Apple’s Inevitable XR Hardware Comes with Doubts around Release and the Company’s Role in the XR Market

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By Eric Abbruzzese | 2Q 2023 | IN-6901

Apple has long been seen as the most impactful potential player in the augmented and virtual reality market. While actual confirmation of hardware and platform plans is expected this year, early reports on the device hint at a confusing go-to-market strategy and roadmap for the company.

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Apple Is Thinking Differently


After years of silent Research and Development (R&D), Apple is finally approaching a launch window for its first Extended Reality (XR) hardware product. The device was recently demonstrated to senior employees internally, and supposedly, the reception was timid, with questions around timing of the device’s  release and overall maturity of the XR ecosystem.

While nothing is official yet from the company, expectations are set on a high-end Virtual Reality (VR) headset with passthrough capability, targeting enterprise, developer, and possibly prosumer audiences with a price point around US$3,000. If these details remain true, the device would most closely compete with the Meta Quest Pro, and possibly even the Mixed Reality (MR) Microsoft HoloLens and Magic Leap 2 devices, depending on the quality of passthrough—true see-through displays with Mixed Reality (MR) devices versus opaque screens with real-time camera passthrough can achieve a similar user experience, but in very different ways. The high price eliminates the large majority of potential consumer buyers, so it can be assumed that outside of developers, Apple will happily sell to enterprises, even if not directly targeting them.

Power to Sway an Entire Market


Apple is one of the few companies that could genuinely dictate the course of an entire market like XR for a decade. Despite enterprise smart glasses and VR, in general, being viable for years already, no company currently in the market has the same brand influence, verticalized strengths, and software and service portfolio. This is true even globally, where Apple has greater competition in other markets like smartphones and tablets. While enterprise customers may not care about brand and status, they do care about ease of use, build quality, and product support—three areas where Apple excels.

Competitors, in fact, will benefit from Apple launching XR hardware. Meta has been the most prolific VR vendor, thus far, and sales have slowed since the Quest 2’s record-breaking 2021. The Quest Pro priced out consumers, and therefore a large swath of potential market share. The Quest 3, expected soon, will be an excellent indicator for the direction Meta is headed with VR; the company is also spending significant money on Augmented Reality (AR), which has not yet been seen. Apple entering the space brings not only a new competitor, but press coverage, content development, and broad general interest in XR.

There are some fair questions around how ready Apple and its headset are to launch, but as of March 2023, not enough is known to draw definitive conclusions. Perhaps Apple is timing this perfectly; some think it is too early, so Apple can cement itself at the center of a market it will propel to scale. One should view the potential growth trajectory of this first-generation XR device similar to the first-generation Apple Watch. It was not the first smartwatch, nor the best, but continually improving the hardware while maturing the content and supporting platform ecosystem created a powerhouse in the wearables market. The same can pan out with XR, starting with a purposefully small target market and building from there. If it turns out the device and/or Apple really is not ready for primetime, then positioning the first Head-Mounted Display (HMD) as a “developer” option or enterprise play softens some of the blow of low sales numbers. Other than an abject failure of a product, there is flexibility in how Apple launches and follows up in XR.

Building an Ecosystem from "Scratch"


Traditionally, Apple has rarely been first to market with a technology, rather focusing on perfecting the vertical slice of hardware, software, and service before launching. While the company certainly would not be first to market with an XR launch this year, it is still an early launch considering the technology. There is no incumbency advantage with XR like there is in phones, tablets, watches, etc. Apple has done a great job of building out a developer back end and overall foundation for an XR product to build on with things like ARKit and Light Detection and Ranging (LiDAR) sensors on phones and tablets, but a dedicated XR product—both HMD and surrounding content—does not yet exist.

The XR market is incredibly challenging to break into, even for a tech giant. For VR, prices have become more tolerable on average (thanks mostly to the success of the Meta Quest 2 at under US$500), but content remains mostly focused on gaming in consumer and training in enterprise. High-end VR, of course, runs into price pressure, and Apple’s entry looks to be no different. Smart glasses have the same price concerns, with the added difficulty of nearly zero consumer-ready glasses devices available today. Content creators are hesitant to invest time and resources into a market with a small user base, even with the promise of that growing significantly over the coming years. Without a wealth of content, early adopters feel left out and potential new buyers will wait another year. Enterprises do not have the same content scarcity issue, as content is mostly tailored to the organization and use case targeted, but that tailoring still requires time and resources.

For Apple, launching a more expensive Stock Keeping Unit (SKU) initially is not unexpected, especially in XR where content development is so critical. This first-generation device will not set sales records for the company, but it will get devices into the hands of developers to aid in content creation, and early customers to identify key use cases and potential pitfalls. Looking forward, true scale comes with the possible follow-up devices, lower cost and similar in feature set, with lessons and content from the first generation carrying over. This unlocks the consumer market as well, where Apple has an incredible revenue path in its services tying into XR; expect to see “Apple VR exclusive” and the like through Apple TV, Arcade, Fitness, etc. Even if the first Apple VR headset does not see record-breaking numbers, the ongoing service revenue, along with increased market presence, will certainly pay off.




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