The Wall Street Journal also said that Apple is planning multiple screen sizes for the device, which some people have dubbed the iWatch.
Samsung, Sony, Qualcomm and others have already released smartwatches, but the gadgets have mostly functioned as companions to smartphones, offering things like email notifications and clock functions.
Samsung's Gear 2 line, released this year, added fitness-related apps and has a heart rate sensor.
There has been long-standing speculation that Apple has been working on a smartwatch. The main question has been when it would come out.