Apple has the design, chip, and know-how to ship high-end headphones at scale.
Rumors of mixed reality headsets from Apple Inc. spread for many years.
Now, they become very real.
Last week, Bloomberg’s Mark Gurman reported that Apple showed off an AR/VR (augmented reality) device to its board and has a “consumer release planned”. plan for 2023.” Whenever headphones come out, Apple is well positioned to win the mixed reality war.
The leading competitor in this area is Meta Platforms Inc. (aka the artist formerly known as Facebook). CEO Mark Zuckerberg changed the company’s name and pledged to spend $10 billion a year to make his vision of a VR-enabled supermarket a reality.
And there’s serious progress: Sales of Meta Quest 2 hit 8.7 million units in 2021, double that of the previous year, and the company owns 80% of the market.
Still, Quest 2’s sales numbers are a drop in the wearable hardware category compared to what Apple can do. According to Apple analyst Neil Cybart, the iPhone maker shipped more than 100 million wearables (Apple Watch, AirPods, and Beats headphones) in 2021, a 4x increase from 2017. Also, don’t forget 233 million iPhones it shipped last year.
No other company can move high-end consumer hardware on Apple’s scale.
In an article from last May, Cybart made the strong case that Apple had built a “decades of leadership in the wearables space” by combining several advantages:
Custom silicon chips: Apple acquired semiconductor company PA Semi in 2008 for $278 million. Since then, the company has rolled out custom chips – often with more performance than alternatives – for its devices: A Series (iPad, iPhone), M Series (Mac), S Series (Watch), W Series (AirPods).
- Design-led product development: Apple has long been a leader in design that fuses design with engineering. When it comes to wearables, combining function and fashion is of the utmost importance. Former Apple exec Jony Ive perfected this approach (according to The Information, Ive consulted with Apple’s headphones, including key details like “battery, device location, etc. imaging and ergonomics”).
- A ready ecosystem: A successful mixed reality headset won’t be a standalone product, especially if it’s meant to interact with the real world. Apple already has solutions for audio requests (AirPods) and hand gestures (AssistiveTouch via Apple Watch). We can expect a pretty seamless integration with the headset.
This experience of building and shipping all this wearable hardware applies directly to headphones.
Unlike Meta, Apple has been very secretive about its mixed reality investment, but we can assume it’s quite large. According to Gurman, Apple has 2,000 employees on its Tech Development Team working on both mixed reality (AR/VR) headsets and standalone AR headsets (unlike fully immersive VR, covered AR) information and digital images on top of the real world”).
Apple has also made a number of AR-related acquisitions in recent years: AR software company Metaio (2015), computer vision company SensoMotoric Instruments (2017), tech startup under hand tracking Vrvana (2017), AR glasses startup Akonia Holographics (2018) and two AR content startups NextVR and Spaces (2020).
It’s not just hardware. In another, Cybart highlights that Apple has rolled out features on the iPhone that can be used in the mixed reality world:
- Memojis: Dynamic digital representations (usually head shots) of an individual.
- FaceTime SharePlay: This feature allows you to listen to music or watch movies with a friend (it will “play a big part in mixed reality as we consume content while simultaneously interacting with friends and family.” family”)
- Text directly in photos: An important way to overlay information on the real world
- Apple Maps: This feature offers AR navigation on iPhone (and will obviously be useful in headsets)
There’s a reason why Apple isn’t messing with its headphones: Consumer devices make up 80% of the company’s revenue, and it’s finding the next success (in comparison, most of Meta’s sales are all ad-based).
One obstacle to Apple’s headphone dominance is price: Its headphones can cost as much as $2,000 (the Quest 2 is available at $299 and $399).
There will also be competition from Microsoft Corp., Alphabet Inc., Snap and Sony Group Corp. But none of these companies can match Apple’s combination of design, cutting-edge hardware, and an already massive ecosystem.
If Apple wins the headphone war, it won’t be the first time the company has entered a category started by someone else – MP3 players, smartphones, smartwatches – and won. win completely.
Trung Phan is the co-host of the No-Investment Advice podcast and writes the SatPost newsletter. He was previously the lead writer for Hustle, a technology newsletter.
