(Bloomberg) — Apple Inc. is considering pushing back the debut of its mixed-reality headset by at least a few months, potentially delaying its first major new product since the Apple Watch in 2015, according to people familiar with the situation.
The headset — a high-end device that blends virtual and augmented reality — was targeted for an unveiling at Apple’s annual Worldwide Developers Conference in June, followed by a release later in the year. But development challenges related to overheating, cameras and software have made it harder to stay on track, said the people, who asked not to be identified because the matter is private.
That could push the announcement until the end of 2022 or later, with the product hitting shelves by 2023, the people said. A spokeswoman for Cupertino, California-based Apple declined to comment.
Apple shares, which had been up about 1% Friday, retreated on the news, dipping as low as $171.68. The stock gained 34% in 2021, outpacing the S&P 500 Index.
The delay would mark a setback for a product seen as one of Apple’s famous “next big things” — a new category that can keep sales growing and help justify the tech giant’s nearly $3 trillion market valuation. The company hasn’t discussed the headset publicly, but the product has been years in the making and already delayed before.
Read more: Apple’s strategy for its first VR/AR headset
Apple had previously planned to introduce the headset in 2021 and ship it this year, according to other people with knowledge of the matter. The company has been developing the device since around 2015 and is counting on it to be the first of many headsets that could eventually replace the iPhone a decade from now.
The hope is to create products with more appeal than current augmented reality goggles, which let users superimpose data and imagery on top of real-world views. Past AR headsets, such as Google Glass or Magic Leap, have either been fringe products or flops — and have drawn ridicule for making users look creepy.
VR headsets, meanwhile, have been more successful. Devices from companies like Meta Platforms Inc. shut out the real world and immerse users in a digital reality — setting the stage for the so-called metaverse. But even VR hasn’t caught on much beyond a core group of gamers.
Apple’s product would combine both technologies in one device, letting the company plant a flag in the still-nascent industry. The headset isn’t expected to be an iPhone-like hit from the start — it will be an expensive niche item — but the device may set the stage for bigger moneymakers in the years ahead.
The challenge is getting such a product to customers. Apple recently informed supply-chain partners that the device probably won’t be released until 2023, according to the people familiar with the discussions. However, it is still pushing vendors to have units available at the end of this year so that they’re ready for the rollout.
Apple is planning to focus its 2023 developers conference on building virtual and augmented reality apps for the device, which will have an App Store, according to the people.
It’s also laying other groundwork for the headset. That includes building in support for the device in iOS 16, codenamed Sydney, a new version of the iPhone’s operating system that’s set to be unveiled in June.
That means Apple could still theoretically preview technical aspects of the headset or its software, without showcasing the full device, as early as this year’s developer conference.
When it ships the product, Apple will face immediate competition. Meta, formerly Facebook Inc., is working on its own mixed-reality headset, known as Project Cambria, that’s likely to be cheaper than Apple’s. Apple has weighed price points north of $2,000 for its headset because of the inclusion of powerful chips, high-resolution screens and new audio technology.
Today’s consumer VR market is led by Meta’s Quest 2 headset and products from HTC Corp., with both companies developing ecosystems of content and developer support around their hardware.
The first Apple headset will be a precursor to a more ambitious set of AR-only glasses, codenamed N421, that the company hopes to debut later this decade. By rolling out the more niche device first, it can educate consumers on the technologies, build an app ecosystem and prepare suppliers for future products.
Given the functionality and expected price of the device, Apple had estimated it would sell one unit per day per Apple retail store. Based on the company’s current forecast provided to supply-chain partners, it believes the product could sell 7 million to 10 million units during its first year.
The thermal challenges with the headset stem from its use of high-end chips normally placed inside professional laptops. The company is planning to include two processors in its first device, which is codenamed N301, with at least one of them being on par with the M1 Pro chip inside the latest MacBook Pro.
In earlier designs of the headset, Apple had looked to mitigate heat problems by placing the high-powered processors in an external device that would wirelessly transmit data. That plan was scrapped after Jony Ive, Apple’s former design chief, balked at the clunkiness of requiring a separate device, Bloomberg reported at the time.
Read more: The team developing Apple’s VR/AR devices
Apple has also faced development challenges with on-board cameras, which will be used to enable augmented reality. Apple is looking to source its camera modules from LG Innotek Co., which plans to begin production of the parts as early as the second quarter of this year.
More than 2,000 Apple employees are now working on its VR and AR hardware as part of a unit called the Technology Development Group, or TDG. The group is run by Mike Rockwell, an ex-Dolby Laboratories Inc. executive, and Dan Riccio, Apple’s former head of hardware engineering who stepped down from that larger role in early 2021.
In recent months, Apple has seen a number of engineers from the unit leave for jobs at Meta. The company responded to the departures by offering key engineers one-time restricted stock unit bonuses worth as much as $180,000, Bloomberg reported in December.
Apple plans for its mixed-reality device to run its own operating system — dubbed rOS, with the “r” likely standing for “reality.” The software, codenamed Oak, is designed to focus on communication tools and media consumption.
VR/AR technology isn’t Apple’s only big bet right now, but it may be the closest to market. Other initiatives, such as a self-driving car, are expected to take longer.
Since Chief Executive Officer Tim Cook took the reins from Steve Jobs more than a decade ago, the company has only pushed into one major new hardware category: the Apple Watch. But Apple has broadened its lineup with more Macs, iPhones, iPads and accessories like AirPods.
When the company first rolled out the Apple Watch, it previewed the device in September 2014, held a follow-up launch to showcase additional features in March 2015 and then ultimately released it in late April that year. Its foray into the world of VR and AR could follow a similar path.
(Updates with share reaction in fourth paragraph.)
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