Apple: Ready Player Zuckerberg? Player Cook Just Entered The Competition

Summary:

• Apple introduced its AR/VR platform visionOS and the accompanying hardware Vision Pro, which features advanced technology and a content strategy focused on gaming and entertainment.
• The Vision Pro is priced at a premium of $3,499 and will be available for purchase in early 2024, with initial shipment volumes estimated to reach 1-2 million units.
• Apple’s product launch is expected to accelerate competition for the metaverse market, which is estimated to be worth around $5 trillion by 2030.

On Friday 9th, Apple (NASDAQ:AAPL) concluded a game-changing WWDC23, where the tech giant introduced the highly anticipated AR/VR platform (visionOS) and accompanying hardware (Vision Pro). Furthermore, Apple revealed a collection of new/ upgraded hardware products, such as the 15-inch MacBook Air and Mac Pro, as well as a range of upgraded software operating systems and features across its diverse lineup of devices.

In the context of VR/AR, it is worth pointing out that, Apple CEO Tim Cook proclaimed a “new era in spatial computing”, arguing that what the iPhone did for mobile computing, the Vision Pro could do for AR/VR. In that context, Meta Platforms (META) has previously struggled to chase the metaverse, a market that McKinsey estimated at ~$5 trillion by 2030. But the world’s most valuable and beloved consumer brand may have a better springboard to capture commercial traction.

For reference, the graph below is highlights data collected by Google, showing search interest for “Apple Vision Pro” (blue) versus “Meta Quest” (yellow) and “Oculus” (red) during the past five years.

The Vision Pro – What You Need To Know

Apple’s VR/AR headset has been long expected – as the consumer giant has reportedly been working on VR/AR technology for a decade now. And in my opinion, Apple’s product launch of the technology did not disappoint. Here are a few notable highlights.

Impressive Technology

The Apple Vision Pro has a curved OLED panel, micro-LED display custom catadioptric lenses, and integrated dual driver audio pods for an immersive audio experience. As compared to the Meta Quest Pro, the Apple Vision’s higher pixel density supports sharper graphics and (likely) a more immersive and visually appealing experience. While the Meta Quest Pro offers a resolution of 1,920 x 1,800 per eye (approximately 7 million total pixels), the Apple Vision offers 23 million pixels.

Leveraging technology derived from autonomous vehicles, the Vision Pro integrates the M2 and R1 chips for real-time sensor processing. The R1 chip allows simultaneous analysis of data from 12 cameras, 5 sensors, and 6 microphones, enabling seamless interaction.

Content Strategy

Gaming and entertainment will likely be at the core of Apple’s VR/ AR strategy, as indicated by the WWDC23 communication: In addition to 100 Apple Arcade games, Apple Vision will also leverage Disney+ (notably, Disney (DIS) CEO Bob Iger joined Tim Cook on stage to share the announcement). Furthermore, the device is anticipated to debut with an extensive range of work/creativity applications, including most of the Microsoft productivity software suite (Excel, PowerPoint, Word, etc.), as well as Adobe Lightroom, et al.

Honestly, I believe Meta is a bit ahead in terms of content and gaming, as the social media giant has quite a few years of head start in building in-house development studios for games and other content. However, Apple’s joint announcement with Disney is very interesting, in my opinion, and likely foreshadows a deeper collaboration of the entertainment and tech giant, which could bring Apple’s content strategy on par with Meta.

In that context, I have previously argued that Disney should/ will likely push into the metaverse to find new growth opportunities. Bob Iger is definitely receptive to exploring possibilities within the metaverse. It is worth highlighting that Iger has already committed his personal funds to support the growth of Genies, a metaverse startup that specializes in developing an advanced avatar ecosystem. Iger said: (emphasis added)

I’ve always been drawn to the intersection between technology and art, and Genies provides unique and compelling opportunities to harness the power of that combination to enable new forms of creativity, expression and communication.

He also added that:

You may have an avatar, but you’ll go all over the place. And I think that it’s likely to be developed into something real as an experience.

User Friendliness

When using the device, navigating between different applications is remarkably intuitive, thanks to the incorporation of eye and hand-tracking technology. User input is primarily based on eye, hand, and voice gestures, with the added feature of displaying the user’s eyes when someone is nearby, supporting natural conversation/ interaction.

The launchpad for the Apple Vision Pro is a home screen similar to the iPhone interface, and precise eye tracking eliminates the need for external controllers. To interact with specific elements, one must only glance at a photo/ icon and then perform a pinching gesture to simulate a “double-click” action. The device enables seamless photo browsing through swiping gestures and allows zooming in as if interacting with a large smartphone projected in front of your eyes. The Quest Pro, on the other hand, requires to work with a set of physical motion controllers to navigate applications.

One notable feature of the device is its ability to effortlessly transition between virtual reality and augmented reality. This flexibility is made possible through an Apple Watch-like dial, which provides manual control to fade between the two modes. Positioned on the top of the mixed reality headset, a crown allows you to easily adjust and fine-tune your level of immersion without the need to navigate through menus or settings. Additionally, in certain scenarios, the device automatically adjusts the mode without user intervention. For instance, if a person stands next to you, simply looking at them will trigger their image to gradually appear and become clearer over time. For context, in VR mode users are fully immersed in a digital world, while in AR mode virtual images are overlaid onto the real surroundings.

Price & Availability

The Vision Pro’s is priced at a premium price tag of $3,499, indicating Apple’s willingness to gamble that the tech giant’s brand value will offset product skepticism about the technological value of a VR headset. For reference, when the Meta Quest Pro was initially released last fall at a price of $1,500, it seemed relatively expensive in comparison to previous Quest headsets. And due to a lukewarm reception and mixed reviews, Meta needed to make the decision to lower the price to $1,000.

With that frame of reference, I personally had estimated the average selling price of the Vision Pro to range from $2,000 to $2,500. But of course, if a company can get away with charging premium prices, it is Apple.

The Apple Vision Pro will be available for purchase in early 2024, with the commercialization initially limited to the U.S. That said, I project initial shipment volumes for FY 2024 to be quite modest, potentially reaching 1-2 million units. This limited quantity reflects the higher price point, a lack of a “killer app” pull, and a somewhat controlled launch strategy, as the commercialization of the device will be initially restricted to the U.S.

Other WWDC23 Takeaways

A Note On AI

Apple is playing catch-up with other tech giants on AI: the consumer company has indicated ambitions to integrate AI/ML technologies into its devices. With that frame of reference, the incorporation of neural language processing extends beyond Siri’s capabilities and can likely be leveraged in various applications, such as Adaptive Audio, Dictation, and Journal.

iOS 17 & macOS Sonoma

The latest iOS updates introduce several notable enhancements, such as personalized contact posters and additional features within FaceTime, including video mail. Additionally, improvements have been made to Messages and AirDrop. On the macOS front, a significant update is the introduction of a new game porting toolkit, specifically designed to assist developers in porting a wider range of video game titles to the Mac platform, making them more accessible to users.

Updates to the Mac Collection

Apple has unveiled an addition to the Mac product lineup, introducing a new 15-inch MacBook Air model, powered by the anticipated M2 chipset (price point of $1.3K). In that context, the M2 chipset is expected to deliver a notable performance boost, estimated to be twelve times faster than the most powerful Intel-based Mac currently available. In addition to this announcement, Apple also revealed plans to incorporate the M2 Ultra chipset into both the updated Mac Studio and Mac Pro models.

Conclusion

In conclusion, the Apple Vision Pro showcase marks the end of a long-awaited product launch, highlighting impressive technology and a commitment to make the metaverse story work. In the short-term, challenges related to pricing, availability, and the absence of a standout application may limit the Vision Pro’s initial market penetration. Nonetheless, the device holds promise for professional and entertainment use cases and will likely accelerate the competition for the ~$5 trillion (by 2030) market opportunity. Or in other words, it is a validation of Zuckerberg’s vision.

As a function of valuation, I remain ‘Buy’ rated on Meta Platforms stock, and ‘Hold’ rated on Apple.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

not financial advise

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