Source: Finance Association
Recently, the news that Apple will stop selling the Apple Watch Series 9 and Apple Watch Ultra 2 in the US attracted widespread attention in the market. According to reports, the current suspension of sales was affected by a previous patent dispute between Apple and medical device company Masimo. A senior consumer electronics patent attorney told the reporter that this case is what is commonly known as the “US 337 investigation,” and related products also have the same risk in the European and Japanese markets. Meanwhile, the reporter called several Apple stores in China today to learn that they have not received a notice to stop sales so far.
Judging from the domestic industry chain, due to confidentiality agreements, many Apple Watch vendors, such as Lixun Precision (002475.SZ), Lingyi Intelligent Manufacturing (002600.SZ), and Changying Precision (300115.SZ), all expressed inconvenience to the Finance Association reporter to comment on the incident. A senior consumer electronics analyst told the reporter that since Apple watches sold through official US channels account for a relatively small share of Apple's revenue, and in addition to the fact that later Apple patent disputes are often resolved in the form of payment of patent fees or settlements, this incident is expected to have little impact on industry chain sales.
According to a decision issued by the ITC Committee at the end of October, infringing wearable electronic devices manufactured or imported by Apple or its related parties and their components with optical pulse and blood oxygen functions are prohibited. According to reports, this patent refers to medical technology company Masimo Corp's patent on blood oxygen sensing technology. Currently, the Apple products mainly involved are the Apple Watch Series 9 and Apple Watch Ultra 2, which were newly launched this year.
Although the matter is yet to be determined, Apple has plans to stop selling the Apple Watch Series 9 and Apple Watch Ultra 2 on Apple.com starting December 21, and to stop selling in Apple retail stores after December 24.
Apple's active suspension of sales this time is a defensive measure. The patent attorney mentioned above told the reporter, “What the ITC is issuing this time is what we often call the '337 investigation'. The ban on the “337 investigation” must be enforced once it comes into effect, so it will have an impact on imports of Apple-related products to the US in the short term, and subsequently on upstream and downstream producers and sellers. After that, if a court lawsuit overturns the ruling, or if the two parties reach a settlement, imports from the mainland of the United States can resume.”
Currently, the ban on the sale of these two products is limited to official channels within the US. On the morning of the 19th, a reporter from the Financial News Agency made phone calls to several Apple stores in Shenzhen. The feedback received was that they had received no news about the product being banned.
For Apple, being able to resume sales in the short term is a top priority. “During the review period, Apple can appeal to the government to veto the ban, go through judicial proceedings to overturn the ban, or resolve this issue by reaching a settlement with Masimo and acquiring Masimo.” The lawyer mentioned above said.
It is worth mentioning that a reporter from the Financial Association discovered that Masimo's related patents are also in the same family in Japan and Europe. The lawyer interviewed mentioned above told the reporter that whether the current sales ban will affect Europe and Japan depends on whether Masimo will launch a lawsuit between Europe and Japan. Since each country has different ways to protect patent rights, Europe and Japan generally need to initiate judicial proceedings before a ban can be obtained, while the US 337 procedure is simpler and less expensive.
Asked about the development of the situation after that, many interviewees believed that Apple has been involved in many patent lawsuits in history, which were eventually settled in the form of payment of patent fees or settlements, so it is more likely that they will eventually settle and re-sell.
Judging from the impact on the industry chain, the senior consumer electronics analyst mentioned above told the reporter that the US region banned this time accounts for about 30-40% of Apple Watch's global sales. Among them, Ultra 2 and Series 9, which are currently banned, are expected to account for about 30% of sales this year. Also, considering factors such as limited sales through official channels and replacement sales of models without blood oxygen function, the affected Apple Watch sales volume is expected to be less than 10%.
Overall, Apple Watch is also not Apple's core profit project. According to Apple's earnings data, in the third quarter of fiscal year 2023 (ending September 30), sales of wearable devices, homes, and accessories, including Apple Watch and AirPods, were US$9.322 billion, down 3.4% year on year. Revenue accounted for 10.4% of total revenue in the third quarter.
Currently, major domestic Apple Watch suppliers include Lixun Precision, Foxconn, Lingyi Intelligent Manufacturing, and Changying Precision, etc. However, due to confidentiality agreements with Apple, many leading “fruit chain” companies such as Lixun Precision, Lingyi Intelligent Manufacturing, and Changying Precision all told reporters today that “it is not convenient to respond.” Judging from the performance of the secondary market today, the sale ban did not affect the stock prices of suppliers. As of the close of trading on the 19th, the stock prices of core suppliers such as Lixun Precision and Lingyi Manufacturing had not declined significantly.
Editor/Jeffrey