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Apple’s Next Product Frontier: Augmented Reality

Global-AR-Revenues Apple Augmented Reality

Apple’s Next Product Frontier: Augmented Reality

Augmented Reality Summary

The augmented reality and virtual reality market is expected to reach $150B of annual revenue by 2020.
Tech giants including Apple, Intel, Google, Facebook and Microsoft have acquired or invested in various augmented reality IP and manufacturing startups over the past 18 months.

Early mass adoption augmented reality smartglasses for industrial applications will begin to take shape over the next 18 months.
The augmented reality (AR) and virtual reality (VR) markets are expected to reach $150B of annual revenue by 2020. The AR market is a market that is expected to expand rapidly and is simply too much of an emerging growth opportunity for tech giant Apple (NASDAQ:AAPL) to ignore and not partake in.

Apple’s acquisition last week of Metaio, a German-based firm that is one of leading augmented reality software developers, may signal the tech giant’s next product line. Over the next 12 to 18 months, I expect Apple to leverage Metaio’s augmented reality knowledge and enhance the company’s near-term product launches. In the long term, I expect Apple to bring an augmented reality smartglasses product to the market by 2017.

Apple was granted a smartglasses patent in January 2015, and the acquisition of Metaio should improve Apple’s augmented reality bench strength and shorten the time to market.Apple Augmented Reality

The closing of the Metaio transaction means a few things to Apple. Apple is 100% aware of the massive augmented reality market opportunity that is just beginning to take shape and Apple more than likely will launch a product or even possibly acquire an AR product manufacturer in the space over the next few years.

The massive and emerging market opportunity for augmented reality applications consists of two main market segments, consumer and industrial. Within the industrial market, AR applications are currently being evaluated for mass adoption for logistics, first responders, aviation pilots, public safety, medical and military uses.

Logistics giant DHL has also published various studies and participated in pilot programs to validate the value add provided by available augmented reality product offerings. DHL’s augmented reality for logistics pilot program focused on vision picking. During the three-week program, 10 warehouse pickers were equipped with head mounted displays such as Google Glass and VuzixM100 and fulfilled 9,000 orders and picked more than 20,000 items.

DHL reported a 25% improvement in efficiency during the picking process. For a company like DHL that has over 275,000 employees worldwide could realize millions of dollars of annual savings through the adoption of augmented reality smartglasses.

The USPS Inspector General released a 21-page report on April 6th detailing opportunities for the US Post Office to improve efficiencies and reduce costs within its supply chain. The Inspector General’s report referenced DHL’s completed pilot program as validation that augmented reality technology saves money in actual practice and not just in theory.

The USPS research paper lists 10 specific ways in which the Postal Service could apply AR in its operations. One important benefit of AR is the spatial benefits that will allow letter carriers to maximize capacity when loading its trucks by enabling them to visualize the space. Spatial benefits are not just limited to trucks, but can also be applied to equipment within the processing facility, allowing users to maximize space and minimize potential issues. Other benefits outlined in the report include facial recognition, locating packages, performance of truck maintenance, providing urgent updates related to traffic/congestion and critical delivery route information.

Apple Augmented RealityApple Augmented Reality


Google (NASDAQ:GOOG) (NASDAQ:GOOGL) made a well-known public attempt at developing the consumer mass market for smartglasses but failed miserably. Google’s Glass product failed on arrival and the project supporting the first generation of Google Glass was suspended in January 2015. Google’s decision to suspend its Google Glass product was not a result of a collapsing market opportunity, but as a direct result of an ugly and design flawed product.

Apple Augmented RealityThe commercial/industrial use case for smartglasses is moving from developing market into the very early stages of a mass adoption market. Google’s glasses, due to a flawed design, were not able to handle the volume and use within industrial applications. As far as the consumer market is concerned, the glasses were so ugly that users were being referred to as “glassholes”.

According to The Wall Street Journal, Italian Eyewear Maker Luxottica (NYSE:LUX) is working with Google on a new version of Google Glass and Intel (NASDAQ:INTC) with the first product expected to be out between February and March of 2016. By early 2016, smartglasses are expected to become fashionable, and the consumer market will begin to gain some noticeable traction.

Intel has been an active player in the AR space after it missed out on the smartphone era. In January 2015, Intel Corporation took a $24.8m position or 24% stake in video eyewear and smartglasses supplier Vuzix (NASDAQ:VUZI). Other notable acquisitions or investments in the AR space since 2014 include Facebook’s (NASDAQ:FB) $2B purchase of Oculus in July 2014, which is now selling its Gear VR Innovator Edition developmental kit.

In March 2014, Microsoft (NASDAQ:MSFT) paid $150m to buy wearable computer IP from the Osterhout Design Group. In October 2014, Google invested $542m in an augmented reality glasses startup Magic Leap, which just announced the availability of the company’s augmented reality developer platform.

Over the past 18 months, nearly $3 billion of investment seeds have been planted by tech giants to help develop augmented reality product offerings and create a marketplace for the next wave of technological product advancement. The augmented reality space and its estimated $120B annual revenue by 2020 remains virtually untapped by Apple and other tech giants alike, but this is going to change soon.

The augmented reality marketplace is still in the infancy phase of growth and mass market adoption. Investors should expect merger and acquisitions to remain strong in the augmented reality space over the next 18 months as the market takes shape and competitors keep a watchful eye to get a leg up on the competition.

Credits: Matt Margolis, Wall Street Forensics

Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.