After years of rumours, Apple Inc on June 5 unveiled its long-awaited virtual reality/augmented reality (VR/AR) headset, Vision Pro — the iPhone maker’s first major product launch since the Apple Watch eight years ago. Much to the chagrin of Apple fanboys, however, there was no “killer app” to lure early adopters, even though the high-tech goggles were as sleek as you’d expect any Apple device to be.
To make matters worse, Apple said the headset, priced at US$3,500 ($4,700) will not go on sale until early next year, long after the year-end holiday shopping season is over. So, is Vision Pro destined to be a flop?
The first iteration of the headset might very well be. Apple expects to sell no more than half a million of the device in its first year, compared with 220 million iPhones that it sells every year. But then again, the first iPhone weighed about twice the current version, had no apps, sold just a million units in 12 months — yet it still turned out to be the most successful tech gadget in history.
Apple sees mixed-reality platforms as key to retaining a toehold in the evolving future of computing. The maker of Macs, MacBooks, iPads, iPhones, AirPods and Apple Watches wants to make whatever computing device you use. The newest shiny thing is a computer on your face.
It will be foolhardy to bet on Apple being pushed from its perch at the top of global consumer technology anytime soon. The world’s largest listed firm (market capitalisation US$2.8 trillion) may have failed to wrest back the narrative from artificial intelligence, or AI, last week, but it remains the most successful tech hardware company in history, with annual free cash flow exceeding US$100 billion.
Although Apple calls Vision Pro “mixed reality”, it has basically made VR goggles that can detect surroundings so well that it acts as an AR device. There is no see-through lens like in other AR devices, but when someone walks in front of you in real life, you can still see them no matter how immersed you are, and they can look into your eyes. You are not actually seeing anything through the glass; you are looking at some of the 12 cameras fitted on the goggles. It is all a magical illusion. Vision Pro is “reshaping the way we interact with the digital world and mix it with the real world”, says Pierre Ferragu, tech analyst at New Street Research in New York.
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“It’s far better than I expected, and I had high expectations,” tweeted Ben Thompson, veteran tech blogger. “The hardware and experience were better than I thought possible and the potential for Vision is larger than I anticipated,” he added. Vision Pro is “an HD sound system, an ultra-high-definition TV, an iPhone and a video-game console” all rolled into one, gushed venture capitalist Matthew Ball, CEO of VC firm Epyllion Co.
“The product is a technology tour de force, boasting spatial audio, 4K video, iris scanning and seamless interaction through a user’s voice, hands and eyes,” wrote Toni Sacconaghi, veteran Apple analyst at Bernstein & Co, in a research note on June 6. “For select applications, such as gaming and video, the experience appears to be a step function ahead of existing offerings today, and the device appears to offer a seamless AR/VR experience.”
The computer eyewear is packed with some of the most sophisticated chips, sensors and cameras you can imagine. Vision Pro boasts two chips — an Apple-designed M2 silicon, and an Apple-designed customised R1 chip which “benefits real-time processing, reducing the lag that can cause a feeling of motion sickness among some users of VR headsets”, Emma Ridderstad, co-founder of Warpin Reality, a mixed-reality software firm in Stockholm, tells The Edge Singapore.
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Vision Pro is packed with 12 cameras, five sensors and six microphones and two state-of-the-art curved micro-OLED screens. When those fancy components all work together with Apple’s proprietary visionOS operating system, it enables the headset to be controlled with just your eyes, hand gestures and voice commands.
The device, which has built-in speakers, also offers spatial audio with audio ray tracing to match sounds to the room and true 4K video. The sensors allow intuitive hand gestures and its sound system allows voice commands. Vision Pro tracks where you are looking, so when you stare at an app and pinch your thumb and forefinger together, it opens.
Apple’s big technology breakthroughs until now have been due to interface innovation. Music player iPod had its track wheel; the iPhone has the touch and pinch. Unlike Meta Platforms’ Quest, which relies on controllers, Vision Pro has intuitive hand gestures. And its cameras track your eyes to help control the visual experience.
Face computer faces reality
Apple differentiates itself from competitors through its tightly integrated ecosystem. The iPhone and Mac maker’s hardware, in-house designed components like chips and sensors, as well as its software and services across all of its devices work seamlessly, while rivals like HP, Dell, Samsung, Microsoft and Google often have trouble making everything work together. Until now, most AR/ VR products on the market had been built on customised versions of Google’s Android OS. Little wonder, then, that they have tended to be clunky with little ability to multi-task, in contrast to Apple’s polished user interface and seamless integration.
VisionOS also allows an array of apps to be viewed against the backdrop of the real world, so you can use them as you go about your day while wearing the headset.
Press a button on the side of the goggles and you will see apps used on Apple devices like the iMessage messenger, FaceTime, Photos, games and Apple TV+. The “digital crown” on the other side helps highlight a smorgasbord of apps and options — and give a more, or indeed less immersive experience. You can make audio calls from your iPhone or FaceTime video calls.
Playing interactive video games and watching 3D movies and sports on the headset is an incredible experience. Disney’s CEO Bob Iger was on hand at the launch to talk about what the entertainment giant will offer on the Vision Pro platform — its entertainment and ESPN sports products. Apple also has a partnership with gaming software developer Unity Technologies to help developers build apps for Vision Pro.
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Wearables like AR/VR headsets have been around for years but have failed to take off so far. Could the Vision Pro be just what the market needs? “Apple has a strong track record of creating new markets,” notes Sacconaghi. Its entry into music players, smartphones, wireless earbuds and smartwatches each expanded the market for such products by 10 times over the following five years, with Apple typically commanding a 20%-plus market share, he says.
The global AR/VR market was nine million units last year. It could grow to 90 million by 2029. Apple has drastically reduced prices and was able to extend its product line-up substantially in smartphones, tablets, smartwatches and ear pods, attracting a broader set of users, the Bernstein analyst says.
Sacconaghi notes the first cell phone — the DynaTAC 8000x, affectionately dubbed “The Brick” and launched in 1983 — was nearly 8 inches long, weighed 2.5lbs (about 1kg) and required 10 hours of charging for just 35 minutes of talk time. It cost nearly US$4,000, or over US$10,000 in today’s prices.
Epyllion CEO Ball notes that in inflation-adjusted dollars, the Vision Pro headset is actually cheaper than the early Apple desktops in the late 1970s. The cheapest Apple laptop, the 13-inch MacBook Air, now retails for US$999 compared with the US$7,300 price tag — that’s US$17,500 in today’s prices — for the Macintosh Portable in 1989.
Ferragu estimates Apple’s bill of materials — or the cost to make Vision Pro — is just over US$1,500. That means it can slash prices to US$2,000 and still make a nice profit. Cheaper headsets will boost demand. A 20% share of the expanded AR/VR market in six years would mean at least 18 million headsets.
Faster price cuts will also likely expand the total addressable market. Even if the price of Apple’s mixed reality device falls dramatically over the next few years, the Bernstein analyst believes headsets could be a US$50 billion annual revenue opportunity for the company.
Keeping its lead
Why is Apple taking a plunge into face computers? As a purveyor of premium smartphones, tablets, PCs and smartwatches, the firm — with its 20%-plus market share in key categories — is close to saturation point. Sure, it can sell a lot more phones or laptops if it could make cheaper products like Samsung, Dell or Chinese rivals such as Lenovo and Xiaomi, but that will devalue its brand and impact its margins.
One way to grow is to expand into new markets. Yet, for a company selling US$400 billion of products and services a year, even a huge new category that generates US$50 billion annually will be just over 12% of revenue. To keep growing at a rapid clip, it needs to expand into several new categories over the next decade. Beyond the mixed reality headsets, Apple has reportedly been working on autonomous vehicles, which are probably still a few years away.
For Apple, mixed reality headsets are really a bet on where computing and personal communications are headed. Over time, the headset that currently looks like ski goggles will evolve into easy-to-wear spectacles that can be used to make video calls, surf the Internet, make payments and go through airport or building security using iris recognition.
AirPods are the stepping stone to a new hands-free communications platform. Apple knows that the iPhone will eventually be disrupted, so it wants to morph it into some form of a wearable. In 10 years, your spectacles, even if you are not short-sighted, will be your video phone and the screen for your Internet and entertainment experience. Ultimately, even the pair of glasses will disappear and become something akin to a contact lens. That’s why Apple’s new hand gesture, eye and voice interface that underpins the headset operating system is so important.
Although Apple has just 20% of smartphone sales worldwide, it accounts for over 85% of the total profits generated in that market. And the iPhone makes up just over 50% of its US$400 billion annual revenues and about 46% of its total profits. That makes Apple vulnerable.
History is full of firms that dominated one big market then missed the next several leaps in tech. Intel, whose motto was “only the paranoid survive”, missed the move to mobile phones and graphics chips, allowing Arm Holdings and Nvidia to dominate. Turns out the chipmaker wasn’t paranoid enough.
Software powerhouse Microsoft missed the rise of the Internet, smartphone, search engine and social media, allowing Amazon, Apple, Google and Facebook to march ahead. Only recently has Microsoft reclaimed lost ground with its lead in generative AI and ChatGPT.
Apple is trying to keep its lead by moving from handsets to headsets and eventually pivot to a pair of lightweight AR glasses that people can wear all day. New, more intuitive computing platforms that just use our eyes, hand gestures and voice are here. In just a generation, computing has moved from desktops to handsets to our faces as a headset. Some years from now, we might all be wearing a computer on our eyes like a contact lens. The future of computing is getting into sharper focus.
Assif Shameen is a technology and business writer based in North America
