December saw Apple issued with a temporary ban from selling its two newest watch models—Series 9 and Ultra 2—in the US owing to an ongoing patent dispute with medical device maker, Masimo. This situation highlights the competitive nature of the smartwatch industry, where Apple is the current market leader. However, this position may be threatened as competition intensifies. It is a critical battle for Apple, aiming to augment its revenue streams beyond iPhones. Despite the proportion of iPhone sales in total net sales decreasing from 62% in 2017-18 to 52% in 2022-23, it remains substantial. Simultaneously, the sales share of Apple wearables, home and accessories, which includes Apple Watch and Apple AirPods, has increased from 6.5% to 10.4%.

Currently, Apple stands as the top player in the global smartwatch market, holding a chunk of 22% market share. In the high-end HLOS segment, Apple commanded a market share of 45% between July and September 2023, as per data from Counterpoint Research. To stay on top of the HLOS market, Apple must contend against brands like Garmin, renowned among outdoor sport and fitness enthusiasts for the precision and range of fitness metrics offered by its devices.

The recent sales ban on Apple was a result of Masimo's patent infringement on wireless pulse oximeters. The sale of Apple smartwatches is also tied to its smartphones. In the US, most iPhone users also own an Apple Watch—with an attach rate’ of 30% in 2022. However, Apple's stock saw two downgrades in early January from Barclays and Piper Sandler, both citing concerns regarding iPhone sales.

Although Apple leads the global smartwatch market, it lags behind Huawei and imoo in China. In China, Huawei's market share grew significantly from 26% in Q2 2022 to 39% in Q2 2023, with Apple Watches market share decreased from 16% to 13%, according to Counterpoint Research. As China constitutes around one-fifth of the global smartwatch market, Huawei's global market dominance has accordingly increased. One reason is Huawei’s rebound in the smartphone market.

In October last year, Bloomberg reported that sales of the iPhone 15 series in China decreased by 6% year over year, whereas the sales of Huawei's Mate 60 series doubled in its launch month compared to the same period a year ago. Huawei also benefited from a bundled sales model, which included smartwatches and phones, according to Counterpoint Research. Additionally, Apple faced difficulties in China when it was reported in September that iPhones were banned for use at work by government officials, as reported by the Wall Street Journal.

In India, Apple's challenge is to match the increasing sales of its iPhones with smartwatch sales. Apple registered revenues amounting to $5.9 billion in 2022-23, a growth of 47.8% from the previous year. The company expects to ship 9 million iPhones in 2023, more than the 6.5 million shipped in 2022. Despite this, Attach rates remain low. It was only recently that the first Apple stores were opened in India, which could leverage cross-selling. In India, half of the smartwatch market is held by Noise and Fire-Boltt, with Apple not even making it into the top five. India accounted for 34% of worldwide shipments in Q2 2023, an increase from 22% in the previous year.

Despite downgrading Apple's stock, Barclays expressed concerns over the lack of new products offered by the company. They noted that while Apple was successful in transitioning from a Mac-centric to an iPhone-centric ecosystem over the past several years, the lack of new products and services could make growth more difficult in the coming years. Smartwatches could still have potential, with IDC predicting an increase in market share from 32% to 34% by 2027. Nevertheless, small rivals are now rising within this market, particularly in regions such as China and India.