Our First Glimpse of Magic Leap One

After a six-year wait, Magic Leap has finally released their highly anticipated headset. With almost $2 billion in funding, one of the country’s most secretive startups has been developing a mixed reality headset that is considered to be a cut above the field by those who have experienced it.

What is it? The device, called the Magic Leap One Creator Edition, includes three pieces of hardware: Lightwear – the goggle-like headset, Lightpack – a hockey puck-sized external computer worn on your belt that is tethered to the Lightwear, and a handheld controller to navigate menus.

Mixed reality is a hybrid of augmented and virtual reality. Rather than simply overlaying information in your field of view like AR, MR allows the user to fully interact with virtual objects. Mixed reality use cases span from immersive gaming and storytelling, to web browsing, more interactive meetings, multipurpose workstations, and data visualization.

What we know. Based on the information available, the device is more or less in line with our expectations. The actual headset, despite still looking like a steampunk Star Trek accessory, is more sleek and deliberately designed than we imagined. The Lightpack, however, seems more cumbersome than what we hoped for. The Creator Edition will ship only to developers sometime in 2018. Rolling Stone was invited for a demo of the product and wrote an in-depth piece here.

What we don’t know. With mixed reality, the user experience is the critical factor. While Magic Leap’s website suggests the experience will be both revolutionary and visually incredible, it’s impossible to know without the trying the Magic Leap One. Bottom line, we have to reserve judgement until we try it for ourselves.

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.

Yet Again, Apple Doubles Down on AR with Finisar Investment

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

This morning Apple announced they will be investing $390M in Finisar (FNSR), which is the company’s second largest vertical-cavity-surface-emitting-laser (VCSEL) supplier. VCSEL arrays are the key technology that powers 3D sensing applications such as Face ID, Animoji, and other face-mapping technologies through a flood immolator and dot projector on the front of the iPhone X. Apple is giving Finisar $390M to build a new 700,000-square-foot manufacturing plant in Sherman, Texas, which Finisar announced on the company’s earnings call last week (see here). Apple now has close relationships, with the two leading VCSEL suppliers, Lumentum and Finisar. Given how capacity constrained both these companies are, Apple’s investment shows the company is yet again doubling down on augmented reality. But more importantly, it locks down VCSEL supply, which will make it tough for other smartphone players to compete longer-term in AR.

Not New To Apple. This type of investment is not new to Apple as they have invested in key component suppliers in the past in order to lock up pricing and block out competitors. For example, Apple made large investments in the NAND suppliers during the iPod boom. Apple has been working with the two largest VCSEL suppliers in world, Lumentum and Finisar. While this investment will likely come across as bad for Lumentum, we do not believe Lumentum’s relationship with the company has necessarily been affected. Given the limited supply of VCSEL arrays worldwide, as well as the limited manufacturing capacity of Finisar and Lumentum, we believe Apple will need multiple suppliers in order to meet their demand targets. Additionally, Apple historically does not sole source key components.

Impact to Apple. Finisar’s capacity expansion initiatives were highlighted on the previous earnings call, and VCSEL demand trends were in line with previous comments, so we are not making any changes to our iPhone estimates. However, this announcement solidifies Apple’s intention to add the VCSEL array to all of its new phones starting the fall of 2018, and possibly to other products. Today, the VCSEL array is limited to the iPhone X.  Most importantly, this investment shows the company is doubling down on AR again, and locks down the VCSEL market, which will make it tough for other smartphone players to compete in AR.

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.

2018 Market Outlook: Who’s Winning in AR & VR?

Written by guest authors Lindsay Boyajian, Product Marketing, and  Zack Kadish, Professional Services at Conductor.

For the past few years, we’ve seen the buzz around AR and VR build. All the major players from Amazon to Apple to Snap have made investments in the space. Funding for VR and AR startups, according to TechCrunch, has amounted to $2.1 billion this year in at least 217 companies in the AR and VR space.

However, is it all just hype? Is consumer interest really growing? Which brands and publishers have the most market share?

This report examines organic search data from Conductor to realize insights into consumer behavior and brand market share. The Conductor Searchlight platform tracked thousands of the most relevant, high-volume search terms that consumers used to find products, services, and information in Q4 2017 related to AR and VR.

Search market share indicates which brands and publishers own the top positions in search results. This data is invaluable because search behavior is a strong indicator of consumer buying intent. It provides insight into what brands, products, and services consumers are interested in.

The insights in this report highlight trends in AR and VR that will influence growth and adoption in 2018. It has category breakdowns to provide a better understanding of who’s dominating by product category and purchase journey stage.

Is AR or VR winning?

For years, VR was the rising star, overshadowing its cousin AR. But the tides turned in 2016 when experts began hailing the potential of AR. In September 2016, Apple CEO Tim Cook said, “My own view is that augmented reality is the larger of the two [VR & AR], probably by far, because this gives the capability for both of us to sit and be very present talking to each other, but also have other things visually for both of us to see.”

There are 30 times more searches related to virtual reality than augmented reality per month.

Despite the changing tides, VR is still leading among consumers. There are 30 times more searches related to virtual reality than augmented reality per month. Searches related to VR gaming are dominant, indicating that is where consumer interest lies today.

Search terms related to business applications of both VR and AR are negligible. For instance, “virtual reality in architecture” has a monthly search volume (MSV) of 320 and “augmented reality for healthcare” an MSV of 10. Neither technology is winning when it comes to owning the customer mind share for enterprise applications.

Which brands and publishers control organic market share?

Who owns market share for search terms related to VR & AR?

Who owns market share for search terms related to VR?

Who owns market share for search terms related to AR?

When we look at tracked searches related to virtual reality, publishers are dominant with some retailers, related to gaming (Playstation, Amazon, and Steam), capturing market share as well.

In comparison, publishers exclusively dominate tracked searches related to augmented reality. There are no retailers that have significant market share.

We also find that the majority of available market share is still unclaimed, represented by the large “other” slice. This indicates opportunity for late entrants to capture organic market share.

Are consumers ready to invest in AR & VR?

There are 5 times as many searches related to early stage intent compared to late stage. The searches are both more informational and comparative based (Early Stage and Middle Stage), rather than transactional (Late Stage). This suggests consumers are information gathering, rather than looking to buy a product or solution.

If we look at each technology individually, there are more transactional terms related to virtual reality than augmented reality. This indicates again that VR is winning when it comes to customer purchase intent.

What strategies can brands and publishers use to capture unclaimed market share?

Brands and publishers should consider optimizing their content for universal result types. 41% of all the tracked searches have video results. Given that most customers are searching for early stage content, brands and publishers should create early stage video content that answers questions like “how to” and “what is”.

Similarly, 30% of all the tracked searches have Google answer boxes, suggesting brands and publishers should optimize their content for answer boxes. Answer boxes are the search result features that appear at the top of the organic results in a Google Search.

When it comes to what topics to write about, the search data suggests there is opportunity to create content around transactional (Late Stage) search terms. These queries have relatively high search volume, but not a lot of high quality content relating to these topics. Creating content answering transactional queries is recommended.

Finally, as we have seen, publishers outperform manufacturers and brands in most categories— suggesting that it’s an ideal entry point for other brands and retailers. By contributing content or advertising on publishers that have high visibility, brands can also make a play to win market share.

The organic search data in this report comes from Conductor. For more, follow Lindsay Boyajian and Zack Kadish on LinkedIn.

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 iPhone X Supplier Receives Qualification and Meaningfully Expands Capacity

Finisar (FNSR) reported earnings for the Oct-17 quarter and the company announced they began shipping production quantities of VCSEL arrays. 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 face of the iPhone X (see below). In addition, the company announced they acquired a 700,000 square foot facility in Sherman, Texas, which will allow them to scale production of their VCSEL arrays. This new site is expected to go live in 2H18. With the combination of volume orders beginning, as well as capex initiatives, we believe Finisar received final qualification from Apple, and will begin shipping larger quantities of VCSEL arrays in the Jan-18 quarter and throughout CY18.

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. What was incremental was acquisition of the Sherman, Texas production facility which suggests that Apple will add the VCSEL array to all of its new phones starting the fall of 2018. Today the VCSEL array is limited to the iPhone X. Separately, our daily checks suggest iPhone X remains supply constraint. We believe the VCSEL laser is causing production bottlenecks for the iPhoneX and with Finisar now receiving Apple qualification we expect the supply/demand imbalance will ease in the next month.

What they said. Finisar VCSEL revenue in the quarter was in the low-single-digit millions, but the company anticipates sales can grow to “tens of millions” of dollars per quarter beginning in Jan-18 and beyond. Once they are at full capacity they will see revenues reaching $30M. However, this compares to Apple’s largest VCSEL array supplier, Lumentum, who recorded $40M in VCSEL revenue in the Sep-17 quarter.

Finisar and Lumentum continue to talk about one customer (Apple) driving demand for VCSEL arrays. We believe both companies remain supply constrained, but Apple has secured a high percentage of all VCSEL lasers created, which we view as a large competitive advantage that will make Apple a leading AR player in the smartphone space.

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.

Why the Money’s on 3D and AR for Mobile

Written by guest author Matan Libis, VP of Product at WakingApp.

Remember when VR headsets were going to be as ubiquitous as iPhones?

The launch of Facebook’s Oculus Rift and HTC’s Vive in the spring of 2016 was met with understandable excitement: the technology was impressive and the user experience exhilarating. But any dream of mass adoption beyond gamers has so far been just that. As TechCrunch reported, VR revenue in 2016 fell far short of the $3.8 billion projections.

There may yet come a day when VR is realized for its full commercial potential, but in the immediate future, the tech world is setting its sights on AR and 3D for mobile. The oversize and unexpected success of Pokémon GO ($600 million in AR mobile revenue in the first three months alone) last year turned heads and reframed the conversation.

And unlike VR, there’s more to AR than just the “wow factor.” AR has real business use cases that can be applied now, from the manufacture and design of the Internet of Things (which one report estimates could be a $7 trillion AR market by 2027), to 3D ads on mobile, to customer service and educational training. For those reasons, Tractica predicts that AR usage on mobile will grow to 1.9 billion unique monthly active users in 2022, from 342.8 million in 2016—to the tune of $18.5 billion in annual mobile AR revenue.

The tech giants are already signaling a shift to AR. Facebook, which bought Oculus for $2 billion and poured millions more into its VR efforts, announced the launch of a platform for augmented reality at Facebook’s annual developer conference in April. Microsoft is adding an AR viewer directly into Windows 10 later this year. And Apple has just released its ARKit, hoping to open the AR market to users of all kinds, with apps for gaming, design, home improvement and much more. Last year, the company’s CEO Tim Cook envisioned a future when we “have AR experiences everyday, almost like eating three meals a day. It will become that much a part of you.”

In fact, some of Snapchat’s 166 million users have already internalized this message. Those silly selfie lenses have brought AR into everyday usage, and last month the company added 3D objects to the mix. It’s not a stretch to imagine 3D/AR as the next big format for sharing data, just as we once texted each other jpgs, then videos, then GIFs.

The question is, why strive to build a device as universally used as a mobile phone when you can add an AR or 3D layer to existing phones? Mobile-first has to be the mantra of any business today. And the good news is that for companies that want in on this AR/3D wave, the barriers need not be so high.

A mobile-optimized platform allowing anyone—even non-programmers—to easily integrate 3D and AR/VR into existing apps – has the potential to revolutionize business at many levels.

For example, Autodesk has recently enabled AR/VR in its software so that CAD users and customers can experience their designs in real time. Microsoft, too, is using AR in its Power BI iOS app to give its customers the ability to augment dashboard tiles within the Power BI app by displaying AR content directly above a scanned QR code. The possibilities are really endless – easy access to AR would allow engineers to gain a real picture of what their creations will be like in the real world, it will allow interior decorators to build a virtual scenario that lets clients walk around and experience for themselves the designed space that they have invested in, and it is already being applied in retail sales; there’s Amazon’s new AR View that lets customers visualize online products in their own home, and stores like Gap and Adidas are using AR to show customers how they will look in outfits with “virtual dressing rooms”. Industrial companies can use AR technology to virtually train employees instead of exposing them to risk by placing them, untrained, in sensitive environments.

The rapid adoption of AR technology is happening and not only are large corporations jumping onboard, but small and medium sized businesses are as well. For AR and 3D, the future is bright—and it’s happening now.

This piece originally appeared on WakingApp. For more, follow their blog and LinkedIn.

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.