Apple (NASDAQ:AAPL) was an early mover in augmented reality, adding ARKit to iPhones in 2017, but it has been all but absent from the burgeoning virtual reality arena.
The iPhone maker is trying to change that, slowly, in part by improving graphics cards in high-end iMacs and Mac Pros to make them VR compatible. And last week, it announced that its next MacOS update, Mojave, will come with plug-and-play support for HTC's Vive Pro VR headset. Apple has been working with HTC and Steam, which runs the HTC Vive platform, to ensure that Vive Pro will operate with Mojave out of the box. The announcement both highlights how far behind Apple is in VR and indicates why the company is putting heavy emphasis on it in its next update.
Playing catch up
Apple is so far behind the the curve in virtual reality that it's essentially a non-factor in the space. To run a VR headset on an iMac, you need an external graphics card; the Mac Pro, which starts at $2,999, is barely powerful enough to run a VR headset, but doesn't come close to matching the industry-standard graphics processing unit (GPU) performance of an NVIDIA GTX 1080 graphics card. Most tellingly, when it comes to Macbooks -- its best selling line of computers -- Apple doesn't offer any ability to use VR.
So, if you're serious about virtual reality, Macs aren't a viable option right now. But Mojave and an updated Mac Pro in 2019 could allow the company to makes some small inroads into the technology.
Getting up to speed in VR
Mojave's plug-and-play VR capabilities will be a big deal, but the more important upgrade will happen with Apple's GPUs. AMD's graphics cards underperform NVIDIA's by a wide margin, so Apple needs to make big GPU upgrades to even get on the VR industry's radar. Keep in mind that Mac Pros and high-end iMacs are geared toward graphics industry professionals, not necessarily the general consumer market, so with these improvements, Apple is really trying to gain some traction within the developer community rather than with average home users.
And developers could be key to Apple's VR long-term plans. VR headsets won't be tethered to computers for long, as indicated by Facebook's Oculus Go standalone headset. Eventually, all headsets will be untethered from computers. When that happens, it won't matter if Macs or PCs are VR capable -- it will matter what computers the developers use, and what platform headset makers are running for VR. And that's where Apple probably sees its future in this segment.
Cnet and Bloomberg have both reported that Apple eventually wants to make a AR/VR headset, but reports are that a device won't ship until 2020. Apple need to avoid losing the entire VR market before that device launches; attracting VR developers to its ecosystem is one viable way for it to gain a foothold in the industry.
The next big computing platform
Ultimately, the upside for Apple in making its hardware and MacOS HTV Vive Pro compatible won't come from sales of iMacs or Mac Pros to people using the current generation of virtual reality headsets. The company is looking two or three years down the road when VR is a more widely adopted technology, and it launches its own devices. And the opportunity for Apple and other tech companies in the space shouldn't be understated.
SuperData estimates that consumer VR will grow from $2.2 billion in total market revenue in 2017 to $19.0 billion in 2021. Adjacent augmented and mixed reality revenues are expected to grow from $1.2 billion to $20.3 billion over the same time frame.
In augmented reality, Apple can leverage the popularity of the iPhone. ARKit was automatically installed on iPhones when it launched, which means it's already available on hundreds of millions of AR-capable devices. VR will be harder for Apple to enter because to use it requires a high-end computer and/or a headset. If Apple doesn't want to be shut out of this market, it needs to find an entry into either the computing side or the headset side -- it has chosen to start with computers built for those developing VR content. That's probably the right move for the company, but it remains years behind the competition.
Travis Hoium owns shares of Apple and owns a virtual reality start-up called REM5, LLC. The Motley Fool owns shares of and recommends Apple, Facebook, and Nvidia. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.