Apple – No spectacle.

Deadlines can easily be pushed out.

• To get augmented reality to the point at which Apple can ship a product that it is ready for its discerning user base may take far longer than its own PowerPoint presentations suggest.
• The Information (see here) has spoken with sources who have disclosed that Apple’s roadmap for VR and AR is to launch a headset in 2022 and then a pair of glasses in 2023.
• This is an important development for Apple because the company now resembles Nokia at the height of its power, meaning that to hold onto this hallowed position in the long-term, the company must disrupt itself.
• At the moment there is no viable contender to replace the smartphone but one possibility is augmented reality (AR) implemented in a fashionable and lightweight pair of glasses.
• This is much harder than it sounds and companies like Microsoft (HoloLens), Magic Leap and Apple are all spending well over $1bn a year on developing it.
• There are many issues that need to be dealt with and all of them are fiendishly difficult to crack.
• The foremost issue is the consumer itself.
• When it comes to digital experiences, there is a key difference between the consumer and the enterprise.
• In consumer, the user pays to have the experience whereas in the enterprise the user is paid to have the experience.
• This is a small but crucial distinction because it means that in the enterprise, one can get away with a poor user experience as long as the experience itself improves productivity.
• This is very far from the case in consumer.
• Hence, one can get away with a substandard user experience in enterprise which is why all of the current AR offerings (except Magic Leap) have long since pivoted in this direction to keep the lights on while they work on the rest of the issues:
• These include:
  • First, letterboxing: Overlaying the virtual world on top of the real world is fiendishly difficult.
  • Not only does one need to understand the real world in real-time so that the virtual world can be seen to be interacting with it, but I think one also needs a full-frame overlay.
  • This means that the virtual world needs to be present everywhere that the user can see.
  • Today this is very far from reality and the virtual world can only exist in a subset of what the user can see making it an implausible experience.
  • This is proving to be very difficult to achieve with any degree of realism, and I do not think that Apple will launch a head-mounted AR product that has not solved this problem.
  • Second, size and weight: Consumers are not about to start wearing computers on their faces meaning that an AR product needs to be no larger or heavier than a pair of spectacles.
  • This produces huge challenges in terms of miniaturisation, performance and battery life that I think will take a long time to overcome.
  • Third, price: launching a device with the potential to replace the smartphone needs to come at a price to match.
  • The cutting-edge devices today are heavy, bulky and cost between $2,000 – $3,500.
  • Apple dominates the high end of the smartphone market with an ASP of around $800 meaning that a high-volume device would need to be substantially cheaper.
  • I think that a lot of work and innovation will be required to bring a lightweight device down to this price point.
• The net result is that I am not at all convinced that Apple will be able to meet this deadline and even if it can, there is a good chance that it will decide not to enter this space.
• Apple has carried out many experiments with new device categories such as televisions and vehicles and I think that this is no different.
• Hence, I think the probability of these launches happening on time is slim with a good possibility that they do not happen at all.
• Apple is no longer the value stock that it was which combined with soft growth leads me to want to take some money off the table.