Apple Watch offers Apple an annual revenue opportunity of up to $70 billion

In the first half of 2022, the Apple Watch’s “attach rate” reached 30% in North America, the highest for any half year since its launch, according to new data from Counterpoint Research. The smartwatch offers Apple an annual revenue opportunity of as high as US$70 billion, the report adds.

The 30% attach rate refers to the percentage of iPhone users that pair the smartphone and smartwatch. This is the highest attach rate for a first half since the Apple Watch launch back in 2015 when Apple sold one Apple Watch for every 10 iPhones. Counterpoint says this demonstrates the growing popularity of smartwatches in the US market, especially Apple Watches.

The attach rate of the Apple Watch to iPhone has been steadily increasing over the years since the launch of the smartwatch in 2015. While Apple Watch has registered a strong share in the North American smartwatch market since its launch, demand was initially limited, as the use cases and value to customers were not immediately recognized. Counterpoint says that, at first, many folks saw the device as a fashion accessory rather than as a useful tool that could improve their daily lives. But now, with Apple Watch gaining maturity, the utility of the device cuts across three key lifestyle elements – Fitness, Health and Wellness.

Other highlights from the Counterpoint Research study:

° Globally, Apple Watch shipments were just 18% of iPhone shipments in 2021. If Apple views every iPhone user as a potential Apple Watch user, then the annual revenue opportunity for Apple Watch would be nearly $70 billion, or nearly 550% higher than the current estimated annual Apple Watch revenues.

° However, the average selling price (ASP) will continue to rise with the introduction of more premium variants such as the new Apple Watch Ultra, which now costs as much as an iPhone 14. This means that the revenue opportunity could be much higher.

In the third quarter of 2022, services generated 23.6% of Apple’s total revenue, up from just over 10% in quarter three of 2015. People love listening to music on the run and while exercising. A connected cellular Apple Watch will play a pivotal role in the growth of service revenues, mainly through subscriptions of Apple Music, Apple Care and Apple Podcasts. There is more room for growth if Apple decides to design more services to fit the form factor.

° Apple Watch further strengthens the “walled garden” approach. It keeps the churn under check and creates more hardware opportunities for Apple. This will be extremely important as Apple forays into health, fintech, automotive and beyond.

° Further, new wireless standards such as 5G Redcap will open new growth avenues for the overall watch ecosystem. With gains in energy efficiency, battery life and connectivity, it is likely to drive higher engagement and edge-based applications right at our wrist.