Why Apple’s VR headset could succeed where every similar product has failed
An attendee wears an HTC Vive Virtual Reality headset during the Apple Worldwide Developers Conference in San Jose, California, June 5, 2017.
David Paul Morris | Bloomberg | Getty Images
On Monday, Apple is expected to announce its first new major product line since the Apple Watch in 2014.
During Apple’s software-focused developer conference, WWDC, it could release its first mixed-reality headset, according to analyst research, media reports and increasingly, vague references from Apple itself.
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The headset, according to reports, will feature high-definition screens in front of the user’s eyes. But it could also let users see and interact with the real world through high-powered cameras mounted on the device, a trick sometimes called passthrough or mixed reality.
Apple is launching its headset as the broader virtual reality industry sifts through what’s been called a trough of disillusionment.
“Although the lackluster uptake of the AR/VR market and the transitory enthusiasm about the Metaverse create a backdrop of challenges, it is instructive to remember that Apple invents entire new categories that have the potential to disrupt existing markets and create entirely new markets,” Bank of America analyst Wamsi Mohan wrote in a recent note.
When Facebook rebranded as Meta in October 2021, it drew attention to VR and the metaverse headsets could enable. But since then, sales for existing VR headsets haven’t been great, usage has been worse and the anticipated explosion in successful VR software companies hasn’t happened.
Augmented reality, a related technology that shows computer graphics through pricey, specialized transparent lenses, has also failed to thrive. Microsoft’s Hololens, announced in 2014, had a high-profile deal to make headsets for the U.S. Army, but it recently stalled. The most visible AR startup, Magic Leap, has changed management and refocused from making a consumer-oriented gaming device to developing a tool for a small set of industries.
Apple’s headset is expected to be more powerful than what’s out there — even current $6,500 VR headsets. It’s expected to have a 4K resolution screen for each eye and a powerful Apple-designed chip, according to TFI Securities analyst Ming-Chi Kuo.
It could also be pricey, retailing for as much as $3,000, according to a note from TD Cowen analyst Krish Sankar, and could only sell in the hundreds of thousands in the first year. By way of comparison, the Apple Watch sold millions in its first year.
But many people in the industry believe Apple’s announcement will energize consumers and software developers and bring the technology closer to its ultimate promise: a headset you wear daily, as you go about your business, or perhaps a pair of lightweight glasses, helping you with contextual information.
“It’s good to see others get into this business, particularly Apple, who doesn’t jump into markets too early,” Magic Leap CEO Peggy Johnson told CNBC. “That is a huge validation of what we have been doing to date, and we welcome that, because it’s also good for the ecosystem.”
Here’s why Apple could succeed where everybody else has failed.
Apple breaks products into the mainstream
Apple seldom invents something unprecedented. Instead, it takes existing ideas and refines them in critical ways that make them a lot more appealing to consumers.
Before the iPod, there were several hardware MP3 players in the market. Before the iPhone was released, the Blackberry had merged a wireless cellular internet connection and pocket computer into what is still called a smartphone, and other companies were building smartphones based on Microsoft’s Windows Mobile system. When Apple released the Apple Watch, there were many other smartwatches on the market, chasing a concept that had been around in cartoons and science fiction for decades.
Historically, Apple uses its significant consumer brand and hefty marketing budget to explain to consumers why they need its latest gadget.
“Apple has a trust and a granted entitlement that no one else has, and they’ve earned it,” said Jarrett Webb, a technology director at Argodesign who develops mixed-reality apps. “They have this leadership position and this poise to help define, and give confidence, to this new form of computing.”
The best example of this was at the original iPhone launch. Steve Jobs, founder of Apple and CEO at the time, described the new device as a combination of three things: an internet communications device, an MP3 player and a phone.
The late Apple CEO Steve Jobs unveiling the first iPhone in 2007.
David Paul Morris | Getty Images News | Getty Images
The language may be dated now. The clunky phrase “internet communications device” transformed into “there’s an app for that” quickly. But it still showed how Apple can quickly slim down a pitch for a new gadget into terms consumers understand.
For now, the world of headset technology is confusing and has no clear use cases. Industry practitioners spend a lot of time explaining the differences between augmented, virtual and mixed reality. If Apple can demystify the whole industry for the public, it could end up with the first headset mainstream consumers understand and want.
Plus, Apple has about 34 million developers for its current phones. That’s a huge resource Apple could encourage to build the killer app that would turn its headset into a must-have.
Apple has been laying the groundwork for a decade
When Apple releases a headset, it won’t just have the technology Apple developed in secret. It will have a base of software and hardware infrastructure Apple has been building and buying for years.
Starting in 2016, Apple CEO Tim Cook began frequently talking about the benefits of augmented reality, often contrasting it with the limitations of virtual reality.
Around the same time, Apple started buying several companies focused on specific technologies that could end up in a headset.
— In 2013, Apple bought PrimeSense, whose 3D camera sensor eventually ended up being part of the basis for Face ID, the company’s facial recognition system for iPhones, and influenced the company’s current depth-sensing cameras.
— In 2015, Apple bought Metaio , which made AR software for mobile devices.
— In 2016, it bought Flyby Media, which worked on computer vision technology.
— In 2017, it bought SensoMotoric Instruments, which developed eye tracking, a core VR technology, as well as Vrvrana, which developed a VR headset.
— In 2018, it bought Akonia Holographics, which developed transparent lenses for AR glasses
— It bought NextVR, which filmed video content for virtual reality, including sports.
Apple also started releasing developer’s kits for augmented reality, including one called ARKit, which could use the iPhone’s hardware to create limited AR experiences on the phone, such as interacting with a virtual pet or trying out digital furniture in a living room.
Apple now has an entire library of software to perform difficult tasks the headset will need to be able to do to integrate the real world and a virtual world seamlessly.
— RealityKit allows developers to render graphics that mesh with the real world.
— RoomPlan scans the room around the user.
— Animoji is a 3D avatar that can match the user’s facial expression.
— Spatial Audio can make audio sound like it’s coming from somewhere, not just from the user’s headphones.
Apple doesn’t give up easily
When the Apple Watch hit the market, Apple didn’t know entirely what it was going to be. Cook even said at its release the company was excited to learn what developers would do with it.
One early thought is the Apple Watch was going to be a fashion must-have. In the early days of the product, Apple spent a lot of time courting fashion media and seeding the product with tastemakers. Beyonce was spotted wearing a gold Apple Watch model, with a never-released band, before it was released.
But once the Apple Watch got into user hands, Apple figured out people were most interested in it as a fitness tracker. Subsequent versions de-emphasized the luxury gold model and introduced a version co-branded with Nike.
When Apple finally released a new premium model of the Apple Watch, the Apple Watch Ultra, its selling point was features that dedicated fitness trackers had for serious weekend warriors, such as marathon battery life and a bigger screen.
Apple could pull the same move with its headset. Even if the first is expensive and doesn’t sell well, Apple is already planning future versions at lower prices and higher volumes, according to Kuo.
Analysts don’t expect Apple’s headset to turn into a significant source of revenue immediately, but they believe Apple is dipping a toe into a market that could one day be worth billions.
“By 2030, I believe the wearables/glasses segment could account for 10% of Apple’s sales (assuming they don’t release a car), a similar size business as Mac and iPad are today,” said Gene Munster, founder of Deepwater Asset Management, in an email.
A logo hangs on the building of the Beijing branch of Semiconductor Manufacturing International Corporation (SMIC) on December 4, 2020 in Beijing, China.
Vcg | Visual China Group | Getty Images
Shares of Semiconductor Manufacturing International Corporation, China’s largest contract chip maker, fell nearly 7% Friday after its first-quarter earnings missed estimates.
After trading on Thursday, the company reported a first-quarter revenue of $2.24 billion, up about 28% from a year earlier. Meanwhile, profit attributable to shareholders surged 162% year on year to $188 million.
However, both figures missed LSEG mean estimates of $2.34 billion in revenue and $225.1 million in net income, as well as the company’s own forecasts.
During an earnings call Friday, an SMIC representative said the earnings missed original guidance due to “production fluctuations” which sent blended average selling prices falling. This impact is expected to extend into the second quarter, they added.
For the current quarter, the chipmaker forecasted revenue to fall 4% to 6% sequentially. Gross margin is also expected to fall within the range of 18% to 20%, compared to 22.5% in the first quarter.
Still, the first quarter saw SMIC’s wafer shipments increase by 15% from the previous quarter and by about 28% year-on-year.
In the earnings call, SMIC attributed that growth to customer shipment pull in, brought by changes in geopolitics and increased demand driven by government policies such as domestic trade-in programs and consumption subsidies.
In another positive sign for the company, its first-quarter capacity utilization— the percentage of total available manufacturing capacity that is being used at any given time— reached 89.6%, up 4.1% quarter on quarter.
“SMIC’s nearly 90% utilization rate reflects strong domestic demand for semiconductors, likely driven by smartphone and consumer electronics production,” said Ray Wang, a Washington-based semiconductor and technology analyst, adding that the demand was also reflected in the company’s strong quarterly revenue growth.
Meanwhile, the company said in the earnings call that it is “currently in an important period of capacity construction, roll out, and continuously increasing market share.”
However, SMIC’s first-quarter research and development spending decreased to $148.9 million, down from $217 million in the previous quarter.
Amid increased demand, it will be crucial for SMIC to continue ramping up their capacity, Simon Chen, principal analyst of semiconductor manufacturing at Informa Tech told CNBC.
SMIC generates most of its revenue from older-generation semiconductors, often referred to as “mature-node” or “legacy” chips, which are commonly found in consumer electronics and industrial equipment.
The state-backed chipmaker is critical to Beijing’s ambitions to build a self-sufficient semiconductor supply chain, with the government pumping billions into such efforts. Over 84% of its first-quarter revenue was derived from customers in China.
“The localization transformation of the supply chain has been strengthened, and more manufacturing demand has shifted back domestically,” a representative said Friday.
However, chip analysts say the chipmaker’s ability to increase capacity in advance chips — used in applications that demand higher levels of computing performance and efficiency at higher yields — is limited.
This is due to U.S.-led export controls, which prevent it from accessing some of the world’s most advanced chip-making equipment from the Netherlands-based ASML.
Nevertheless, the chipmaker appears to be making some breakthroughs. Advanced chips manufactured by SMIC have reportedly appeared in various Huawei products, notably in the Mate 60 Pro smartphone and some AI processors.
In the earnings call, the company also said it would closely monitor the potential impacts of the U.S.-China trade war on its demand, noting a lack of visibility for the second half of the year.
Phelix Lee, an equity analyst for Morningstar focused on semiconductors, told CNBC that the impacts of U.S. tariffs on SMIC are limited due to most of its revenue coming from Chinese customers.
While U.S. customers make up about 8-15% of revenue on a quarterly basis, the chips usually remain and are consumed in Chinese products and end users, he said.
“There could be some disruption to chemical, gas, and equipment supply; but the firm is working on alternatives in China and other non-U.S. regions,” he added.
SMIC’s Hong Kong-listed shares have gained over 32.23% year-to-date.
Close-up of a hand holding a cellphone displaying the Amazon Pharmacy system, Lafayette, California, September 15, 2021.
Smith Collection | Gado | Getty Images
Amazon is expanding its online pharmacy to fill prescription pet medications, the company announced Thursday.
The company said it has added “hundreds of commonly prescribed pet medications” to its U.S. site, ranging from flea and tick solutions to treatments for chronic conditions.
Prescriptions are purchased via Amazon’s storefront and must be approved by a veterinarian. Online pet pharmacy Vetsource will oversee the dispensing and delivery of medications, said Amazon, adding that items are typically delivered within two to six days.
Amazon launched its digital drugstore in 2020 with the added perk of discounts and free delivery for Prime members. The company has been working to speed up prescription shipments over the past year, bringing same-day delivery to a handful of U.S. cities. Last October, Amazon set a goal to make speedy medicine delivery available in nearly half of the U.S. in 2025.
The new pet medication offerings puts Amazon into more direct competition with online pet pharmacy Chewy, as well as Walmart, which offers pet prescription delivery.
Amazon Pharmacy is part of the company’s growing stable of healthcare offerings, which also includes One Medical, the primary care provider it acquired for roughly $3.9 billion in July 2022. Amazon’s online pharmacy was born out of the company’s 2018 acquisition of online pharmacy PillPack.
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