Apple Is Quietly Worrying About its Answer to the Metaverse

Apple is reportedly concerned that its AR/MR headset announcement won't recreate an 'astounding iPhone moment,' an analyst says.

Virtual reality bites.

All right, that might be a little harsh, but the concept of virtual reality becoming the Next Big Thing seems to be getting a little green around the gills. 

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Worldwide sales of virtual and augmented reality headset dropped 12% last year, and were off 2% year-over-year in the U.S.to $1.1 billion.

Analysts cite such reasons as expensive gear, economic concerns, and a post-pandemic reunion with the outside world for the slowdown.

Meta Platforms  (META) - Get Free Report CEO Mark Zuckerberg is among those who have taken a real world beating on his virtual reality bet.

He has invested billions of dollars into his metaverse project and, so far, all he's gotten for looking through rose-colored glasses is a red ink shellacking.

In 2021 and 2022, Reality Labs, the division housing metaverse projects, recorded a cumulative loss of nearly $24 billion, including $13.7 billion last year.

Not Seeing an 'iPhone Moment'

Meta sold about 20 million of its $400 Quest 2 headsets since 2020 and recently cut the price of the Quest Pro to $1,000 from $1,500 due to disappointing sales.

In addition, the parent company of Facebook, Instagram and WhatsApp has cut 21,000 jobs in four months.

Now Apple  (AAPL) - Get Free Report is reportedly having some serious second thoughts about its Augmented Reality/Mixed Reality headset.

Apple analyst Ming-Chi Kuo tweeted on March 30 that Apple "isn't very optimistic about its AR/MR headset announcement recreating the astounding 'iPhone moment.' "

As a result, he said, the mass production schedule for assembly has been pushed back by another one or months to mid-to-late third quarter.

The analyst said that the delay also adds uncertainty to whether the new device will make an appearance at Apple's Worldwide Developers Conference, as the market widely expects.

The conference, which is scheduled from June 5 through June 9, is dedicated to the third-party software developers that create apps for Apple’s platforms.

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Apple said that the conference will spotlight the latest iOS, iPadOS, macOS, watchOS, and tvOS advancements. 

Kuo said that due to the delay in mass production for assembly, "the shipment forecast this year is only 200,000 to 300,000 units, lower than the market consensus of 500,000 units or more." 

The analyst said Apple's lack of optimism stems from the economic downturn, compromises on some hardware specifications for mass production, such as weight, the readiness of the ecosystem and applications, a steep selling price that could run from $3,000 to $4,000 or higher,

Apple did not immediately respond to a request for comment. 

Kuo’s comments follow a March 26 New York Times story that said enthusiasm about the headset has given way to skepticism.

Some employees have defected from the project because of their doubts about its potential, the Times reported, citing three people familiar with the situation, while others have been fired over the lack of progress with some aspects of the headset, including its use of Apple’s Siri voice assistant.

Apple has postponed other new products in the past, including AirTags, the coin-size location tracking devices, which Apple withheld for more than a year as it addressed privacy issues.