Apple Metaverse – No choice.

Apple must address the Metaverse but not yet.

• According to the media chatter, Apple was supposed to release a Metaverse device this year, but I continue to think that this makes no sense at all before 2025 at the earliest.
• This is very likely to go hand-in-hand with its own version of the Metaverse creating yet another silo, which if not interoperable, will ensure that the Metaverse fails to fulfil its potential.
• There are two main reasons why a Metaverse device now makes no sense:
  • First, hardware and user experience: As impressive as VR is today, it is still miles away from where it needs to be to become a mainstream digital device.
  • The devices are heavy and bulky with poor battery life while the software is glitchy and unreliable.
  • These are problems that can be solved, but they will take money and time and RFM research (see here and here) has concluded that the earliest time that these will be solved will be in 2025.
  • Furthermore, the current malaise hanging over the economy and cost cuts at technology companies may mean that it takes longer to perfect these devices.
  • Consequently, if Apple launches a device now, it is likely to be disappointing given its reputation for quality and excellent user experience.
  • A weak device now runs the risk of damaging both Apple’s credibility and the aspirational nature of its brand.
  • Second, addressable market: The rewards for launching a device now are puny.
  • RFM research has concluded that usage of the Metaverse is just 0.013% of the usage enjoyed by the smartphone making it a niche destination in the best instance (see here and here).
  • This means that the addressable market for the Metaverse as it stands today is tiny and from Apple’s perspective not worth chasing in my opinion.
• This is why I think that there will be no Metaverse device or service from Apple before 2025.
• However, in the long-term, this is a segment that Apple has to address just on the off chance that it becomes wildly successful, and head-mounted devices overtake smartphones as the place to live one’s digital life.
• Should this come to pass, and Apple does not have a device with which to migrate its ecosystem to the Metaverse, then it will, in all likelihood, repeat Nokia’s fate.
• This is why I am certain that Apple will address this space with both VR and AR but not just yet.
• Apple has been a relatively safe haven in the technology sector despite its relatively high valuation and in a down market, I would expect this to continue.
• However, there is much better value to be had elsewhere from companies that are growing faster and where their shares are trading at lower multiples.
• Qualcomm, MediaTek and TSMC are three of these although I remain a little wary of TSMC given its ownership of fabs which is not ideal in a cyclical downturn.