NEW YORK (TheStreet) -- As Apple (AAPL) - Get Free Report gets ready for the April sales launch of the Apple Watch, the biggest question remains how much the Silicon Valley powerhouse will upend the luxury segment of the watch market.
We already know the Apple Watch is going to disrupt the low end of the business, as evidenced by comments last week from Fossil's (FOSL) - Get Free Report CFO Dennis Secor. "While notable newcomers can help grow the market by bringing new customers into the category, they might also cause some near-term disruption," Secor warned during Fossil's fourth-quarter earnings call.
But high-end watches, from makers such as Patek Phillipe, Cartier, Rolex, Brietling and others, cost thousands of dollars -- and in some cases, tens of thousands. On the very high end, such timepieces are the sorts of coveted items that get passed down as heirlooms from one generation to the next, keepsakes to hold in the family.
Considering the fact that some significant fraction of the revenue related to the Apple Watch will come from the luxury Apple Watch Edition (which is likely to cost around $10,000 or more, according to Apple blogger John Gruber), Apple has to bear in mind that those top-tier consumers won't be buying a new Apple Watch Edition every year or two the way people replace their iPhones. It's a lot easier to convince someone to plunk down a few hundred dollars every couple of years than it is to convince them to spend $10,000 or more, at any time.
The Wall Street Journal recently reported that the initial first-quarter production run for the Apple Watch would be between 5 and 6 million units. Half of the production would be of the entry-level Apple Watch Sport model, which Apple has said it will price $349. One-third of production would be of the mid-tier, with the higher-end versions accounting for the remaining sixth.
Apple has surely taken the heirloom factor into account when going after the luxury market, as well as the fact that the chip running the Apple Watch, the S1, is likely to be obsolete in a year or two due to Moore's Law.
In the past, analysts, Apple enthusiasts (including Gruber) and others have speculated that the company might design the Apple Watch in a way that allowed the S1 chip to be easily popped out and upgraded for a few hundred dollars, justifying the investment and keeping the technology up to date. However, that's never been Apple's style, as the company places as much emphasis on the inner workings and look of a piece of technology as it does on the outside, if not more, as recently evidenced by this incredible profile of Apple's senior vice president of design, Jony Ive, in The New Yorker.
As launch day gets closer, it's entirely possible (and highly probable) that Apple will answer these questions and end the speculation. Given all of the hype surrounding the Apple Watch, from Wall Street, the watch world, Apple lovers and the media, it's a question that definitely needs to be answered.
--Written by Chris Ciaccia in New York