Apple’s XR Investment Is An Insurance Policy

Apple Vision Pro (AVP) is an engineering masterpiece. It marks a significant advance in consumer electronics and is the most complex device ever made, far outstripping competitors in terms of technical competency. Apple starts to ship the headset today, 2nd Feb 2024. AVP swiftly sold out once pre-orders began on January 19, starting at $3,499 for the 256GB memory variant, seven times what the 128GB version of the Meta Quest 3 costs. Whether the few hundred thousand units in initial volumes are followed by a sustained demand will demonstrate the device’s appeal, or a lack thereof, beyond developers, early adopters and Apple’s die-hard fans. 

Apple positions Vision Pro not just as a headset, but as a new spatial computing platform with its own operating system, user interface paradigm and digital content delivery. This strategic shift aims to move the discourse beyond mere headset competition and towards competition between entire ecosystems, signalling Apple’s long-term commitment to this new product line. One surely needs to believe in Apple’s long-term commitment since the use cases demonstrated by Apple were generic and interesting at best. Showcasing familiar experiences like watching movies, working on large virtual screens, and teleconferencing raises questions about whether AVP is a solution seeking a problem (though this criticism could be applied to many VR devices). 

While the over 600 apps developed for Vision Pro add to the 1 million+ compatible App Store apps, the lack of “killer apps” remains a concern. Despite touting entertainment as a major attraction with partnerships including with Disney, Apple suffered setbacks with popular video and audio platforms like Netflix, YouTube, and Spotify choosing not to launch dedicated apps. Without compelling use cases or major first-party apps, Apple’s launch of AVP seems predicated on hope. Apple appears to rely on developers creating the “killer apps” that will replicate the success of the iPhone and iPad App Store. Even if Vision Pro doesn’t gain mass adoption, Apple’s entry into the segment has generated popular awareness regarding the eXtended Reality (XR) industry. 

Apple, we believe, is essentially using Vision Pro as an insurance policy. iPhone is the core of Apple’s almost $3-trillion market cap (at the time of writing). For years, speculation has pointed to augmented reality devices as the potential successor to smartphones as our primary interface with digital life. So far, the XR market has been disappointing – generating a few 10s of millions of unit sales but limited consistent usage outside niche enterprise applications. Furthermore, the technical challenge of making true augmented reality glasses has proven to be beyond the capabilities of even the most technically gifted companies. Therefore, the slow-developing XR industry doesn’t pose an immediate threat to Apple. 

For Apple, the worst-case scenario would be a booming XR market with no Apple product in the game. Even if the market fails to materialize despite Apple’s multi-billion-dollar investment in XR development, the cost, while sizeable, would not significantly impact its cash reserves. 

So, Apple made the logical choice to invest in creating the Apple Vision Pro. In the process, it has amassed an impressive patent portfolio that strengthens its position. 

Should the XR market finally take off, Apple will be ideally positioned to capitalize on the opportunity. However, even if it remains a niche market, Apple has secured its place with a product that will serve as a benchmark for future competitors. 

Counterpoint research is a young and fast growing research firm covering analysis of the tech industry. Coverage areas are connected devices, digital consumer goods, software & applications and other adjacent topics. We provide syndicated research reports as well as tailored. Our seminars and workshops for companies and institutions are popular and available on demand. Consulting and customized work on the above topics is provided for high precision projects.

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