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AmextaFinance > News > Apple’s mixed reality headset is a hedge against future disruption
News

Apple’s mixed reality headset is a hedge against future disruption

News Room
Last updated: 2023/06/01 at 9:51 PM
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What if Apple came up with its most important new product in years and the world yawned?

Next week’s expected unveiling of Apple’s mixed reality headset — a product that combines virtual reality with augmented reality, which overlays a digital world on to the real one — feels oddly out of step with the times.

Generative AI has taken the tech industry by storm this year. It could represent the most important new way of interacting with computers in a long time, with the sort of impact that resulted from the iPhone’s multitouch screen 16 years ago.

It is not yet clear how this new form of AI will affect the smartphone domain dominated by Apple. The text-heavy interactions of ChatGPT are not suited to small screens and voice- and image-based applications of the technology for handsets are still under development. But for now, this has become the tech industry’s most important experimental focus, rather than the immersive world of VR.

Even without this explosion of interest in a different corner of the tech world, the headset that Apple has been working for years to perfect would still feel oddly beside the point to most consumers. At around $3,000, its high price will limit sales to a handful of enthusiasts, as well as developers who want to create software for it. And the world has not been demanding a cheaper VR device (Meta’s Quest 2 will soon sell for as little as $299). Most people who have tried virtual reality are amazed by the novelty, but they feel little desire to don a headset when they want to work, play games or be entertained.

However, Apple’s venture into virtual and augmented reality needs to be judged against a broader set of objectives. It is best seen as a hedge against future technology disruption, a relatively modest but still useful extension of Apple’s existing universe of services and gadgets and a place holder for a technology revolution that is likely to take many years to play out.

The hedge is against threats to Apple’s iPhone empire. It is not clear whether or when the smartphone will lose its central place in people’s digital lives, but Apple clearly needs to place more bets on the future.

The company formerly known as Facebook was the first to attempt the leap beyond the smartphone, with its acquisition of VR company Oculus nine years ago. It signally failed: only 8.5mn VR headsets were sold last year, according to an estimate from the Interactive Data Corporation. That still leaves the field wide open for Apple.

Even if sales are minimal for a protracted period, the headset should be a moderately profitable addition to Apple’s line-up and another way to tie users more tightly into its expanding digital universe. With a suite of its own digital services, such as music, video content and game subscriptions, Apple will be well-positioned to develop the VR experiences needed to stimulate demand for its headsets.

The 34mn software developers registered to work on Apple’s devices represent an even more powerful asset. It is not clear what the “killer apps” will be for VR, but the combined efforts of these people make it likely they will come to Apple’s headsets first.

This has left most Wall Street analysts sanguine about the expected extension to Apple’s hardware range. Goldman Sachs, for instance, forecasts that its headset sales will reach $18bn five years from now. That would give a useful lift to Apple’s division that sells wearables, home devices and accessories, and which delivered sales of $41bn last year. A wild card is the high-margin services sold alongside the headsets: if consumers are willing to pay up for the deeply immersive experiences that come with VR, software sales could eventually overshadow the amount spent each year on hardware, as they do in the console gaming market.

Finally, as a place holder in an important new category of technology, an Apple headset would be a statement of intent, rather than an end in itself. However impressive the technology behind the device, it will still suffer from the problem common to all VR and AR headsets: most people do not want to don a bulky headset or to cut themselves off from the world to enter a different digital realm.

Until the same experiences can be worked into lightweight glasses — or even, one day, contact lenses that make the technology completely invisible — VR and AR are unlikely to infiltrate everyday life in the way that smartphones did. But if Apple finally launches its headset next week, it will have taken the all-important first step.

richard.waters@ft.com

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News Room June 1, 2023 June 1, 2023
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