Gene and Andrew discuss a recent report that Apple’s Board of Directors has seen a preview of the company’s MR headset project, and answer two keys questions: What will they do with it and, when we will see it?
From mid-November 2021 to May 19th, we have been tracking lead times at Apple for nine products in six countries. We’ve found that lead times for 8 of the 9 products have been essentially stable over the past month. It’s worth noting that on exception, the MacBook Pro lead time skyrocketed over the past month, increasing from 9 days to 58 days. We estimate the MacBook Pro is about 4% of overall sales.
Lead Time Details
- Typical lead times for Apple products in the third month of the March quarter are “same day.”
- Today, Apple is quoting an average of 11 days for the seven products launched last fall and the two new products launched this Spring in six countries (United States, France, Germany, Mexico, Japan, and China). That is a measurable step back from the 7 days we observed at the beginning of April.
- MacBook Pro is in the tightest supply among the nine products, with lead times averaging 56.7 days. This is a major increase from the 9 days we observed in April. The Mac accounts for about 10% of sales.
- Although the iPad remains to be in a tighter supply than most of the products we track, its lead time improved from 25 days in April to 18 days in May. For the iPad Mini, it has an average delivery time of 1.2 days, which is an improvement from 2 days we observed at the beginning of April. The iPad accounts for about 8% of sales.
- An improvement in the average delivery time for the Mac Studio is observed as well, from 19.4 days in April to 15.5 days in May.
- The new iPhone SE lead times declined from 2 days in April to 1.2 days in May. The average delivery time for iPhone 13 remains to be “same day.” However, for iPhone 13 Pro, the average delivery time slightly increases from “same day” to 1.5 days. The iPhone accounts for just under 53% of revenue.
- The Apple Watch and AirPods 3 experience the same trend in which the average delivery times slightly go up from “same day” in April to 1.2 days now. Apple Watch accounts for just over 5% of revenue.
I’ve written a lot about augmented reality over the past five years. That’s not surprising, since we started Loup in January of 2017 and the opportunity of merging physical and virtual worlds with AR was one of our five cornerstone investment themes. In August of that year, Tim Cook commented that AR will be “one of those huge things that we’ll look back at and marvel.” I was giddy, and wrote:
“Tim Cook has been waiting a year for this. He spent the past twelve months dropping 7 public hints about Apple and AR, prior to announcing ARKit in June. The Jun-17 earnings call was Cook’s first chance to talk about the theme of AR with investors, and he made it clear that Apple believes that AR will be the foundation of an upcoming paradigm shift in computing.”
Five years later, little substance has come out from the tech giants on the topic. Don’t be fooled by the seeming lack of progress. AR is the next computing platform, and Apple and Google are the leaders in that mission. I don’t see Meta as a key participant in the race. More on that below.
This week, Google hosted its annual product event, Google I/O. While the focus was—of course—on search, the company did announce some measurable progress on the AR wearables front.
Google Previews AR Glasses
What’s less important are the details made public about Google’s AR glasses, given that its release is still years away. What is important is that AR glasses were a part of Google’s announcements at I/O. This means they continue to put measurable resources behind it, and it’s only a function of time before the product sees the light of day.
- Timing. Google previewed the glasses and stopped short of announcing availability. My guess is 2024.
- Features. Google’s AR glasses preview did highlight an AR implementation of Google Translate. The glasses will provide subtitles to your experience of the world. I was not surprised to hear about this feature, given that real-time translation has been an anticipated use case of an AR wearable. While flashy, the number of people that would pay for the feature is limited.
- Privacy. Privacy remains the second biggest challenge to AR behind accurately mapping out the surrounding environment. Most tech followers will remember 10 years ago when Google presented its internet-connected glasses, Google Glass. The product failed to gain momentum in part due to its (lack of) privacy “creep” factory. A camera set on glasses meant that audio/video recording was made even more inconspicuous than a user with an iPhone. It meant that A/V recording could happen without the consent of others. To follow these concerns, Google Glass was banned at casinos, restaurants and movie theaters. Google Glass still exists as an enterprise product, Google Glass Enterprise Edition 2.
- M&A, Patents. In 2020, Google made an acquisition of a smart eyeglass maker, North, a company that launched its own smartglasses in 2018 and built the retinal projection technology that features 2D elements floating about a meter before your eyes. Undoubtedly, Google has acquired other AR tech, mostly for the acquisition of talent.
- Cost. TBD
Waiting to see Apple’s MR preview
In terms of Apple’s new product priorities, I believe that AR is lower than auto and higher than healthcare. That said, Apple will be one of the two most meaningful contributors to AR hardware, along with Google. Even though the addressable market is relatively small, I agree with Cook’s AR use case vision from 2017. That vision included education, entertainment, interactive gaming, enterprise and categories we’ve not even thought of.
- Timing. Apple’s MR headset is expected to be released in 2023 or 2024. If that goes smoothly, we anticipate that Apple Glass will likely follow in 2026.
- Features. TBD, though Apple has over 14,000 AR apps on its App Store, Cook reported. That will make for an extensive library of software and games once the hardware is ready to go.
- Privacy. Apple’s response to the privacy concerns of Google Glass is clever. The MR headset is not expected to have cameras. Instead, LiDAR sensors were chosen as the solution to allow for environmental awareness without becoming an invasion of privacy.
- Patents. Apple has filed over 59 patents related to in-air gestures. Beyond that, patents include a spatial 3D audio engine to enhance virtual reality gaming and even a feature referred to as “optical subassembly,” which would perfect impaired vision, allowing the AR device to take the place of prescription lenses.
- Cost. Apple’s MR headset is expected to be priced around $3,000, making it only reasonable for tech geeks and early tech adopters. Mainstream adoption will need a sub $1,000 price and more features to convince people to wear these devices in their daily lives.
What about Meta Platforms?
While I don’t see Meta Platforms as a long term contributor to AR hardware, I see the company as a key beneficiary of AR hardware products that Apple and Google will build.
Meta would object to my prediction, given they are investing heavily into the metaverse with a projected ~10B investment into Reality Labs for 2022. This is real investment into the metaverse. Apple and Google have not broken out their spend in AR, however, their total projected R&D spending are ~$26B and ~$39B, respectively. It’s worth noting that on Meta’s most recent earnings call, Zuckerberg mentioned that he thinks “monetization of the metaverse,” including elements of AR, is still a decade out. Slowly, but surely.
The reason I believe Apple and Google will be the hardware winners for AR is accredited to core competencies of the companies. Apple’s is hardware. Google’s is mapping and search. Meta’s is the social graph. That social graph along with the opportunity to port it into the metaverse is the reason why Loup is an investor in the company.
The bad news for Meta: they’re still going to be tied to Apple hardware ecosystems.
Some things never change.