Yesterday Patently Apple posted a report titled "Apple Watch 3 has Reached Final Testing Stage before Mass Production in Q4." Today sources within the upstream supply chain in Taiwan are predicting that Apple's overall smartwatch shipments are expected to rise to 4.5 million units in the fourth quarter and hit 15 million for the whole year 2017, according to sources from the upstream supply chain. The sources expect the volume to rise to 20 million units in 2018.

Despite Apple Watch's strong performances, other vendors are seeing weakening demand for their wearable devices. Xiaomi and Fitbit are both seeing dropping sales for their smart bands, while smartwatch shipments from Samsung Electronics, LG Electronics, Huawei and Motorola remain weak.

Asustek Computer has already decided to depart from the market and Intel has been cutting personnel and R&D resources for its wearable platforms.

The sources pointed out that smartwatches' high prices, weak battery life, overlapping functionalities with smartphones, and not yet fully integrated ecosystem have prevented demand from reaching expected levels.

With the third-generation device expected to feature updated apps and communication functionality, related shipments are expected to greatly boost Apple's overall smartwatch volumes.

As we noted in our report yesterday, the third-generation Apple Watch will be manufactured by Quanta Computer. What's new is that Foxconn's subsidiary Shunsin Technology has entered the Apple Watch supply chain providing system in packaging (SiP) services for the Apple Watch. It's also believed that Compal may become a second Apple Watch supplier sometime in 2018.

During Apple's fiscal Q3 financial conference call, Apple's CEO stated during his opening commentary that "Sales of Apple Watch were up more than 50% in the June quarter and it's the number one selling smartwatch in the world by a very wide margin. Apple Watch is having a positive impact on people's health and daily lives and motivating them to sit less and move more. With features like built-in GPS and waterproofing Apple Watch series 2 is the perfect companion for hiking, running, and swimming."

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