My tempered Apple Reality AR/VR HMD WWDC 2023 reveal expectations

With Apple's Worldwide Developers Conference 2023 set to kickoff tomorrow, I figured it might be a good time to compile all of the things that should be expected of the company's long-awaited Reality VR/AR headset reveal. Please take a look.

Apple's acquisitions in the AR/VR space

Apple acquired PrimeSense in 2013, the technology that powers FaceID was also featured in Xbox Kinect, and features depth-sensing camera tech that could come in handy in an augmented reality interface. In 2015, Apple added Metaio to its AR portfolio. The company was known for making mobile AR software. Computer vision technology company Flyby Media was acquired by Apple in 2016. In 2017, Apple acquired passthrough VR HMD company Vrvana and eye-tracking firm SensoMotoric Instruments. The Cupertino tech behemoth wasn't done in 2018, adding AR lens company Akonia Holographics to a very large portfolio of AR/VR companies. More recently, Apple acquired VR sports broadcaster NextVR and VR videoconferencing startup Spaces in 2020.

Those are just the acquisitions that were made public. Apple is known for being as secretive as possible when building new products, and there are rumors of other deals that have been made in the mixed reality space. Spanish passthrough AR optics company Limbak was bought by "a large US company" last year, leading many speculators to suspect that Apple may have acquired the tech firm last year.

Apple's mixed reality patent portfolio

Outside of just buying their way into the MR space, there are a lot of Apple patents and trademarks that have led this to be one of the most leaked product reveals in the company's history. Pieced together, these patents paint a very interesting picture that could provide some hints at what to expect from the Apple Reality user experience.

One Apple patent that I have been somewhat obsessed with for years is for a holographic retinal projector. The company appears to have tweaked the patent and repurposed the idea into a head-mounted display (HMD) form factor.

A European patent filing for a "Continuity" feature for the HMD surfaced earlier this year, and it sounds like it could open the door for never-before-seen features from an AR/VR headset. Apple is well-known for a proprietary intertwining of the company's product ecosystem, and it does appear that the company intends for Reality HMDs to interact with existing products like iPhone and Apple Watch in ways that no other major VR companies have done.

As for human interface devices (controllers) for the HMD, Apple has plenty of hand-tracking patents, but the company has several patents describing wearable rings that could be used in conjunction with the Reality headset.

One more patent that seems to signal where the software experience is heading describes using drones and backpacks armed with 3D sensors to capture maps. Apple Maps may have struggled at launch, but patents seem to indicate that Apple has not given up on competing against Google Maps.

Apple Reality HMD will launch with a decent suite of first party software

Putting together the patents and the acquisitions described above can help construct some potential software experiences. Many Apple platforms focus on connecting people, and it seems that the Reality HMDs will feature some sort of FaceTime equivalent. We have seen countless attempts at this sort of experience from Facebook and other companies, and Apple already has Memoji avatars that could take a user's place in a VR chatroom. While FaceTime is a very useful service on other Apple devices, it will be interesting to see if the VR chat platform will be branded something different.

As I mentioned above, Apple Maps just won't go away, and the company is positioning the service to be a killer AR app. Imagine walking through a crowded subway that you have never been to with a nice AR waypoint and path laid out in front of you. The work Apple has been doing on bike lanes, public transit, and roadways should eventually lead to a better Apple Maps experience for all users, but the focus on pedestrian-friendly mapping could be a key differentiator for the app.

Apple Reality could also be a sneaky way for the Cupertino tech behemoth to stake a larger claim in live sports broadcasting. NextVR is an innovator in live VR sports broadcasting and that technology could even be applied to concerts. There are other experiences in VR that try to bring music to life in new ways, but unleashing the Apple Music behemoth in VR could be another game changer. It will not be that surprising if most of the first party launch apps for Apple Reality will focus on more passive consumption of content as opposed to intensely immersive gaming experiences.  

One other component of the Apple Reality software experience that could be very cool is the implementation of the "Continuity" feature. This feature could be a wow moment during the WWDC 23 demonstration. The combination of high quality passthrough with high resolution optics could open the door for iPhone, Mac, iPad, and Apple Watch products to interact with Apple Reality HMDs in ways not before seen. Sure, there are plenty of virtual desktop demos, but I am very interested in seeing what kind of mixed reality magic will be unlocked by the Apple ecosystem of products.

Another software feature of Apple Reality HMDs could be a new take on point-of-view capture. GoPro really set the bar for this type of video capture, and we have seen Snapchat and Facebook attempt to release products in this realm, but Apple may have the right sauce for this user experience. With excellent photo sensors being used in a lot of existing products, as well as the acquisitions made in the space, Apple Reality may unlock a door for a new realm of AR/VR content created by users and viewable inside of the headset. 

Apple launched iPhone with several game-changing software experiences, and it seems like the company is ready to do that again with the Reality first party software suite.

Rumors

Apple Reality is the most leaked product in the history of the company. Just last week, reports began to swirl across the Internet describing some very high-end specifications for the product. Display Supply Chain Analyst Ross Young claims that Apple Reality will feature Micro OLED lenses that are 1.41 inches in diagonal, with 4000 PPI and over 5000 nits of brightness. If these specs are to be believed, Apple Reality will boast some of the most impressive visuals in a VR/AR headset. And that will not be cheap. Many reports have said that the HMD could cost as much as $3,000, but that could be the price of the dev kit.

Not all rumors surrounding this product release are good. According to a former Apple engineer that was working on the project, the HMD has been postponed multiple times over the past few years. Many at Apple view this ski goggle form factor as version one of the product category, but the design team reportedly pushed to delay release until a lightweight pair of AR glasses were feasible. While that AR product does sound pretty swell, Apple's business-minded team members have pushed for a more traditional MR headset to be released this year. As an Apple fan for many decades, it is troubling to hear that the design team was not sold on shipping this first iteration of the Reality HMD. 

"Don't worry, be crappy," as former Apple evangelist Guy Kawasaki once said about shipping a new product category. It appears that the top of Apple's org chart feels that way and is comfortable shipping the Reality HMD in its current state.

Reasons for concern

As a long-time shareholder and fan of Apple, there are a few reasons to be concerned about the upcoming launch of the Reality HMD. The most concerning data point is that Apple's design team has no leader. Jony Ive, Apple's former head of the design team, left in 2019, with VP of Industrial Design Evans Hankey taking the reins. Hankey announced she would be leaving the company last fall, and the company didn't replace her role. Apple has gone from having Steve Jobs and Jony Ive in charge of the design team to having no leader, with all of the team now reporting directly to COO Jeff Williams. 

Based on the rumors that Apple's design team didn't want to ship the current ski goggle form factor of the Reality HMD, it is troubling that Hankey would leave before the product reveal. This is the biggest product reveal for Apple since the death of Steve Jobs, and it is very concerning to see the company make concessions on the design side in favor of shipping something faster. Apple wasn't the first to ship an MP3 player, tablet, or smartphone and they aren't the first to enter this MR space either. So why hurry?

Facebook (META) has lost tens of billions of dollars in the VR space, and those losses appear to be accelerating. How will Apple be able to break this trend? If the product is actually $3,000, I just don't see how it will positively move the needle for the company. 

It's not smart to bet against Apple, but I am certainly more worried for this product reveal than I have been in the nearly 12 years since the death of Steve Jobs. The amount of leaks surrounding this product is a sign of a different era at Apple, and it will be hard to surprise and delight fans on Monday like Steve Jobs did on that fateful day in January 2007 when iPhone changed the world forever. 

Apple tends to make products for everyone, and it is hard to see what the addressable market for an expensive mixed reality headset will be early on. If the company sells a million units at that rumored $3,000 price point, that wouldn't even make up 1% of Apple's annual revenue. With the stock sitting within dollars of its all-time high share price, it might make more sense to let WWDC 23's keynote come and go before buying or selling into the hype.

This is a pivotal moment in Tim Cook's tenure as CEO of the company, and while there are reasons to be concerned ahead of the reveal, it's always exciting to see Apple enter a new product category.

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long Apple via AAPL shares 

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.