Report: Apple to produce at least 5M Apple Watches for initial production run

Apple (NASDAQ: AAPL) tasked its suppliers in Asia to produce a combined 5 to 6 million units of its three Apple Watch models during the first quarter ahead of the gadget's launch in April, according to a Wall Street Journal report.

apple watch

The Apple Watch is scheduled to be released in April.

The report, citing unnamed people familiar with the matter, said half of the first-quarter production order is being set aside for the entry-level Apple Watch Sport model, which will retail at $349. Additionally, the mid-tier Apple Watch is expected to account for one-third of the units, while the high-end Apple Watch Edition featuring 18-karat gold will receive a relatively small number of units in the first quarter. The report added that Apple plans to start producing more than one million units per month of the high-end model in the second quarter.

Apple declined to comment, according to the report.

Apple has not said how much the more expensive mid-tier and high-end watches will cost, but the high-end model could range into the thousands of dollars. The Apple Watch is the company's first new product category since the iPad tablet in 2010 and Apple has a great deal riding on its success, especially to prove that it can still deliver breakthrough new products under CEO Tim Cook. Analysts expect the Apple Watch to accelerate adoption of wearable devices, especially smart watches.

Apple sold 7.5 million iPads in the six months after it launched in April 2010, and Apple's expected orders indicate the company thinks there is strong demand for its watch. Around 720,000 smart watches running Google's (NASDAQ: GOOG) Android Wear platform were shipped in 2014, according to a report last week from research firm Canalys, or just 15.6 percent of the 4.6 million shipments in the overall smart band market. Samsung Electronics, Motorola Mobility, LG Electronics Sony and a few other companies dominate the Android wearable market, though Samsung ships the most units.

However, according to a separate Journal report, which also cited unnamed sources, Apple had to cut back on its ambitions for the Apple Watch, especially in terms of its health monitoring capabilities. When Apple started developing the watch around four years ago the company wanted the gadget to be able to measure blood pressure, heart activity and stress levels, among other metrics, but Apple was forced to abandon the technologies for the initial Apple Watch because some of the technologies did not work reliably and others were too complex.

As a result, the report said, Apple executives were struggling to define the purpose of the smart watch and why a consumer would want or need to buy one. Apple executives have focused on trying to define the Apple Watch as many things: a fashion accessory; something that can make mobile payments; a companion with Siri, Apple's digital personal assistant, to offer information and deliver notifications. Apple declined to comment, according to the WSJ

"One of the biggest surprises people are going to have when they start using it is the breadth of what it will do," Cook said last week at an investor conference.

Apple will need to clearly market the benefits of a device whose purpose is not that obvious. However, analysts also think Apple's brand name alone will likely propel the Apple Watch to become the most successful wearable thus far.

For more:
- see these two separate WSJ articles (sub. req.)
- see this The Verge article
- see this CNET article

Related Articles:
Canalys: Just 720K Android Wear smart watches were shipped in 2014
Cook: Apple doesn't need to make a cheap iPhone to be successful
CES: Wake me up when wearables are so smart I can leave my phone at home
Cashing in on wearables
HTC places smart watch plans on hold as it refines product
Apple announces Apple Watch wearable, designed for health and fitness

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