Most mainstream smartwatches collect data about the user's heart rate and other health-related metrics, in addition to facilitating tasks like checking e-mail and making phone calls.
A third source said LG Display is the exclusive supplier of the screen for the gadget's initial batch of production. It also contains a sensor that monitors the user's pulse. Singapore-based imaging and sensor maker Heptagon is on the supplier list for the feature, two other sources said.
Apple declined to comment. Quanta, LG Display, and Heptagon also declined to comment.
Apple's move will follow on the heels of releases of similar devices by Samsung, Sony, Motorola and LG Electronics—gadgets that tech watchers say haven't been appealing or user-friendly enough to ignite a wave of mass adoption.
But the market is growing fast, with data firm IDC saying that worldwide shipments of wearable computing devices—a category that includes smartwatches—will triple in size this year over 2013.
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Apple has already dropped hints of its plans in this arena, hiring the former chief executive of French fashion house Yves Saint Laurent, a unit of Kering SA, and proclaiming that it will introduce "new product categories" this year.
Many are hoping that Apple's entry into the field of so-called smart wearables will be a game-changer that transforms the industry like the company's iPhone did in 2007.
Some are foreseeing that smartphone sales, the current cash cow of the consumer tech world, will lose momentum in the years ahead as the market reaches saturation.
IDC predicts that worldwide smartphone sales will increase 23 percent this year, a slowdown from the 39 percent growth of last year, and that growth will average only 12 percent annually from 2013 to 2018.