Not everyone is convinced that the Apple Watch ban will only have a small financial impact

The latest report from Consumer Intelligence Research Partners (CIRP) believes that the bans of the Apple Watch Series 9 and Apple Watch Ultra 2 based on pulse oximeter patents will hurt Apple's revenue in the short and long terms. But not all analysts agree on the impact.

For example, Wedbush Securities analyst Dan Ives estimates that the disturbance might lead to a loss of approximately $300-400 million in Apple's sales during the holiday season. However, this amount is comparatively small for Apple, considering the anticipated total sales of nearly $120 billion for the October-December quarter.

Additionally, Ryan Reith, who leads IDC's mobile device tracking program, stated that the ban will not negatively affect the sales of Apple Watches during the holiday season. He further mentioned that the complete consequences of the ruling, assuming it remains in effect, are expected to emerge in January and February of 2024.

Apple Watch ban

To adhere to a ruling by the International Trade Commission (ITC) in a patent infringement case involving Masimo, Apple is set to halt the sales of the two Apple Watch models in the United States.

The dispute has resulted in an import ban for these models, while models like the SE remain unaffected. The situation emerges at a critical juncture, with the suspension slated to commence on Christmas Eve, traditionally a peak sales period.

Analysis of Apple's sales over the past twelve months indicates a strong preference for the now-suspended models — the Series 9 and its predecessors, Series 7 and 8 — which account for over half of US sales.

The Ultra 2 and its predecessor, the original Ultra, hold almost a quarter of the market share. Interestingly, all Apple Watches from Series 6 onwards, including the original Ultra, incorporate the pulse oximeter technology now under dispute.

Will the Apple Watch sales ban have an impact on revenue?

The recent development in Apple's patent dispute, leading to a suspension in sales of its Series 9 and Ultra 2 Apple Watch models, involves more than just a sales ban. It's an import ban that could, over time, significantly impact Apple's inventory.

While the company typically maintains a few weeks of supply on hand, that stockpile will deplete if the ban persists, leaving no new shipments to replenish it. Retailers like WalMart and Best Buy can continue selling their existing stock. Once sold out, and if the ban continues, retailers won't have access to new units.

It's a potential long-term challenge for Apple if the ban is not quickly resolved, despite the short-term stability due to the existing inventory.

Despite being unaffected by the suspension, the lower-end Apple Watch SE is unlikely to fully compensate for the shortfall. Accounting for only 19% of sales, its limited features compared to the suspended models make it a less appealing choice, particularly for existing Apple Watch users seeking upgrades or new users looking for non-entry-level options.

Apple's decision to halt sales of the Apple Watch models 9 and Ultra 2 in the US isn't likely to affect the current quarter's financial results, given that the quarter ends on December 31. Assuming that the Biden administration doesn't veto the import and sales ban, the full impact of the decision will likely be revealed in Apple's financial report in April.