A key component of the Apple Watch [the Tapic Engine] made by one of two suppliers was found to be defective, prompting Apple Inc. to limit the availability of the highly anticipated new product, according to people familiar with the matter.
Daisuke Wakabayashi and Lorraine Luk | The Wall Street Journal (behind paywall)
Update: Rick Lauraya pointed out to me that this is not necessarily new news. Two weeks ago, KGI Securities analyst Ming-Chi Kuo (who has a pretty good track record on these things) listed the vibrators that power haptic feedback as a potential bottleneck.
More thoughts: As John Gruber points out on Daring Fireball, problems like this are simply part of launching a groundbreaking new product. In fact, I bet it's just one of many challenges Apple is working through:
Update 2: Dawn Chmielewski chimes in on the matter:
Apple identified a flaw in a critical component of its Apple Watch before any of them were shipped to consumers, according to people with knowledge of the matter.