Apple (NASDAQ:AAPL) is rumored to release its highly anticipated iWatch in the third quarter this year, and the company is targeting shipments totalling 65 million units, according to Economic Daily News via DigiTimes.
Unlike more recent product launches like the iPhone and iPad, where Apple had a first mover advantage, Apple is entering a market with established players. Samsung (NASDAQOTH:SSNLF) notably released the Galaxy Gear last year, and is already on its second generation of the device. Additionally, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) recently announced Android Wear and released a preview software development kit, so developers can get started working on watch apps.
Moreover, 65 million units is just a massive number of devices. Can Apple really sell that many units in a competitive environment?
How did the iPhone and iPad do?
As mentioned, the iPhone and the iPad had the advantage of establishing a new market. As a result, competition wasn't as much of a factor as it will be if and when Apple launches the iWatch.
Nonetheless, sales weren't anywhere near 65 million units in the first six months after launch. The iPhone sold 1.4 million units in its first three months and another 2.3 million units in the following three months. The iPad did better, selling nearly 7.5 million units in about six months.
Granted, there were several factors holding back sales. First was the price. These devices were originally priced well above what most consumers were used to paying for "comparable" devices -- the iPhone in particular. Additionally, iPhone sales may have been held back due to carrier exclusivity.
Perhaps a better comparable would be the iPod. The iPod was far from the first mp3 player, but was certainly the best in class. In fiscal 2002, almost exactly one year of iPod sales, Apple sold $143 million worth of iPods. That's about 350,000 units.
If these past launches are any indication, Apple may have the biggest launch of its history, but it won't come close to 65 million this year.
Since the launch of the iPod, a lot has changed at Apple. The company has gone from selling a few million computers every year to selling hundreds of millions of devices every year. In fiscal 2013, the company sold 264 million units across the iPhone, iPad, Mac, and iPod segments. In fiscal 2002, the company sold 3.1 million Mac units, no iPhones, no iPads, and approximately 350,000 iPods.
In other words, Apple has a much bigger market presence today than in the past. It's a global brand, and its reach has never been greater. All this means that the company can better sell a new product launch.
The market isn't that big though
Samsung shipped 800,000 units of its Galaxy Gear smartwatch in the first two months after launch. Whether those shipments represent actual sales is unclear, but Samsung claims it's the most sold wearable device on the market.
It's been about six months since the launch, but even if Samsung kept up that early pace -- although recent studies regarding used smartwatches would indicate it's unlikely -- that's still just about 2.5 million units.
When it was revealed that the next generation of Samsung's wearable would feature Tizen OS instead of Android, Google was quick to respond. It pushed out Android Wear, and LG will be the first to utilize the new OS when it releases its smartwatch in July.
According to research from the Consumer Electronics Association, smartwatches are only expected to produce $177 million in revenue during 2014, which clearly conflicts with Samsung's numbers. Meanwhile, fitness tracker sales are expected to reach $1.15 billion this year.
Even combining the two markets, there's not enough room for 65 million iWatches without significant expansion.
Big, but not that big
The iWatch could be a hit and still not reach 65 million units by the end of the year. It should be noted, however, that the iPad accounted for about 7.6% of sales in the year it was launched, so a similar ratio would put iWatch sales around $15 billion in 2014 based on analyst estimates. That number could easily account for 65 million units.
I have my doubts, though. There's no indications that the market demand is there for that kind of supply. But if any company could sell that much, it's Apple.