Apple actively develops sleep tracking features for Apple Watch, as reported by Bloomberg. The report indicates that sleep tracking features will be associated with new hardware, rather than a watchOS software update.
The publication says Apple employees have been testing sleep tracking features on campus for several months with a view to starting original sleep tracking features for Apple Watch next year. Apple usually publishes new versions of Watch in the fall.
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The company purchased the Sleep Shield Hardware Maker in 2017, and sells the Beddit screen in Apple Stores. It even gave a smaller hardware update to that sensor late last year. Ever since Apple bought Beddit, people have believed the company is working on sleep tracking integrated into Watch.
Currently with regard to sleep tracking on Watch, Apple currently does not offer built-in sleep tracking functionality. Third-party watch apps, like AutoSleep, work reasonably well and can sync data to the Health app on the iPhone. The IPhone Clock App's Bedtime Alarm can contribute to the user's health data based on the alarm time setting and detected phone activity as a rough sleep time approach. It is clear that a proper first-party solution will be beneficial for the product line.
Competitors for Apple Watch, like Fitbit Versa, have naturally supported sleep detection for many years.
It's not clear how Apple would tackle the battery life problem. Currently, Apple recommends charging Apple Watch overnight – which obviously precludes tracking. A future Apple Watch can offer more battery life that causes this problem to disappear, or the Watch software can enter a lower night power mode. One possible result is that Apple adds sleep capabilities to a watchOS software update for existing users, and doubles down with exclusive sleep features in a future Apple Watch model.
Despite Apple's recommended usage pattern, many customers are already using the clock to bed and charging it in the morning as they wash and dress.