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Rumours of an Apple mixed-reality headset have been swirling for years. Now, they are getting very real.

Last week, Bloomberg’s Mark Gurman reported that Apple demonstrated an AR/VR (augmented and virtual reality) device to its board of directors and has a “consumer release planned for 2023”. Whenever the headset does come out, Apple is well-placed to win the mixed-reality battle.

The leading competitor in the space is Meta Platforms (aka the artist formerly known as Facebook). CEO Mark Zuckerberg renamed the company and committed to spending $10bn a year to bring to life his vision of a VR-enabled metaverse.

And there has been serious progress: sales of Meta’s Quest 2 hit 8.7-million units in 2021, twice as much as in the prior year, and the company owns 80% of the market.

The Quest 2 sales figure is a drop in the wearables hardware bucket compared with what Apple has been able to move, though. According to Apple analyst Neil Cybart, the iPhone maker shipped more than 100-million wearables (Apple Watch, AirPods and Beats headphones) in 2021, an increase of four times from 2017. Also, don’t forget the 233-million iPhones it shipped in 2021.

No other company can move high-end consumer hardware at Apple’s scale.

In a May 2021, Cybart makes the strong case that Apple has built a “decades-long lead in wearables” by piecing together several advantages:

  • Custom silicon chips: Apple acquired semiconductor firm PA Semi in 2008 for $278m. Since then, the company has rolled out custom-built chips — often higher-performing than alternatives — for its devices: A Series (iPad, iPhone), M Series (Mac), S Series (Watch), W Series (AirPods).
  • Design-led product developments: Apple has long been a design-first firm tightly integrating design with engineering. When it comes to wearables, combining function and fashion is vital. Former Apple executive Jony Ive has all but perfected this approach (per The Information, Ive has consulted on Apple’s headset, including key details like “battery, camera placement and ergonomics”).  
  • A ready ecosystem: A successful mixed-reality headset won’t be a stand-alone product, especially if it’s meant to interact with the real world. Apple already has solutions in place for audio (AirPods) and hand gesture (AssistiveTouch via the Apple Watch) requirements. We can expect seamless integration with the headset.

The experience of building and shipping all this wearable hardware directly applies to headsets.

Unlike Meta, Apple has been mum about its actual mixed-reality investment, but we can assume its sizeable. According to Gurman, Apple has 2,000 employees in its Technology Development Group working on both a mixed-reality (AR/VR) headset and a stand-alone AR headset (unlike full-immersion VR, AR overlays “digital information and images on top of the real world”).

Apple has also made a number of AR-related acquisitions in recent years: AR software firm Metaio (2015), computer vision firm SensoMotoric Instruments (2017), hand-tracking tech start-up Vrvana (2017), AR glass tech start-up Akonia Holographics (2018) and two AR content start-ups NextVR and Spaces (2020).

It’s not just hardware, either. In another piece, Cybart highlights that Apple has been rolling out features on the iPhone that can be used in a mixed-reality world:

  • Memojis: Animated digital representations (typically headshots) of an individual.
  • FaceTime SharePlay: This feature allows you to listen to music or watch movies with a friend (it will “have a big role to play in mixed reality as we consume content while simultaneously interacting with friends and family”).
  • Live text in photos: An important way to overlay information onto the real world.
  • Apple Maps: This feature provides AR navigating on the iPhone (and will obviously be useful in a headset).

There’s a reason Apple isn’t messing around with its headset: consumer devices account for 80% of the company’s revenue, and it’s looking for the next hit (in comparison, almost all of Meta’s sales are ad-based).

One hurdle to Apple’s headset domination is price: its headset could cost as much as $2,000 (a Quest 2 is available at $299 and $399).

There will also be competition from Microsoft, Alphabet, Snap and Sony Group. But none of these companies can match Apple’s combination of design chops, cutting-edge hardware and a huge existing ecosystem.

If Apple ends up winning the headset battle, it wouldn’t be the first time the company entered into a category someone else started — MP3 player, smartphone, smartwatch — and won it outright.

Bloomberg Opinion

More stories like this are available on bloomberg.com/opinion


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