminal on your wrist is difficult. You can't have an immense display."

Hayek further explained that consumers often view watches as pieces of jewelry that they like to change often.

Aside from the inherent challenges of entering a new market, Apple may also be facing some unforeseen competition in the watch space. It's recently been reported that Samsung is looking to manufacture their own smartwatch device. Furthermore, Google is reportedly working to develop an Android-based smartwatch as well.

 

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