Apple Inc. Watch Sales: Supplier Unable To Hit ‘Break Even’

Updated on

Apple may be secretive about Apple Watch sales numbers, but one of the suppliers has hinted that those numbers are disappointing. Last month however, Apple said the gadget exceeded its expectations.

Apple supplier well short of target

Now it seems that Apple was overstating demand as one of the OEMs which supplies parts for the wearable claims demand for the watch is so dismal that it is unable to hit break-even volumes.

The information comes from The Wall Street Journal, which cites Bernstein Research analyst Mark Li. According to Li, a subsidiary of Taiwan-based Advanced Semiconductor Engineering (ASE) which makes system-in-package (SiP) cases for the watch told investors that it had yet to hit a “break even volume” of 2 million units per month in the second-quarter. In addition, ASE believes it will not hit break-even numbers even in the third quarter.

The revelation from ASE’s subsidiary during its earnings call could be a warning for other Apple Watch suppliers as the current period is usually seen as a busy one from a manufacturing point of view with the holiday season approaching. Li further notes that even the fourth quarter is uncertain for ASE’s subsidiary as it was non-committal on reaching the required sales numbers in the quarter.

“The shortfall of Apple Watch is a disappointment. We came in with a low expectation but below break-even still surprised us,” Li stated in his research note.

Suspense about actual sales number

Apple has been quiet on the watch sales number, including watch sales in the “other” category with the Apple TV, the iPod, etc. One point to note is that the “other” category posted a profit in the last quarter. When asked about the Apple Watch numbers during the earnings call last month, Apple CEO Tim Cook said the “sell-through was higher than the comparable launch periods of the original iPhone or the original iPad.” In addition, replying to reports that watch sales are slowing, Cook said sales were more in June than in April and May.

However, ASE’s numbers do suggest that the gadget is not selling as well as many had expected. In May, Morgan Stanley analyst Katy Huberty expected Apple to ship 36 million units of the watch in the first year. Piper Jaffray analyst Gene Munster recently slashed his watch sales estimate for the second quarter from 3 million to 2.5 million.

Leave a Comment

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!