Apple Seeking New Supplier to Help Manufacture Apple Watch 2

Thursday November 19, 2015 4:27 AM PST by Mitchel Broussard

Apple is currently searching for an additional supplier of next year's rumored Apple Watch 2, according to a new report from supply chain sources (via DigiTimes). The company is speaking with Inventec, Wistron and Foxconn Electronics to join Quanta Computer in the manufacturing of the next generation of the Apple Watch. The report cites a "weaker than expected" profit return for Quanta in regards to the first generation Apple Watch, which is causing a few of the targeted manufacturers to voice concern about supporting the long-term investment in the future device.

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Quanta has invested heavily in equipment for Apple Watch's manufacturing, but its profit return from the device has been weaker than expected. This is a concern for the ODMs that have been approached as a secondary supply partner, the paper added.

Also mentioned in the report is Apple's ordering of 4 million Apple Watch units for the fourth quarter of 2015, slightly down from the original 6 million planned in preparation for the holiday season since demand is "not as strong as expected." Still, the company expects sales for the wearable device to surpass 10 million units by the end of the year, before leading into the rumored launch period of the Apple Watch 2 sometime in the second quarter of 2016.

Today's news comes after Quanta Computer's chairman Barry Lam was reported to have commented on the impending manufacturing process of the Apple Watch 2, giving the device a launch window sometime late in Q2 2016 and higher volume shipments beginning in Q3. Little is known about the second generation Apple Watch, besides a few rumors that pointed to the possibility of a thinner device, integrated FaceTime camera, and a growing independence from the iPhone.

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Buyer's Guide: Apple Watch (Neutral)

Top Rated Comments

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57 months ago
First point: from 2013 to the beginning of 2015 - let's round that to 2 years - Pebble, the most successfully smartwatch company to that point, had sold a total of 1 million watches. Giving it the benefit of the doubt, let's say that by now it has doubled sales to 2 million (in less than 1 year). Apple is predicted to sell 10 million in its first year (actually only about 6 months). And yet people are calling it a failure.

Second point: with the prices of the watches and an estimated margin of 40-50% I am wondering what is going on at the manufacture that is causing them not to turn over a significant margin? either Apple has another one of those deals where the manufacture was never going to make money or the manufacturer is doing something wrong.
Score: 7 Votes (Like | Disagree)
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57 months ago
Apple Watch 2 needs integrated SIM (eSIM), GPS, more health features (i.e. for diabetics), work with hearing-aids w/o iPhone, needs to be thinner (but connect with current bands) and apps should run without the need for iPhone. I do not care about the camera but others do.
Score: 7 Votes (Like | Disagree)
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57 months ago
I doubt that the watch will be thinner for awhile.

Thinner=less gold=less valuable.
Score: 4 Votes (Like | Disagree)
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57 months ago

If the Pebble had the kind of tight integration with the iPhone that the Apple Watch has I'm sure it would sell better. But also many buyers of the Apple Watch do so because it's Apple not because it's actually a good product and Apple is facing a problem where unsatisfied buyers are abound telling everyone it's only so-so.

You need only look at the reviews when it came out to see that no one was impressed by it, it was just a "eh" product. That reviewers felt most could do without and many have.

Don't forget Apple sell around 55-75 Million iPhones per quarter. 2-4 Million Apple Watches sold in these same quarters shows it's got a lot of people to convince. I'm not saying it's a failure as selling millions of anything is definitely not a failure indicator but it's certainly not in the same ballpark as the iPhone and you must own an iPhone to use the watch at all.

Your comparisons are not appropriate. Instead look at this - http://www.statisticbrain.com/wrist-watch-industry-statistics/. What you will find is that the entire smartwatch industry pumped out 6.8 million in 2014. If Apple is expected to hit 10 million in its first attempt, it has completely eclipsed the entire smartwatch market. Let's not compare the watch to the phone. Let's compare watches to watches. As a matter of fact, in that same report, it states that the entire swiss watchmaking industry pumped out 29 million watches. So Apple is selling about 33% of swiss industry. When I look at these numbers I would say that Apple has a runaway hit in the watch space and if I focus on the smartwatch space then Apple just killed it. The watch is not a phone -- it's a watch -- so please let's make sure we compare, um, apples to apples.
Score: 4 Votes (Like | Disagree)
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57 months ago

A "weaker than expected" profit return item with a "very sattisfying" sales. Welcome to Apple economics!

That makes sense. Apple's suppliers and analysts just pull figure out of their asses and expect the impossible. This is why Apple is wise to not engage in public discussion about how much they anticipated to sell, and how much they actually sell. It's a first gen product of a new category for Apple. It's gonna take time to mature and then it will boom. Just like the iPod and iPhone and iPad and Apple TV.
Score: 3 Votes (Like | Disagree)
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57 months ago

This is why Apple is wise to not engage in public discussion about how much they anticipated to sell, and how much they actually sell

I agree with most parts of your post, but not with this.

They have started every keynote speech for the past years with boasting exactly how many million units they've sold of a certain product. With the Apple Watch they don't. I can understand why this raises concerns.
Score: 3 Votes (Like | Disagree)

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