NEWS
NEWS
NEWS
Apple Watch supplier falls short of break-even point in Q2, sales volume remains a mystery
Speculation continues as to how many Apple Watches were sold during the wearable’s first three months of availability. Apple has shared a few metrics by which we can guess, analysts have a wide range of estimates and others warn of slowing demand.
Now a new report from The Wall Street Journal further muddies the water with an Apple supplier contributing to the debate by reporting on its own performance in relation to the Apple Watch.
It appears a subsidiary of Taiwan’s Advanced Semiconductor Engineering Inc. (ASE) has failed to break even on Apple Watch components during the second quarter. ASE is contracted to assemble the Watch’s S1 system-in-package (SiP) chip which combines 30 individual components.
According to Bernstein Research analyst Mark Li, the ASE subsidiary did not reach its “break-even volume” of two million SiP units per month between April and June and does not expect to do any better in the third or fourth quarters.
“The shortfall of Apple Watch is a disappointment,” Mr. Li wrote in a note to clients. “We came in with a low expectation but below break-even still surprised us.”
In an interview, Mr. Li said it is unusual for a company like ASE not to reach break-even volume during a typically busy period like the third quarter, especially when dealing with a new product.
Prior to Apple’s recent third-quarter earnings report, a poll of 27 analysts put estimated Apple Watch sales for the period at an average of 4.07 million units. Estimates range from as low as 2.85 million units to as high as 5.7 million units.
Meanwhile, Piper Jaffray analyst Gene Munster lowered his second-quarter estimate to 2.5 million units and estimates Apple will again only sell 2.5 million units during the current quarter.
Taking into account the increase in revenue from Apple’s “other products” category during the third quarter and comments made by Apple CEO Tim Cook and CFO Luca Maestri, the company may have sold somewhere north of 2.5 million Watches for a revenue contribution in excess of $1 billion.
Cook reiterated that Apple Watch exceeded Apple’s expectations and revealed that June sales were higher than April and May – making it clear that recent reports of slowing demand for the Watch are wrong.
Image credit: Shinya Suzuki via Flickr
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