LOS ANGELES – Apple is just days away from a US ban of its best smartwatches, and is plotting a rescue mission for the US$17 billion (S$22.6 billion) business that includes software fixes and other potential workarounds.
Engineers at the company are racing to make changes to a sensor on the Apple Watch that measures a user’s blood oxygen level – a feature that medical device maker Masimo has argued infringes its patents. They are adjusting how the technology determines oxygen saturation and presents the data to customers, according to people familiar with the work.
It is a high-stakes engineering effort unlike any Apple has undertaken before. Though the iPhone-maker’s products have previously been barred in certain countries over legal disputes, this restriction would hit one of Apple’s biggest money-makers in its home country – on Christmas no less.
Without a last-minute veto by the White House, a ban imposed by the International Trade Commission (ITC) will take effect on Dec 25.
Apple could settle with Masimo, though that is a route it typically prefers not to take. And the two companies do not appear to have engaged on that front. For now, Apple is focused on modifying its technology and trying to win favour with regulators.
If the ban holds, Apple is working on a range of legal and technical options. Already, it has begun preparing stores for the change. It sent new signs to its retail outlets that promote the Apple Watch without showing photos of the Series 9 and Ultra 2 – the two models targeted by the ban. The company’s lower-end SE watch will still be available.
Apple plans to stop selling the prohibited watches on its website on Dec 21 and then pull them from its roughly 270 brick-and-mortar outlets in the United States by Dec 24.
Outside the US, both models will still be available for purchase.
The ITC ban also applies only to Apple’s direct sales channels, so third-party retailers like Walmart, Best Buy and Target can continue offering the devices. Walmart and Best Buy both said on Dec 18 that they do not plan to stop.
Work within Apple suggests that the company believes software changes – rather than a more complicated hardware overhaul – will be enough to bring the device back to store shelves. But the patents at the heart of the dispute are mostly related to hardware, including how light is emitted into the skin to measure the amount of oxygen in a person’s blood.
An Apple spokeswoman said the company is working on submitting a workaround to the US customs agency, which is in charge of approving changes to get a product back on the market.
Masimo has said that a software fix will be an insufficient remedy. “The hardware needs to change,” it added.
In either case, actually getting the new technology to market will take time. Apple needs to ensure that any changes will not break other smartwatch features. The adjustments also may need additional testing given their medical purpose.
In a scenario where Apple needs to remove hardware from its device, getting new models produced and shipped could take at least three months, according to one person familiar with the company’s operations. And that does not account for how long it will take the customs agency to approve the move.
The blood-oxygen feature was first added to the Apple Watch in 2020 with the Series 6 model. At the time, the Covid-19 pandemic was raging and some doctors used blood-oxygen levels to assess the impact of the virus on patients’ ability to breathe.
The capability was also included on the Apple Watch Series 7 and Series 8. Apple stopped selling the Series 7 when new models were released, but the Series 8 remains available as a refurbished device. If the ban takes effect, those sales will need to stop as well.
Apple has increasingly used health and safety features to market its smartwatches, helping turn the line-up into a major growth driver in recent years.
Analysts estimate that it generated US$16.9 billion in revenue for Apple in fiscal 2023, up from US$9.1 billion annually five years ago.
Though that is a fraction of the US$200 billion generated by the iPhone, the watch also helps keep people locked into the Apple ecosystem.
It is unclear if the White House will ultimately grant Apple a reprieve. An administration official said that US Trade Representative Katherine Tai is handling the review and carefully considering all factors in the dispute.
The White House has the power to veto ITC decisions, and the Obama administration did just that with a ban of the iPhone in 2013 in the US. But that ruling stemmed from a patent fight with South Korea-based Samsung Electronics. Masimo is located in Irvine, California, which means the government would have to pick one US company over another.
Masimo said in a statement that the ITC’s judgment “should be respected”. The ban “demonstrates that even the world’s most powerful company must abide by the law”, it added. BLOOMBERG
