Corrected entry: When Bond uses his watch to blow Primo/Cyclop's eye (with the watch acting like a magnetron), Bond's electronic earpiece for communication is still fine - it should have been destroyed in the same explosion.
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Correction: Given both items were provided by Q, it's reasonable to assume that the earpiece was shielded against the effects of an EMP.
Also, it is explained (and shown) that the device must be really close to the watch in order for it to work.