Feedback Loup: Star Wars Holochess

Now you play chess in AR just like R2-D2 and Chewie. On Wednesday, Star Wars Holochess was released as an additional game mode on the Star Wars Jedi Challenges iOS app. This version of Holochess uses ARKit and allows users to play the game right on their smartphone. Holochess, officially known as ‘dejarik’ in the Star Wars universe, is a chess-like augmented reality game where players compete against an opponent with holographic monsters on a game board. Holochess was one of the early mainstream examples of augmented reality in the media, first appearing in 1977 in Star Wars Episode IV: A New Hope.

Source: StarWars.com

Holochess was previously available with Star Wars: Jedi Challenges, but the hardware was required to play. It’s now available on the App Store, but it’s apparent that it was ported over from the headset version. The experience isn’t perfect, and the controls aren’t very intuitive, but for Star Wars fans, the novelty of playing Holochess on your table is enough to download the app.

The game’s visuals are crisp, the creature models look good, and each has their own animation (faithful to the films) for both doing damage to an enemy and eliminating one. However, the user can’t change the size of the board or choose its location once it’s been placed. In order to get a closer look or read descriptions and stats for creatures, the user must physically get closer to the board with their phone. The creature in the center of the picture below is an example. Its name, number of hit points, and damage dealt are all displayed but very difficult to read and there’s no way to make it more legible short of peering closely.

If anything, this edition of Holochess is an example of the high expectations we have for augmented reality being met with the harsh reality of what the technology is, or is not, capable of today. Yes, it’s true that you can now play Holochess in your living room and don’t need to travel to a galaxy far, far away, but it’s not something you will spend hours playing. This is not the Star Wars AR experience you’re looking for. For that, you’ll have to buy the headset and controller from Lenovo, which allows you to have full on lightsaber battles in your living room, among other things.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Apple Education Playbook: Hardware, Software, Services… and Creativity

  • Apple announced an updated iPad along with a suite of programs that enable educators and students to pursue creativity, which is critical in the future of education.
  • We estimate education accounts for 10-15% of Apple’s business. We believe today’s announcements will have a small impact on their education business, but an immaterial impact on their overall business.
  • Apple emphasized augmented reality as an important aspect in the future of education. Greg Joswiak added, “there’s no doubt that AR is going to dramatically change the way this generation learns.”
  • Our research suggests iPad is strongest in K-5 and Chromebooks are preferred 6-12. We don’t think today’s announcements change that dynamic.
  • The new iPad is priced essentially the same as its predecessor but adds the A10 Fusion chip and Apple Pencil Support. This essentially now competes with the $649 10.5″ iPad Pro.

We attended Apple’s education event today in Chicago. It’s been 6 years since Apple has done an education-focused event, which means the company had a lot to talk about related to its efforts in education that we estimate to account for 10-15% of Apple’s overall revenue. The main takeaway from today’s event is that Apple has a suite of hardware, software, and services that can be used by students, teachers, and administrators to optimize the education experience. At the core, is Apple’s belief that creativity in music, video, photography, and drawing can be a framework for advancing learning in STEM. Apple’s initiatives in education have hit a headwind over the past five years as cheaper Chromebooks have gained more adoption in schools. We believe Apple and iPad are uniquely positioned toward creativity, while Chromebooks are better positioned for the utilitarian aspect of education (essays, spreadsheets, etc).

What was announced today?

  • 9.7″ iPad with support for Apple Pencil. Previously, the cheapest iPad with Pencil support was the 10.5″ iPad Pro for $649. We believe this will have a small impact on overall iPad demand. We are currently modeling for flat iPad unit growth for the next three years, and believe today’s news could inch iPad unit growth to 1-2% per year. The overall iPad revenue will likely remain unchanged given there will be a mix shift from the 10.5″ iPad Pro to the new, lower-priced 9.7″ iPad.
  • More free storage for education. Students get 200GB of iCloud storage instead of 5GB.
  • Everyone Can Create program. In 2014, Apple announced the educational Swift programming language. Today, Apple announced the Everyone Can Create program, which is a companion to Swift and focuses on creative elements ofmusic, video, photography, and drawing. Apple believes that nurturing creativity will help further education in the sciences.
  • SchoolWork. This app is essentially a dashboard for students, allowing them to see current to class topics, manage assignments, and message classmates.
  • Apple also talked about management tools for educators for teachers and administrators. These applications have already been available for several years.

Looking to the future with creativity, empathy, and community. One aspect of today’s event was Apple painting its picture of the future of education. Filling in the blanks, it seems that this future includes a combination heavy on science and creativity. We would agree and add that along with creativity, empathy and community are the human qualities that machines are unable to replicate. We’re encouraged to hear that Apple is, to some extent, preparing students for the future by focusing on our most unique abilities and using technology to foster them.

Are kids getting too much screen time? As we processed today’s news, which will ultimately lead to more screens in schools, we revisited our concern that kids are getting too much screen time. This is not an Apple-specific problem, given iPhone and iPad only account for roughly 20% of the world’s mobile screens. That said, given Apple’s dominance in tech, they are a natural target for the “too much screen time” narrative. It appears Apple shares parents’ screen addiction concerns and has dedicated a portion of its website to educating parents on managing screen time. See here.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Key Apple Supplier Confirms AR Features Will Be in Multiple iPhones This Fall

After markets closed, Finisar (FNSR) reported earnings for the Jan-18 quarter. Finisar is Apple’s 2nd largest VCSEL array supplier, which powers 3D sensing applications such as facial recognition through a flood immolator and dot projector on the front of the iPhone X. While the company’s VCSEL contribution remains small ($8 – 10M), Management’s commentary remains mostly in-line with the previous quarter, and the company seems to be positioning itself for a large 2H18. Following this update, we continue to believe Apple is preparing to integrate 3D sensing into multiple iPhone SKUs that will be released this fall.

What they said. We believe Finisar’s VCSEL revenue in the quarter was minimal (~$8 -10M), and the company expects VCSEL revenue to be down sequentially in the Apr-18 quarter as a result of seasonality. However, most importantly, Finisar provided an update on the company’s new Sherman facility, which is the new 700,000 square foot capacity expansion initiative the company announced shortly before Apple awarded Finisar $390M contract for future orders. While Management highlighted yield improvement is a primary focus, the company continues to believe the new plant will go live in 2H18.

Impact to Apple. In terms of a read on demand for iPhone X, Finisar’s comments are in-line with previous comments, so we are not making any changes to our iPhone estimates. That said, we believe Management’s comments around a 2H18 ramp remains positive for Apple’s new iPhone launch this fall, where we expect the company to introduce multiple new iPhones and all will incorporate 3D sensing technology. This in-turn confirms that Apple will make augmented reality (AR) a core feature in all new iPhones this fall.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Key iPhone X Suppliers Provide Robust 2H18 Outlook

Special thanks to Austin Bohlig for his work on this note. 

Two of Apple’s key iPhone X component suppliers, Lumentum (LITE) and AMS AG (AMS), reported strong Dec-17 quarter results and more importantly provided upbeat 2018 outlooks. Both company’s supply key components going into the flood illuminator and dot projector on the face of the iPhone X (see below), which allows for 3D sensing and enables augmented reality applications such as facial recognition. While Apple recently guided for lower-than-expected iPhone sales in the Mar-18 quarter, we believe the robust 2018 guidance and capacity expansion initiatives indicate two things. First, iPhone X demand is healthy, and we continue to expect iPhone X will account for about 25% of total iPhones in FY18. Second, 3D sensing, as well as augmented reality applications, will remain a core feature and be added into new iPhone SKUs to be introduced in Fall 2018.

Lumentum – Lumentum is the world’s leading vertical-cavity-surface-emitting laser (VCSEL), which is the key component going into the flood illuminator and dot projector. The company reported 3D Sensing revenues of ~$200M, which exceeded the company’s expectation and is up from $40M in the Sep-17 quarter. Due to seasonality, the company expects 3D sensing revenues to be down $60 – 65M in the Mar-18 and Jun-18 quarters. However, the company continues to see strong order flow and aggressively adds VCSEL capacity. But most importantly, Management indicated 3D Sensing volume should “more than double” in 2H18 over 2H17, which we believe a high percentage of these orders will be going into current and new Apple SKUs this fall.

AMS AG – AMS is an Austria-based semiconductor that provides additional optical components for the iPhone X that enables 3D sensing applications. While the company positively preannounced last Monday, they waited to issue guidance until they announced earnings this morning.  In-line with Lumentums comments, AMS foresees a very strong second half 2018, based on currently available forecasts, with substantial sequential revenue growth rates in the second half year, similar to 2017. AMS anticipates high volume ramps in its consumer business to drive this strong expected second half development. AMS also decided to accelerate new internal production capacity for VCSEL laser products in the second half 2018 and beyond. Lastly, AMS increased their 2016 – 2019 revenue outlook to 60%+ CAGR over this time period, which bodes well for the future for AR.

What this means for Apple. iPhone X demand is healthy, and we continue to expect iPhone X will account for 25% of total iPhones sold in FY18. Given Lumentum and AMS strong 2018 outlook, we believe 3D sensing will remain a key feature in iPhone SKUs, as well as augmented reality (AR) applications. However, both companies are beginning to work with more Android related customers, and it is not 100% clear what percentage of these sales are going to Apple. Importantly, both Management’s team’s comments around contributions from new wins, we believe the majority of these sales will continue to go Apple.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Simplicity Series: Augmented Reality

Last week we wrote about simplicity as a driving force behind the world’s biggest technology offerings. We’re extending our thoughts on simplicity into a series that explores the necessity of simplicity in frontier technology. First, we’ll dive into AR.

Simplicity for AR in 2018 must start with a question: “What does AR do?” Not in the literal sense. We all know it overlays digital information on the real world. What the question needs to answer is what undeniable and unduplicable benefit AR confers to its users. What can only AR do?

The smartphone put a powerful computer in your pocket that lets you work and play from everywhere. Apple makes the smartphone so simple anyone can pick it up and start working and playing instantly.

What can only AR do?

The Internet connected you with the world’s information. Google sorts it for you. Amazon lets you buy things you find.

What can only AR do?

The answer isn’t that it puts a computer with the world’s information in your eye. That’s only marginally better, maybe not even, than what we have now. Marginally better is fine as an emerging feature on smartphones today, but it won’t drive mass adoption of AR wearables that people wear all day long.

The problem is more obvious when asked what the killer use case of AR is. To be clearer, a use case the average consumer could engage in every day. It’s not envisioning a new couch in your living room or getting step-by-step instructions or doing facial/object recognition. AR doesn’t have the advantage of email, messaging, and web browsing as the smartphone inherited from the Internet. Because AR is a true paradigm shift in how we interface with computers, we need to rethink communication, information collection, and information consumption specifically for AR. That hasn’t happened in a meaningful way yet.

Our tone here is tough, but only because we think the AR space has been taking a pass at answering this hard existential question in favor of experimentation with hopes that customers figure it out for them. We remain bullish on the future of AR and think the answer to our core question here might have something to do with the relative “nearness” of information it creates. To elaborate, we’ve evolved from a limited keyboard-style interface to a touch interface to a mixed reality interface that might incorporate gestures, thoughts, voice, etc. Interacting with information is becoming much closer to how we interact with the real world. This answer isn’t perfect, but we think it’s in the right direction.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.