We mentioned in our note yesterday that the hardware focus on Apple’s (AAPL) potential AR/VR products is missing the big picture surrounding the long-term viability of such a product’s ecosystem.  For others, especially smaller companies, AR/VR is a hardware game, and there is considerable competition between VR development teams and companies to provide the latest technology to differentiate their products and justify entering a smaller and likely less robust AR/VR environment.  As we have noted previously, we keep an AR/VR database, separating out those products that have been released from those that have been announced, given that some announced products are still unreleased more than a year after being announced.
One AR/VR product from a Prague based company called VRgineers (pvt), who showed their XTAL 3 Mixed Reality and Virtual Reality headsets at CES, and while both are still in pre-order mode, they have a release date of April 2022, only a few weeks away.  These headsets are the next generation following the company’s XTAL 8K headset released in 2020, with much of the design oriented toward the use of VR headset in pilot training.  While gaming VR headsets do have to meet demanding specifications, VR headsets used in pilot training are a bit more specific in use but more demanding in terms of their ability to interface with physical cockpit training systems, and in the case of the XTAL 8K and XTAL 3 headsets, they were designed in cooperation with the USAF and the Royal Air Force and interface with a wide variety of cockpit simulation hardware and software, something not part of most VR headset specifications.
These are not your typical $500 headsets, as the older XTAL 8K (currently on sale) model sells for $4,800, while the two newer versions sell for $8,900 and $11,500, so they are really at the top end of the AR/VR universe, but also not out of the range of some of the AR headsets that have been developed for industrial use.  That said, they have some interesting features that make them a bit different than other VR headsets and justify the price in the right environment, particularly eye and hand movement tracking and 4K resolution.
A number of VR headsets employ eye tracking, a technique that uses internally mounted cameras to measures the position of a reflection on the cornea of the eye (Fig. 1) (red arrow) against the center of the pupil (blue arrow) and calculates where the user is looking, regardless of head movement.  In most VR systems the data is used to move the user’s field of view in game software, so when the user looks to the side, the game view shifts the same way.  In the VR headsets mentioned above, not only does the eye tracking data re-locate the FOV, but the data is recorded and used to measure how long it takes a pilot to notice something appearing in the periphery, or how often they look at controls or other external objects.  Similar data is collected from controllers that evaluates hand motions and can give insight into how quickly a pilot reacts physically to visual stimuli.
Taking eye tracking out of the aerospace environment and into the Metaverse, eye tracking information can be used to give game developers ways to help you improve your gaming ability.  By tracking where you are looking during a game, the eye tracking information can adjust where you are throwing or shooting to more accurately align the shot.  But eye tracking information also gives clues as to emotion and reaction to various situations, which is the kind of data that can help data collectors build a more accurate model of you in the Metaverse, although when we say model, we don’t mean your avatar but more things like your level of excitement when viewing a new smartphone or piece of clothing, data that helps them ‘improve the user experience’ or in real terms produce a better selling environment.
This is just one small aspect of why on-line data collectors like Facebook (FB) and Google (GOOG) are excited about and promoting the Metaverse.  By increasing the amount of information a user generates, the value of the data is also increased, and while there will be much said about selling virtual real estate and other virtual items that don’t exist in the real world, the game remains the same as it is in the 2 dimensional internet, collect more data and sell it to folks so they can sell more stuff, whether its virtual or physical.

​Back in 2020 you had a small surgical procedure to relieve Carpal Tunnel Syndrome on your right hand.  Your insurance paid for the surgery and your 2 weeks of rehab, and you fully recovered, but you suddenly are receiving a bill from a collection agency that says you owe $675 to an anesthesiologist for services performed during the operation.  Since your insurance company was paying the bills directly to the billing hospital, you wonder why a collection agency is sending you a notice only to find out that for some reason the insurance company found that the anesthesiologist used the wrong code when filing the claim and the bill was never paid by the insurance company.  Since you signed a release before the operation, you are ultimately the responsible party and the monthly calls you get from the collection agency are becoming a major nuisance, despite your insistence that the insurance company is responsible for paying the bill.
That’s one kind of ‘collection’ that can become both an annoyance and a detriment to your mental and fiscal well-being, but there are innumerable ‘other’ types of collection agencies that know more about you than you do.  While we stare in horror at scenes of facial recognition systems in China identifying everyone crossing against the traffic lights in Beijing, we routinely allow detailed data collection every time we use social media.  But it goes further, as we habitually agree to ‘Terms of Service” that allows companies to not only monitor everything you do on-line, but to add to that database information collected by almost any company affiliated with that application, meaning any on-line company that uses the Facebook (FB) Pixel application to collect data and monitor their website traffic.
We did a bit of digging to actually try to understand at least some of the data that we give access to when we use social media, in this case Facebook, but we expect such terms and privacy policies are similar for Google (GOOG) and other on-line applications.  By agreeing to Facebook privacy policy you allow the company to collect information about any of the following:

• Information from your sign-up
• Any content you create
• Any content you share
• Any messages you send or receive
• Anything from the Facebook camera app, including being added to their facial recognition system, including people, places, accounts, tags, are groups you are connected with
• How you use content, including type of content, features used, actions, people, time, frequency of use, duration of use, including what posts, videos, content you view and any purchases or transactions you make including credit and debit card numbers, authentication information, billing and shipping addresses, and contracts you agree to
• Information that others provide about you, which can be from computers, phones, TV or other web devices
• Such external information can include device attributes, O/S, hardware & software versions, battery levels, signal strength, available storage, applications, file names, and mouse movements (!).  Information about your Wi-Fi , nearby Wi-Fi networks,  cell tower usage, mobile phone IP addresses is also included, although GPS, Camera, and Photo access can be limited if you choose the option
• Cookie data
• Information from partners that is collected by Facebook partners, even when off the Facebook application, including ‘likes’, ‘dislikes’, sites you visit, purchases you make and ads you see.

This barely scratches the surface of what you allow Facebook to collect about you, which makes those collection agency calls seem minor when you realize the huge profile of information you provide to social media companies.  Think of it as a file cabinet full of information about you that they have been accumulating since that time you first signed up, and we have not even begun to explore what they are allowed to do with the information that is collected, although there is a simple stipulation that says if the company is sold, all of that data goes to the new owners.  While the Google and Facebook algorithms use much of that data to offer you ads and suggestions that would lead to more data collection, they are not limited as to what the data can be used for, other than illegal purposes.  In fact much of the data is used for site analytics, but there is no limitation on the sale of such data or its use by affiliated companies. 
While this all might seem a paranoia fest, the US is particularly lax when it comes to personal information, especially when compared to the EU’s GPDR (General Data Protection Regulations) which force companies situated in or doing business in EU member countries to ask for more specific consent as to what they collect and what it is used for, with defaults limiting access to only basic information and operational cookies.  With all the data being collected, the potential for you information to be misused, hacked, or sold is enormous, which could lead to problems that are almost impossible to correct or even discover, and the Meta-verse, if or when it becomes a reality, will just give such collection agencies even more data to collect.  It was much harder to get purchaser information from brick and mortar retailers than it is to get it from on-line retailers.  Just think of how easy that data will be to collect when you wander through hundreds of Meta-verse ‘universes’ or outfit your personal universe with all of those things you can’t afford or could never own in the real world. 

​While all local smartphone markets have their own characteristics, the US smartphone market is quite different from other large markets.  It is expected to garner a ~10% share of the overall smartphone market with a population that represents ~4.2% of the global total, while China, with 18.3% of the global population, is expected to be 26.7% of global smartphone share at the end of this year, although both are expected to see negative growth this year.  In 3Q Samsung took the top share in the global smartphone market, although we expect Apple (AAPL) will take that position in 4Q on sales of the iPhone 13 series, but the number 3 brand globally, Xiaomi, doesn’t appear in the US, unless it falls into the ‘other’ category, which in total came to 7% in the US in 3Q.
In the US Apple was the share leader in 3Q at 42%, growing 3% from last year’s 3Q, while Samsung took a 35% share, up 5% from last year.  LG Electronics, who last year had a 13% share in the US market (3Q) is defunct, with much of that share falling to Apple and Samsung.  There were two Chinese brands that registered in the US smartphone market in 3Q, TCL and OnePlus (pvt), with 5% and 3% respectively, while Samsung did not register in China, although Apple had a 13% share in 3Q.  Oppo (pvt) and Vivo (pvt) were the two brands in China with the largest share in 3Q, at a combined 43%, both of whom are owned by the same private company, and Honor (pvt), formerly a Huawei (pvt) sub-brand, came in just above Apple (13%) and Xiaomi (14%) at 15%.
Last year in 3Q, the Chinese market was dominated by Huawei with a 35.6% share, which is now down to 8% because of trade restriction imposed by the US that limit the company’s ability to access Google (GOOG) store applications. So, while the US is a diverse smartphone market in terms of brand source, China is not, with 89.9% of new models released in 3Q coming from Chinese based brands.  With Apple and Motorola the only US based brands in the US market, there is plenty of room for competition for US smartphone dollars, although based on what is currently available from US carriers, there are really few choices other than Apple, Samsung, and Google, with a smattering of Nokia and last year’s LG phones.  

​Google (GOOG) is expected to release its latest Pixel smartphone, the Pixel 6 and Pixel 6 Pro at the end of this month, and has said to have placed orders for 7m units from suppliers.  While these are small numbers compared to smartphone giants like Samsung and Apple (AAPL), the tally for last year’s Pixel series sales were 3.7m units, putting the current order rate over 89% higher than last year.  Google’s optimism extends further in that they have been said to have placed orders for ~5m Pixel 5 series phones, which were released last year around this time.  The pixel line i(prices are expected to be $600 and $900)  is considered to be a  competitor to high-end flagship brand models at a lower price, but has yet to capture significant share of the smartphone market.  While pre-ordering has begun, we doubt initial order rates have had anything to do with pre-delivery orders and reflects Google’s optimism about its ability to gain share this year.  While they risk ~$1b to $1.5b with such a high order rate, it seems a bit small in perspective given their $182b sales base last year.