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Apple Immersing Into Virtual Reality


AAPL, Apple Immersing Into Virtual Reality VR AR

We look at Apple's real potential to reinvent Virtual Reality.

Released on Monday, December 10, 2018, 1:00 PM ET
by Email Russ UrbanContact SpeculatingStocks

Pittsburgh, PA (SpeculatingStocks) - Virtual reality and augmented reality could take Apple to the $2 trillion market cap level. Apple (NASDAQ:AAPL) can make it happen with a headset device that immerses users into a virtual world without motion sickness. AAPL stock has fallen from a market cap of over $1 trillion to under $800 million. The drop in Apple’s market cap is due to potential iPhone sales weakness in the coming quarters. All of a sudden it seems like the whole world is questioning Apple’s future. Two words: complete overreaction. The market must understand that Apple has been planning for iPhone weakness for years. This is a company that follows the Steve Jobs motto of focus, and it’s true that the iPhone has been its cash cow, but soon it will be time for a new cash cow. The technology cycle will spin to peak virtual reality (VR) and it’s less exciting, but more practical cousin augmented reality (AR).

Apple’s Learning Curve Concerning Virtual Reality

The learning curve to enter the virtual reality industry would normally be massive, but not for Apple with their ability to plan far into the future and spread out the learning curve. The company has had years to analyze the failures by other companies in the virtual and augmented reality industry. Mass-market entries into virtual reality by Facebook (NASDAQ:FB) and Samsung (OTC:SSNLF) have failed for all intents and purposes by not having iPhone-like success yet. That’s a problem for these companies. The Oculus Rift by Facebook and the Gear by Samsung are fascinating, but neither have controlled the market. Google (NASDAQ:GOOG) meanwhile has made a half-hearted attempt at virtual reality through Google Cardboard. Both iPhones and Android phones work with Google Cardboard, they can be slipped into the cardboard container, but it is a rudimentary form of virtual reality. Other competitors in the VR space include PlayStation VR, HTC Vive, and Microsoft’s (NASDAQ:MSFT) Hololens.

Technical failures in the virtual reality space have been such that Facebook recommends a 10 to 15 minute break for every 30 minutes that a user is within the Oculus Rift headset. That just won’t cut it, and Apple will surely create a product that doesn’t have such an issue because they want the product to be usable throughout the day. Virtual reality takes both hardware and software working in synergy to solve the problems technical problems with VR such as its negative effect on the vestibular system causing motion sickness in 25% to 40% of individuals. This motion sickness, nausea issue has to be solved and will be solved, and whichever company solves it will take over the virtual reality market. Guess what? Apple has filed for a VR patent looking to solve motion sickness within the realm of virtual reality. AAPL understands the singular issue that is holding virtual reality back from it becoming mainstream. Apple’s version of virtual reality would surely have new technology that doesn’t exist yet on the market and it’s likely to already be covered by a patent pending, or new patents at launch. An Apple Virtual Reality headset could even tie into a refreshed version of their HomePod Smart Speaker device.

Rumors Related to Apple’s Entry into Virtual Reality

Rumors currently are that Apple will be coming out with both augmented and virtual reality solutions and that the company is very aggressively working on such. Apple’s timeline for release of VR/AR is said to be similarly aggressive and likely even more so with weakness currently occurring in the smart phone market. The tech industry as a whole will likely find a new growth market in VR/AR. Tech desperately needs a new growth area with the smart phone industry being fully matured. Apple has shown in the past its ability to lay in wait and pick apart (and reinvent) competitor products, all while designing a full solution to win out and take over the market. Reinventing burgeoning technology is exactly what Apple does and why it is the #1 most profitable company in the world. Apple is also working with a major gaming platform brand in Valve to bring Steam VR to Macs. It certainly all seems like a real world test drive for bigger plans to come down the road. Apple doesn’t build just cool products -- they build cool products at the right time in the tech cycle. Timing is everything in tech.

Apple has timing down to a science and appears poised to take over the virtual reality market once their VR/AR product(s) are fine-tuned; whether that time is next year, 2019, or 2020. Google Glass is an augmented reality invention that was not well timed. The next decade, 2020-2030, could be the decade of virtual reality and likely extend to two decades through 2040. Virtual reality and augmented reality, and its uses will end up being a massive market in both the short and long run.

Remember, Gordon Gekko holding the big cell phone in the movie Wall Street? That was 1987 when cell phones were the size of a baseball glove. Apple won that market long-term when it launched the iPhone 20 years later, in 2007. As for the timeline with virtual reality, America was introduced to mainstream virtual reality through the movie "The Lawnmower Man" in 1992. This year, the movie Ready Player One took the VR craze to the next level. The appetite by the consuming public for a virtual reality solution that is highly functional is at an all-time high. AAPL is just the company to make it virtual reality happen… finally. Who couldn’t imagine the late Steve Jobs presenting a virtual reality product to the masses? It would be an unbelievable presentation and reality distortion field.

Virtual Reality Matches Apple’s Strengths

AAPL loves highly profitable, high margin products with synergies that match its current strengths including in their supply chain, workforce, developer ecosystem, and years of experience engineering semiconductor chips and hardware miniaturization. Virtual reality combines all of the above strengths in that it is a wearable, a screen, miniaturized hardware, and software all combined into one. Not to mention the innovation it takes to conquer a new industry such as virtual and augmented reality. The Apple Watch may seem like an unfocused flop by the company, but it is a wearable and it is miniaturized technology, and is valuable experienced gained by Apple. Apple is extremely tactical and every move that it makes, the company makes for a reason. Much like how Apple reinvented cell phones by leaps and bounds with the iPhone, they will be the company to reinvent poorly-adopted and engineered virtual reality. The bar has been set by visionaries in the virtual reality space over the last several years. Much like Apple was patient with the mobile phone industry, it has shown similar patience with VR/AR solutions.

Widespread Uses for Virtual Reality

Virtual reality technology applications are not always obvious. VR/AR can be put into use in cars to minimize motion sickness caused by self-driving vehicles. Surely, a company like Tesla (NASDAQ:TSLA) is looking into virtual and augmented reality as well. Virtual reality could be used by the healthcare industry to solve all sorts of diseases from mental health conditions to afflictions affecting movement, balance, and coordination. Virtual reality is already being used to train surgeons. According to a recent study, VR experiences improve the knowledge and self-confidence of surgical residents. There will be robust usage of virtual reality, even uses that no one has imagined yet.

Developer Community for Virtual Reality Software

Virtual reality must have an ecosystem of software developers to create the applications that live up to the picture of virtual reality that the consuming public expects. Apple has the synergies in place to make that happen with the App Store. Apple has an ecosystem of developers who are readily excited to code applications for Apple operating systems and any new platform that Apple creates. Developers need a new platform to be excited about as the iOS marketplace for applications has matured with massive barriers to entry. Facebook’s Oculus hasn’t generated the coder excitement necessary to make it take off and certainly hasn’t hit the mass market that a developer expects their software to reach. Speaking of Facebook, their core competency of social networking / community creation could be threatened by Apple’s potential success in virtual and augmented reality. Apple could have a pathway into social networking through virtual reality that could help Apple take social networking market share away from Facebook. Facebook has already thought of the potential of virtual reality and its connection to social networking. It is most likely the reason that Facebook acquired Oculus for $2 billion; however, FB has failed at mass-virtual reality adoption so far because Oculus is far from mainstream.

Success at VR will take a pure focus and require a blending of expertise across all sorts of new technology. Virtual reality is a complex problem to solve from both a hardware and software perspective. Facebook does not have enough experience with hardware, and just as much at issue is that they did not have a major launch event for Oculus. The excitement was already out of the bag. Apple brings magic to their launch presentations that wow the consuming public, globally. Facebook lacks the experience in the smartphone hardware industry, a strength for Apple. Facebook acquired Oculus, but hasn’t built the necessary parts around it. It’s basically a side project to Facebook, and lacks focus. Apple has advantages such as creating its own custom semiconductor chips. Apple has been using its semiconductor chips in their products, creating competitive advantages that other companies do not have. It was reported that Facebook may design its own chips, which would be a smart move, but FB is still very much behind in the hardware game. Apple filed VR/AR patents as far back as 2006 including a patent for a head-mounted display system. From a software perspective, Facebook is also behind in creating an ecosystem of coders. Apple has been thinking about augmented and virtual reality for quite a while. The Apple App Store is such an understated part of the Apple ecosystem. Steve Jobs valued the App Store highly. Apps will make Apple’s virtual reality solution just as they helped make the iPhone a big success.

Current Design Chief at Apple, Jony Ive, describes "Focus" as taught to him by Steve Jobs:

Focus will help set Apple apart from its competitors in virtual reality!

Potential of Apple Moving into Augmented Reality

Apple’s CEO, Tim Cook, has stated that augmented reality could potentially be as important as the iPhone. It could be even bigger than the iPhone because AR and VR fit together perfectly. Apple has dabbled in AR with their ARKit to get software developers to dive head first into augmented reality development. There is already a specialized base of augmented reality programmers due to the ARKit already being released into the wild. Of course, Apple doesn’t want to make it too obvious, but it’s pretty clear on what is going on at this point. Apple is certainly highly interested in VR/AR.

Apple VR/AR Headset Device Rumors

There are rumors that a VR/AR headset by Apple would be standalone, meaning it would have its own operating system and powerful, miniaturized chips. The miniaturization of a virtual reality processing chip built into an Apple VR/AR headset could go as small as a 5-nanometer processor, compared to the chip in the iPhone X that is 10-nanometers. Chip miniaturization is a major advantage that Apple has against other companies trying to compete in the VR/AR headset space. The device wouldn’t need to be connected to a computer. It would be surprising if the headset needed to connect to anything except a wireless Internet connection because Apple has the technology to make it happen through their years of experience with the iPhone. A standalone unit would also create headaches for competitors, putting them even further behind an Apple best-selling product in VR/AR.

The iOS operating system was highly important to the success of the iPhone and a similarly well done operating system for an Apple Virtual Reality headset would fortify its position in augmented and virtual reality. Apple’s VR/AR operating system may come to be known as the "rOS" or reality operating system.

AAPL is the best at display technology. Apple was the first to bring Retina technology to displays, and is now rumored to be working on an 8K display, or even an amazing 16K display. The 8K display could also make virtual reality experiences appear more lifelike and minimize the negative effects on the vestibular system. An immersive experience is integral to virtual reality. The user must forget that they are in virtual reality to feel immersion. Immersion in virtual reality is when the user perceives that they are physically present in that virtual world. Apple has gained the experience from semi-immersing users into their iPhones, so much so that iPhone users have become addicted. Of course, this is a different kind of immersion, but it is experience and success gained nonetheless with hooking users. Time spent by users in virtual reality could be at a scary high level if Apple succeeds at full immersion through a virtual reality headset. Text-book full immersion long-term will take all 5 senses coming into play including sight, sound, touch, smell, and taste.

Virtual Reality / Augmented Reality Market Size

Augmented and virtual reality will have massive profit potential not only through the obvious applications, but by use at live sporting events with stats overlaying the event as it progresses. VR/AR will have the same applications for concerts and movie premieres, even award shows such as the Grammy’s and Emmy’s. Video games will come alive more than ever and immerse users into an addictive experience never felt before. Revenue in all of these VR/AR arenas will take off exponentially from 2020 – 2025. There will be significant revenue and profits to be made from both the hardware and software sides like Apple has experienced with the iPhone. According to a report by P&S Market Research published in June of 2018, the global VR/AR market combined is expected to reach $94.4 billion by 2023. We believe that if Apple enters the VR/AR market, that this industry size number could go much, much higher.

How Serious is Apple About Virtual and Augmented Reality?

How seriously of a look has Apple been taking towards augmented and virtual reality? has stated that Apple is rumored to have a secret team of hundreds of employees working on virtual and augment reality projects. We wouldn’t be surprised if it’s more than hundreds working on VR/AR at Apple. The number could ramp up into the thousands fairly quickly. Rumors are that Apple’s focus on VR/AR has ramped up over the last two years, which means that Apple’s belief in the technology has increased and that they’re likely having in-house success with the technology. The feedback from their in-house VR/AR team must be positive.

Acquisitions by Apple in the VR/AR Industry

One of the biggest clues to Apple’s mass involvement in augmented and virtual reality has been their acquisitions in the space. In 2015, Apple acquired augmented reality and computer vision company Metaio. In 2017, Vyrvana was acquired by Apple. Vyrvana created an augmented reality headset that had rave reviews, but never shipped. In 2018, Apple acquired Akonia Holographics, a company that focuses on building lenses for AR smart glasses. Other acquisitions by Apple in the VR/AR space include PrimeSense, Faceshift, Emotient, Flyby Media, and RealFace. These acquisitions by Apple show a clear drive by the company to lay a virtual world on top of the real world.

Synergies Between Virtual Reality and Augmented Reality

It may seem like there is a divisive battle shaping up between augmented and virtual reality, but the two will go hand in hand. Augmented reality may be easier to solve at first and be a stepping stone to a full and seamless virtual reality experience in the long run. Think of how the iPod came before the iPhone. The iPod helped Apple solve the puzzle in develop the more complicated device in the iPhone. This is the brilliance of Apple. Success of AR applications such as Pokemon Go and others are a precursor to other major successes down the road in augmented reality. Companies like Apple have surely studied the success of Pokemon Go and are ready to use that knowledge to apply software to their VR/AR hardware. Conquering augmented reality would be a huge step in conquering the more challenging virtual reality. Augmented reality can be seen as a stepping stone for both converting the minds of consumers to adopt virtual reality as well as for Apple engineers to overcome the challenging technical difficulties that come with virtual reality.

Apple Hiring Virtual Reality and Augmented Reality Employees

In late July, Apple hired a developer of a popular painting app used on VR headsets. The developer Apple hired is Sterling Crispin, who is the developer behind 'Cyber Paint'. The VR app known as Cyber Paint is available on the HTC Vive, Oculus, and Google Day Dream. This is a clear sign that Apple will be building its own essential apps package for AR and VR much in the way Apple has its essential apps on iOS. On his LinkedIn page, Crispin is known as a "prototyping researcher." Other hires by Apple include their hiring away of Nick Thompson and Bennett Wilburn from Microsoft. Nick Thompson worked on the HoloLens audio hardware and Bennett Wilburn focused on machine learning technology for human activity recognition. These hires by Apple, among several other VR/AR hires, are just a few more examples of how serious Apple is when it comes to augmented and virtual reality. Apple even sent employees to Stanford’s Virtual Human Interaction Lab. This is the same lab that Facebook CEO, Mark Zuckerberg visited before acquiring Oculus.

Apple’s Entry into Virtual Reality and Augmented Reality Could Come by Mid-2020

Entry into both augmented reality and virtual reality industries by Apple seems imminent, possibly June 2019 or sometime before or around June 2020. It’s rare that a company has the opportunity to own the future again, and again, and again, three times, but Apple has that chance with augmented and virtual reality. Apple did it with the Mac, then the iPhone, and has a third opportunity with augmented and virtual reality. Augmented and virtual reality are the future. Apple will likely be steering that future.

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⇒ About the Author of this News Article:

Russ Urban has been following the stock market for over 18 years and holds a Bachelor's Degree in Finance. From a young age, he watched CNBC with a keen eye and became obsessed with the market and technology. Russ Urban has written hundreds of stock articles and stock picks through the years since he founded, Inc. in 2006 and holds strong faith in the power of the markets and capitalism.

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