20% Collapse - Apple Watch’s Sales Sends Shockwaves Through the Smartwatch Market

[caption id="attachment_97885" align="aligncenter" width="1024"] Image: DALL-E[/caption] 20% Collapse - Apple Watch’s Sales Sends Shockwaves Through the Smartwatch Market - is Garmin Happy? Three factors are at play here, explaining the first-ever drop in smartwatch annual sales. Apple Watch sales have dropped by almost 20% Growth in China increases strongly Growth in India declines notably. Let's examine why this is happening and analyse the implications for Garmin and Apple. The situation is not as dire for Apple as the numbers in the title suggest, but there is a positive spin for Garmin. What are the numbers? Counterpoint Research has produced trade/B2B smartwatch sales for several years. The accuracy of the company's ex-factory shipments is probably from international tradeflow databases - ie declared customs and import tax data. Global smartwatch shipments declined by 7% in 2024, marking the first recorded downturn. The report shows a high likelihood that Apple, a dominant force in the industry, played a causative role in this negative shift. [caption id="attachment_97883" align="aligncenter" width="926"] Image: Counterpoint[/caption] While Apple does not disclose shipment details, Counterpoint estimates a 19% drop in sales last year. In Counterpoint's report, the decline is attributed to increased competition, longer upgrade cycles, and the absence of additional Watch models to support the latest Watch Series. It's also suggested that the patent dispute resulted in a temporary US import ban on specific Apple Watch models, contributing to lower shipments in the H1.2024. Despite these challenges, all other manufacturers reported growth. Chinese brands, including Xiaomi and Huawei, gained traction and were most likely responsible for significant domestic market increases. Consequently, China overtook North America and India to become the largest smartwatch market in shipments for the first time. [caption id="attachment_97884" align="aligncenter" width="1024"] Image: Counterpoint[/caption] Xiaomi, in particular, expanded rapidly with strong sales of its Watch S series and Redmi Watch models, securing a position among the top five global smartwatch brands. Apple in 2025-26 and beyond Apple will likely launch at least two Watch models in September 2025. We will see Watch 11 and one other - either Watch SE (perhaps called Watch 10e) or Watch Ultra 3. Watch SE/10e/11e is heavily rumoured and could hit the shelves within 2 or 3 months. In contrast, Watch Ultra 3 has always been launched in September, missed an expected iteration in 2024, and should be launched alongside Watch 11. Whilst Watch SE/11e/10e will happen this year, Watch Ultra 3 is less certain. Apple likely planned Ultra 3 to be next-gen hardware to encourage upgrades, but that next-gen status will only come from better screen tech (microLED) or a new sensor array. Other than foolish media claims that Apple is about to launch a medical-grade blood pressure sensor, there have been few inklings that Apple is ready to iterate its optical sensor array to a new generation. The long and the short of it is that from a technical perspective, we could argue that Apple could launch just one genuinely new product. Still, the 2024 sales numbers mean that commercial pressure to release at least two Watches will be exceptionally high - and commercial pressure typically trumps tech restrictions, often resulting in a rebadged Watch from the previous generation. Watch SE Renaming: Watch 10e if released soon, Watch 11e if released in September Looking further ahead, the future place of smartwatches is less clear. Their uses are typical of a health/sports monitor combined with a convenient display and input mechanism for its partner smartphone. With smart rings now extremely popular and credible alternatives for health monitoring, this diminishes one of the drivers of smartwatches. This then brings us to Garmin. Garmin had a stellar 2024 performance. Does this signal that ever more people want that dedicated sports watch? If so, that's perhaps another reason fewer people will buy Apple Watch. My Takeout I'm surprised by the decline in the Indian market and don't quite understand why it happened. The changes in China are proceeding as expected. The Chinese manufacturers make some good products at low prices and are clearing up in their domestic market. Another factor I don't think Counterpoint mentioned was that iPhone sales are being subtly restricted by state forces in China - as Watch sales are linked to iPhone sales, restrictions could be another reason for Apple's declines in China. I bet Apple will release Apple Watch 11 and Watch 11e(10e) this year. I would be surprised if we did not see both. I also expect to see Watch Ultra 3, but I doubt Apple has the tech ready for this model that it always banked on. Watch 11e and Watch 11 should be sufficient to reverse apple's poor 2024. A new Ultra 3 would sell extremely well, prompting upgrades and triggering sales from buyers waiting to switch for a year - I might even go for Ultra 3 over Watch 11 this year. I suspect Garmin is not directly causing Apple's woes. Still, the lack of Watch Ultra 3 in September 2024 might have gone some way to explain the success of Fenix 8 - I and others were quite critical of Fenix 8 as somewhat of a non-event technically. Yet, you guys seemed to be rushing for every available credit card to grab one. Bottom line - it's a blip. This will have no material effect on the end game: Apple vs Google/Samsung, with Asian brands dominating at the low-priced volume end of the market. Ultimately, Garmin will be forced to change its business model to become a dominant high-margin niche player.