Significant Decision by Apple Inc.
On Monday, Apple announced its decision to cease the sales of Series 9 and Ultra 2 smartwatches in the United States, effective immediately. This strategic move is a direct response to an order issued by the U.S. International Trade Commission (ITC) in October. The order can potentially prevent Apple from importing its Apple Watches, citing alleged patent infringement related to the blood oxygen feature. The patents in question belong to the medical technology firm Masimo.
Ongoing Review of ITC Ruling
The ITC ruling, handed down in October, is currently in the process of being reviewed by President Joe Biden, with a final decision expected by December 25. Should the ruling not be vetoed, the import ban would be enforced on December 26. Despite the ongoing review, Apple is proactively taking measures to align with the ruling, anticipating potential implications for its smartwatch business in the United States.
The Office of the U.S. Trade Representative, the part of the Biden administration handling the case, has stressed that Ambassador Katherine Tai is meticulously considering all factors surrounding the case. The stakes are high, given the possible ramifications of an import ban on Apple’s smartwatch sales within the U.S..
Suspension of Sales – Key Details
Apple has specified that sales of the affected smartwatches will be temporarily suspended on its official website starting December 21. Additionally, sales in Apple retail locations will be halted after December 24. However, other Apple Watch models, such as the more affordable Apple Watch SE, which lacks the disputed blood oxygen sensor technology, will remain unaffected by this legal dispute.
Holiday Sales Outlook
Addressing concerns about the impact on holiday sales, Ryan Reith, Program Vice President for IDC’s mobile device tracking efforts, offered reassurance. He stated that Apple is well-equipped with inventory, particularly for Watch 8 and SE models, to meet the holiday season’s demand. Reith suggested that the full consequences of the ruling if upheld, may manifest in January and February, typically slower sales months for Apple in the U.S.
Reith highlighted the broader implications beyond immediate sales, pointing to uncertainties about Apple’s future use of the contested blood oxygen sensor technology. This uncertainty raises questions about the necessity for a settlement or exploring alternative solutions.
Global Market Share and Apple’s Legal Strategy
Counterpoint Research’s findings reveal that Apple currently commands approximately a quarter of the global smartwatch market. This figure typically rises to over a third during the U.S. and European holiday sales seasons. Despite the suspension of sales in the U.S., both the Series 9 and Ultra 2 smartwatches will continue to be available outside the United States, including during the upcoming Lunar New Year season in Asia.
Disputing the ITC’s findings, Apple firmly believes they are erroneous. The tech giant intends to appeal the decision to the Federal Circuit, initiating a legal process to challenge the validity of the patent infringement claims and, potentially, overturn the impending import ban.
Stock Market Response
In response to the announcement, Apple’s shares experienced a 0.9% decline on Monday. The market’s reaction suggests a cautious stance among investors as they closely monitor the developments surrounding the patent dispute. Investors are particularly attentive to potential impacts on Apple’s smartwatch sales and the company’s future product development.
