AR Primer
While rumors that Apple (AAPL) has postponed its AR device project in favor of an XR device to be released this year or next, there has been considerable activity concerning AR devices before and during CES 2023. While we still favor AR over VR in terms of practical applications, the extended reality universe has been gradually attracting larger CE companies, and with those companies comes the need for high volume products. Gaming is the most obvious application for VR, particularly as enthusiasm for the Metaverse wanes a bit, and as a ~$200b market, the gaming software market makes the hardware that feeds such a large space quite attractive to CE manufacturers looking to become a new player or expand their share of CE hardware.
That said, while VR is the focus for most hardware manufacturers, the more recent trend has been toward creating a mixed environment that allows VR headsets to also be used for AR, and while this is really a convenience for VR users, it adds a bit more credibility to the AR space, which saw 17 models from 15 brands released in 2022. In that group were 8 brands that were new to the AR space, although some have VR offerings, and of those eight, three are likely recognizable to our readers, Oppo (pvt), Xiaomi (1818.HK), and Huawei (pvt), all well-known Chinese CE companies with representation in a number of CE segments. Further, announcements of upcoming AR devices were made by 13 brands, including TCL (000100.CH) and Lenovo (992.HK), also major Chinese CE companies, indicating the shift from small, private brands to large Chinese high-volume manufacturers, although we do note that the earliest supporters of AR hardware were Google (GOOG), Microsoft (MSFT), and Meta (FB) years ago.
We believe it is important for investors to understand a bit about both the AR and VR space, both from the perspective of being able to understand trends in the industry and to better understand how new products will affect the space and the private and public companies involved. SCMR LLC has developed a comprehensive database of both AR and VR products (headsets) which breaks down the hardware into relatively simple categories, but before we detail some of that data, we believe it would be helpful for investors to understand the basics concerning AR headsets.
The idea of Augmented Reality, in a limited form has been around for many years but much of the early work on developing a system that could provide such visual information to a user was developed by and for the military, either as a ‘simulator’ or a HUD (Heads-up Display), with much of the research being done at various universities. Early pioneers such as Evans & Southerland (pvt) and Boeing (BA) were limited by the need for computing power and graphic capabilities, but in 2013 Google opened the concept of AR to the consumer world with the release of Google Glass to a limited group of ‘Explorers’ (You could ‘explore’ for $1,500 & ~8,000 did), and roughly a year later to the general public, and followed with ‘Enterprise’ and ‘Edition 2’ models in 2017 and 2019, although consumer oriented production was ended in 2015. The device was able to project data to the user’s eye using either a touch system on the side of the device or by voice commands, and could take pictures and short videos and was able to project requested directions, messaging, Google search results, or connect to your smartphone.
Unfortunately, the cost was high and while the headset was remarkably sophisticated for its time, the concept of walking down a street with such glasses while viewing data was a bit ahead of its time, and privacy concerns about not knowing when the Google Glass user was recording, left many concerned over privacy. No matter what the problems were with Google Glass at the time, you have to give Google considerable credit for trying to bring AR to the consumer market, and despite Google’s problems with ‘glass’, Microsoft released the Hololens in 2016, a Windows AR device that was oriented toward business applications (~$3,000), and Oculus (now Meta) released the ‘2’, a less expensive (~$1,500) but bulkier AR headset in the same year. From that point forward AR device releases came primarily from small, VC or private investor based firms, and while both Microsoft and Google released updated models in 2019, the number of devices released each year was minimal. That changed in 2020 with over 10 models released, 2021 with 13, and last year with 17 new models.
That said, while VR is the focus for most hardware manufacturers, the more recent trend has been toward creating a mixed environment that allows VR headsets to also be used for AR, and while this is really a convenience for VR users, it adds a bit more credibility to the AR space, which saw 17 models from 15 brands released in 2022. In that group were 8 brands that were new to the AR space, although some have VR offerings, and of those eight, three are likely recognizable to our readers, Oppo (pvt), Xiaomi (1818.HK), and Huawei (pvt), all well-known Chinese CE companies with representation in a number of CE segments. Further, announcements of upcoming AR devices were made by 13 brands, including TCL (000100.CH) and Lenovo (992.HK), also major Chinese CE companies, indicating the shift from small, private brands to large Chinese high-volume manufacturers, although we do note that the earliest supporters of AR hardware were Google (GOOG), Microsoft (MSFT), and Meta (FB) years ago.
We believe it is important for investors to understand a bit about both the AR and VR space, both from the perspective of being able to understand trends in the industry and to better understand how new products will affect the space and the private and public companies involved. SCMR LLC has developed a comprehensive database of both AR and VR products (headsets) which breaks down the hardware into relatively simple categories, but before we detail some of that data, we believe it would be helpful for investors to understand the basics concerning AR headsets.
The idea of Augmented Reality, in a limited form has been around for many years but much of the early work on developing a system that could provide such visual information to a user was developed by and for the military, either as a ‘simulator’ or a HUD (Heads-up Display), with much of the research being done at various universities. Early pioneers such as Evans & Southerland (pvt) and Boeing (BA) were limited by the need for computing power and graphic capabilities, but in 2013 Google opened the concept of AR to the consumer world with the release of Google Glass to a limited group of ‘Explorers’ (You could ‘explore’ for $1,500 & ~8,000 did), and roughly a year later to the general public, and followed with ‘Enterprise’ and ‘Edition 2’ models in 2017 and 2019, although consumer oriented production was ended in 2015. The device was able to project data to the user’s eye using either a touch system on the side of the device or by voice commands, and could take pictures and short videos and was able to project requested directions, messaging, Google search results, or connect to your smartphone.
Unfortunately, the cost was high and while the headset was remarkably sophisticated for its time, the concept of walking down a street with such glasses while viewing data was a bit ahead of its time, and privacy concerns about not knowing when the Google Glass user was recording, left many concerned over privacy. No matter what the problems were with Google Glass at the time, you have to give Google considerable credit for trying to bring AR to the consumer market, and despite Google’s problems with ‘glass’, Microsoft released the Hololens in 2016, a Windows AR device that was oriented toward business applications (~$3,000), and Oculus (now Meta) released the ‘2’, a less expensive (~$1,500) but bulkier AR headset in the same year. From that point forward AR device releases came primarily from small, VC or private investor based firms, and while both Microsoft and Google released updated models in 2019, the number of devices released each year was minimal. That changed in 2020 with over 10 models released, 2021 with 13, and last year with 17 new models.
Early 1990's Boeing AR headset - Source: medium.com
Motion Stabilized AR Display - Source: codereality.net
Google Glass Explorer - Source: Engadget
Microsoft Hololens (2016) - Source: Microsoft
What makes AR different from VR is that AR is not an immersive experience and allows the user to see and interact with the real world while seeing projected data or images overlaid, essentially a ‘pass-through’ device. Simplistic uses, such as directions, similar to automobile HUDs, give the user the ability to follow directional indicators that move with the user without holding a smartphone, and more sophisticated uses, such as language translation are basic to AR (Watch the video here to see the translation function in action) and have real world uses that over time, will become ubiquitous with over 7,000 languages spoken across the globe and a global population of over 430m considered deaf (ASL can be translated).
Marketing is an even more obvious use, allowing a shopper to look at an object, such as through a store window, and see information about that item instantly, sort of having a personal assistant available 24/7, with sophisticated retailers opening the door to consumers ordering items as they wander through a store, without the need for ‘advocates’ to help them make a physical sale. More commonly seen uses for AR are in the business world, where manuals, data, and other information about complex systems can be projected directly on such items, giving workers the ability to see how repairs are made, or procedures for maintenance, and during meetings, users can see data and images while also seeing facial expressions and objects around them, rather than avatars in an unreal VR environment.
Marketing is an even more obvious use, allowing a shopper to look at an object, such as through a store window, and see information about that item instantly, sort of having a personal assistant available 24/7, with sophisticated retailers opening the door to consumers ordering items as they wander through a store, without the need for ‘advocates’ to help them make a physical sale. More commonly seen uses for AR are in the business world, where manuals, data, and other information about complex systems can be projected directly on such items, giving workers the ability to see how repairs are made, or procedures for maintenance, and during meetings, users can see data and images while also seeing facial expressions and objects around them, rather than avatars in an unreal VR environment.
Directional AR Overlay - Source: Phiar
Simple AR Maintenance Overlay - Source: Medium.com
AR Repair Guide - Source: Softability
Of course, AR devices vary considerably, both in feature sets and price, and with 14 AR headset models already announced but unreleased and the potential for Apple to enter the market at some point, it is important to understand the potential differences and a bit about how AR devices work. Among the most important items to understand is whether the device is a standalone one, or one that needs to be tethered to another device, in many cases a smartphone. This is important as non-tethered headsets would need the ability to communicate with the outside world directly, while tethered devices could use the communications hardware of a smartphone or similar device. The hardware needed for direct communication would add weight, bulk, cost, and power usage to the device, but would free the user from some mobility constraints.
There are a number of display technologies used in AR headsets. Some display the AR image on a transparent display, some use non-transparent displays combined with camera images, and some project the AR image directly on the user’s eye, but the quality of the display, the cameras, and or the optics are important factors in determining the quality of the device and what its uses might be. The display itself is important and a variety of display technologies are used in current AR headsets (OLED, Micro-LED, Micro-OLED, and LCD), but combining camera images, and AR images requires optical systems that take up room and add weight, which makes the development of consumer AR not only based on the quality of the display, but on the optical technology.
Along with the display and optical hardware, the systems needs to be able to understand the user’s position in space, so it can move the overlayed image as the user’s gaze moves. This is done with tracking cameras, accelerometers, and other sensors, and in some cases eye tracking. All of this and built-in speakers, a microphone, memory & storage capacity, at least some CPU capacity, and a battery, must fit in a lightweight and thin frame (averages ~70 grams or 2.5 oz. as opposed to VR which averages ~17.5 oz.) that looks (hopefully) almost like normal glasses.
As with VR, the resolution of the displays themselves is important, especially as they are so close to the user’s eye, with typical AR devices sporting full HD (1920 x 1080) displays, but as AR displays are used in normal or even bright light situations, display brightness is also a factor that must be considered when evaluating AR headsets. While we do not trust advertised ‘peak brightness’ metrics used by many brands, brightness levels (peak) have been increasing over time, with Micro-OLED (OLED on Silicon) and Micro-LED displays offering the brightest current headsets.
There is one headset characteristic that is important to both AR and VR, and that is FOV or field of view. In VR headsets an FOV of 90° or more is essential, as the brain is more easily fatigued when it receives a more narrow visual field, and while AR devices are essentially visual pass-through devices, the larger the FOV in AR devices the more natural the overlay seems and a full view requires less head movement but at a higher cost. Therefore, the cost of AR headsets can vary considerably based on hardware, with 2022 released devices ranging from $349 to $3,300 (~$500 average), and as larger CE companies move into the space, the ability to lower overall product costs is improved.
While we believe VR is still a technology looking for an application, we see so many use cases for AR that we wonder why AR headset brands seem less inclined to promote the technology to the general public than VR brands. We do note that some AR applications require software developed specifically for that use case, such as AR used in a surgical suite or use in vehicle repair and maintenance, but when looking at such a basic use as language translation, much of the software has been written and is in the public domain or easily licensed. A reasonable looking AR headset that sells for $150, would be able to solve communication issues for millions of individuals, families, and organizations, and while we are not quite there yet, we believe such a target is not that far off based on the progress made over the last few years.
There are a number of display technologies used in AR headsets. Some display the AR image on a transparent display, some use non-transparent displays combined with camera images, and some project the AR image directly on the user’s eye, but the quality of the display, the cameras, and or the optics are important factors in determining the quality of the device and what its uses might be. The display itself is important and a variety of display technologies are used in current AR headsets (OLED, Micro-LED, Micro-OLED, and LCD), but combining camera images, and AR images requires optical systems that take up room and add weight, which makes the development of consumer AR not only based on the quality of the display, but on the optical technology.
Along with the display and optical hardware, the systems needs to be able to understand the user’s position in space, so it can move the overlayed image as the user’s gaze moves. This is done with tracking cameras, accelerometers, and other sensors, and in some cases eye tracking. All of this and built-in speakers, a microphone, memory & storage capacity, at least some CPU capacity, and a battery, must fit in a lightweight and thin frame (averages ~70 grams or 2.5 oz. as opposed to VR which averages ~17.5 oz.) that looks (hopefully) almost like normal glasses.
As with VR, the resolution of the displays themselves is important, especially as they are so close to the user’s eye, with typical AR devices sporting full HD (1920 x 1080) displays, but as AR displays are used in normal or even bright light situations, display brightness is also a factor that must be considered when evaluating AR headsets. While we do not trust advertised ‘peak brightness’ metrics used by many brands, brightness levels (peak) have been increasing over time, with Micro-OLED (OLED on Silicon) and Micro-LED displays offering the brightest current headsets.
There is one headset characteristic that is important to both AR and VR, and that is FOV or field of view. In VR headsets an FOV of 90° or more is essential, as the brain is more easily fatigued when it receives a more narrow visual field, and while AR devices are essentially visual pass-through devices, the larger the FOV in AR devices the more natural the overlay seems and a full view requires less head movement but at a higher cost. Therefore, the cost of AR headsets can vary considerably based on hardware, with 2022 released devices ranging from $349 to $3,300 (~$500 average), and as larger CE companies move into the space, the ability to lower overall product costs is improved.
While we believe VR is still a technology looking for an application, we see so many use cases for AR that we wonder why AR headset brands seem less inclined to promote the technology to the general public than VR brands. We do note that some AR applications require software developed specifically for that use case, such as AR used in a surgical suite or use in vehicle repair and maintenance, but when looking at such a basic use as language translation, much of the software has been written and is in the public domain or easily licensed. A reasonable looking AR headset that sells for $150, would be able to solve communication issues for millions of individuals, families, and organizations, and while we are not quite there yet, we believe such a target is not that far off based on the progress made over the last few years.
Selected 2022 AR headset Releases - Source: Company Data
Key:
Top Left – ThirdEye Razor
Top Right – Vuzix Blade 2
Bottom Left – Magic Leap 2
Bottom Right – Huawei Vision Glass
Top Left – ThirdEye Razor
Top Right – Vuzix Blade 2
Bottom Left – Magic Leap 2
Bottom Right – Huawei Vision Glass
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