Apple is facing an impending ban on sales of its two latest Apple Watch models in the United States due to a patent dispute, forcing the company to hastily push out a software update in hopes of skirting the import ban.
Background of the Dispute
The ban stems from a long-running patent fight between Apple and medical device maker Masimo Corp over pulse oximetry technology. Pulse oximetry allows the Apple Watch to measure blood oxygen levels.
Masimo sued Apple in 2020, accusing the tech giant of stealing its proprietary technology. A U.S. trade agency ruled in November that Apple infringed on Masimo’s patents, paving the way for a ban on importing and selling Series 9 and Ultra 2 watches.
The U.S. International Trade Commission (ITC) formally issued that import ban order last week, with the ban set to take effect on December 28 unless overturned by President Biden.
| Apple Watch Series 9 | Apple Watch Ultra 2 | |
|---|---|---|
| Release Date | September 2022 | September 2022 |
| Key Features | – Temperature sensor – Crash detection improvements – Low power mode |
– Larger screen – Longer battery life – Rugged titanium case |
| Starting Price | $399 | $799 |
This ruling applies only to the latest Series 9 and Ultra 2 models – not older generations of the watch. However, it presents a massive headache for Apple as it heads into the busy holiday shopping season.
Apple’s Efforts to Avoid Ban
Upon the ITC’s order, Apple immediately said it plans to appeal the ruling while simultaneously working on tweaks to the Apple Watch software in hopes of dodging the import ban.
Bloomberg has reported that Apple engineers are rushing to remove features found to infringe on Masimo’s patents before the ban deadline. This likely includes disabling the blood oxygen measurement functionality.
Removing key features would degrade the experience of the latest watches. But it may be Apple’s only recourse to keep selling the devices in the short term while it continues challenging the ban.
Experts say Apple has strong motivation to settle the dispute out of court at this point to avoid supply chain headaches. But Masimo’s CEO has indicated he wants a public apology from Apple before agreeing to any settlement talks.
Impact on Apple’s Business
The smartwatch category has become an increasingly vital part of Apple’s business. Revenue from wearables, home products and accessories has been the company’s fastest-growing segment recently.
In fiscal 2022, Apple’s wearables business generated $38.4 billion in sales – 15% of Apple’s total $297 billion revenue. The Apple Watch makes up a majority of that segment.
Banning the latest Series 9 and Ultra 2 watches could put a dent in Apple’s sales trajectory heading into 2023. It presents an unwelcome disruption right in the middle of the lucrative holiday quarter.
While older generations of the watch wouldn’t be impacted, the newest models accounted for an estimated 20-30% of Apple Watch shipments this fall, according to analyst Ming-Chi Kuo.
Losing the ability to sell the latest watches in the U.S. would reduce Apple’s market share against competitors like Garmin and Samsung in the wearables space. It could also delay the company’s rumored plans for a future Apple Watch with microLED display technology.
What Happens Next?
If President Biden does not veto the ITC ruling, Apple would need to immediately stop selling Series 9 and Ultra 2 watches when the ban takes effect on December 28.
To keep the watches on store shelves, Apple is betting on a Hail Mary software update and ongoing efforts to overturn the ban. The company is also likely engaging with Masimo privately to reach a settlement.
But if these methods all fail, Apple would miss out on selling its newest watches during the ever-important holiday season – resulting in a noticeable hit to its wearables revenue as it heads into 2023.
The coming weeks will be pivotal in determining the very near-term fate of the Series 9 and Ultra 2 devices in the U.S. market. But Apple’s longer-term ambitions in the smartwatch space hang in the balance as this painful patent fight drags on.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
