Apple Reportedly Aims to Ship More Than 20 Million Smartwatches in 2015

Shipment estimates for the smartwatch, Apple's first wearable gadget that went on sale on Friday, vary widely as it's a relatively new type of consumer product and the market is largely untapped.

But while smartwatch sales are set to be well below those of the blockbuster iPhone, Apple's own production plan indicates the company is optimistic about its potential, said people at companies that make components for the watch.

Firms in the supply chain estimate Apple will ship 2 million watches per month in the current quarter, said one of the sources. Another source said Apple is planning to ship 26 million watches this year.

"Apple always gives a high target because they believe there's market demand out there," said the person.

The sources declined to be named due to confidentiality agreements with Apple.

Apple declined to comment on its production plan. It has not released any sales numbers since it opened pre-orders on April 10, but many buyers were told their watches would not arrive for a month or more as supply appeared to dry up.

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On Wednesday, Apple notified some buyers that they would not have to wait so long after all.

"Our team is working to fill orders as quickly as possible based on the available supply and the order in which they were received," Apple said in a statement.

Analyst forecasts of Apple Watch sales for this year vary from 10 million to 26 million.

Compared to the iPhone, which sold 74.5 million units in the fourth quarter alone, initial estimated sales of the watch are low. A Reuters poll put the number at about 15 million units in the United States.

"Even if the product doesn't sell well this year, Apple won't give up on it," said Kylie Huang, an analyst at Daiwa Capital Markets in Taipei who follows Apple and its supply chain. "They're playing a long game."

Large component orders
Apple usually works with three or more suppliers of tiny components like circuits in order to ensure stable supply if demand should spike, the supply-chain sources said.

One such supplier received orders to equip 15.65 million watches between January and August, one of the sources said.

The source declined to say how big a portion the company's supply accounts for in Apple's total component requirement, but the deal indicates Apple may place a larger amount of component orders relative to the number of finished watches it expects to produce.

The relative novelty and complexity of the watch has led to production problems up and down the supply chain, the sources said, without elaborating on the specific issues.

Prior to the first quarter, there were market forecasts as high as 36 million Apple Watch shipments for 2015, said one of the sources.

"But then when production began ramping up in the first quarter and problems showed up, the guidance was cut," he said. Since then production has become relatively smooth, the source said.

© Thomson Reuters 2015