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Apple's Premium Headphones Inch Closer to Launch

By Evan Niu, CFA – Apr 17, 2020 at 11:00AM

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The product has faced numerous delays and now the novel coronavirus pandemic is threatening the timeline.

Investors have been hearing rumors of Apple (AAPL -1.41%) working on premium over-ear headphones for more than two years. During that time, the company has dramatically expanded its portfolio of wearable audio gadgets ("hearables"), which have become one of Apple's fastest-growing businesses. Last year was particularly momentous for hearables, as the broader wearables market rapidly shifted toward that product category: Total unit volumes nearly doubled to 336.7 million, according to market researcher IDC.

Apple's headphones, which are distinct from the Solo Pro released under the Beats brand last year, are slowly inching closer to launch.

Customers at an Apple Store using AirPods Pro

Apple continues to expand its portfolio of audio accessories. Image source: Apple.

Apple is hoping to launch the headphones this year

Bloomberg reports that the over-ear headphones are making progress in the development pipeline, with Apple testing out two different versions. One version uses a fabric similar to leather, while another version emphasizes fitness with breathable materials, according to the report. It's unclear if Apple intends to launch both variants or if it will choose one over the other.

The Cupertino tech giant is using a modular design where various components can be swapped out, which could provide customization options, as well as extend the lifespan of the product once ear pads or other parts wear down. Interchangeable parts could also add versatility, allowing the headphones to essentially convert from general use to fitness applications and vice versa.

Apple is also expected to incorporate noise-cancellation and its clever wireless-pairing technology that allows its other hearables to seamless switch between paired devices. The Solo Pro and AirPods Pro that were both launched in October similarly feature active noise cancellation (ANC), along with an audio pass-through mode using external microphones that Apple calls Transparency mode.

Bloomberg also notes that the over-ear headphones have been delayed "at least twice," but that Apple is hoping to unveil the gadget later this year. The novel coronavirus pandemic could still threaten that timeline, however, as suppliers and contract manufacturers are still in the process of slowly resuming operations and ramping production. On top of that, much of Apple's ability to test the product internally is being hindered by containment orders and the shift to remote work.

The public health crisis is far from over and much uncertainty remains, as many countries are still working to beat COVID-19. That also means that third-party market forecasts -- such as a recent Arizton research report that predicts the global earphone and headphone market will grow to $45 billion in 2025 -- should be viewed skeptically, since the coronavirus could very likely push the global economy into a recession that will crush demand for headphones that cost $300 or more.

Apple has become the clear leader in wearables, which has become a $20 billion business, thanks in large part to its growing lineup of audio accessories. Premium noise-canceling over-ear headphones would help build on that momentum as the company continues to challenge the likes of Bose, Sony, and Sennheiser, among other high-end audio specialists.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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