The iPhone may be the most successful product of all time, selling over 1 billion units and making Apple the most valuable publicly traded company in the world.
Yet Apple already has to face the possibility of a world where new kinds of computers supplant the iPhone, just as the iPhone replaced iPods, and other computers, a decade ago.
The smartphone is the dominant computing platform today, but Microsoft, Google, Facebook, and now even Apple are already starting to invest heavily on augmented reality technology, which integrates computer graphics into the real world.
The thinking is that one day, this technology will end up in light and portable smart glasses, which will be able to replace all the screens in our lives — even the iPhone.
Apple sees what other tech companies are seeing: The smartphone market is not the growth engine it was a few years ago, and tech companies need something to replace it.
Apple CEO Tim Cook loves to talk about augmented reality. “I am so excited about it, I just want to yell out and scream,” Cook told Bloomberg earlier this month.
It’s not the first time he’s teased a big new product related to AR.
“AR is going to take a while, because there are some really hard technology challenges there. But it will happen, it will happen in a big way, and we will wonder when it does, how we ever lived without it. Like we wonder how we lived without our phone today,” Cook said last year.
A secret project
Apple has never said it’s working on glasses, although it’s been reported that the company is exploring a digital glasses product.
Apple never talks about future products, but it does hint at them in two major ways: through acquisitions and through software releases.
Earlier this month, Apple announced ARKit, which is software that makes it easy for an developer to make AR apps for the iPhone.
It’s already producing some amazing results, and although Apple hasn’t shown off many in-house developed apps using the software, the idea is that this fall, there will be a number of AR apps available for people’s iPhones.
So the hope is that if Apple Glasses ever come out, then there will already be a library of creative, polished applications.
Apple’s AR ambitions really got started when Apple bought Metaio, a German augmented reality company, for a price in the hundreds of millions of dollars in 2015, according to a person familiar with the sale. Metaio technology and talent underpins ARKit, with some of its former employees working in a “special projects” camera group at Apple.
And Apple has continued to buy several other companies making AR-compatible tech since then. Last week, it was revealed that Apple had purchased SensoMotoric Instruments, a German company that had built a pair of smart glasses that specialised in eye-tracking, a technology that’s seen positively by AR startups.
The purchase of SensoMotoric caught industry watchers by surprise. The German company kept a low profile, and many surveys of the AR landscape omitted them.
But they were a German company, like Metaio. Metaio’s CEO Thomas Alt, a German, now says he is a Director of Procurement on a strategic deals team at Apple on his LinkedIn profile.
Apple may be on the lookout to buy more AR companies. A contingent of Apple employees, including Metaio alums, were at Augmented World Expo in California earlier this month, three people who attended the conference told Business Insider. AWE is one of the biggest AR industry events, and most of the big companies in the space, including Microsoft, Facebook, and Google, send people.
Apple was not listed on the list of participating companies and its employees did not identify themselves as affiliated with Apple on their badges, the people said. Apple didn’t respond to a request for comment.
Cannibalise yourself first
Apple has never minded cannibalising its own products. In fact, former employees recalled this week that Apple started to work on the iPhone because it was looking at what could displace the iPod, a big revenue driver for Apple back in 2005.
Over the next few years, there is the possibility for another platform shift — only this time, it would possibly affect the iPhone, which is a much bigger product than the iPod ever was.
This expectation has already started to show up in analyst projections.
Veteran Apple analyst Gene Munster of Loup Ventures said earlier this week that his model for Apple projections sees iPhone sales growth starting to decline over the next decade.
Munster believes that iPhone sales will slowly be supplanted by a product that he calls “Apple Glasses,” which he forecasts to go on sale in 2020 for $US1,300.
“Apple will do ‘heart transplants’ and they have obviously done that before, and I think they are setting up for another heart transplant, and the magnitude of that will depend on … what these Apple Glasses ultimately look like,” Munster told Business Insider. “I think the speed of it is going to take longer than what you would think, but it is eventually going to replace the phone.”
The smartphone market is projected to grow just 3% per year through 2021, according to a forecast from market research firm IDC. The massive wave that Apple rode over the past decade has crested and is now washing out.
But one new emerging category offers the potential for massive growth: augmented and virtual reality headsets. IDG expects headset growth to hit an annual compounded growth rate of 198% through 2020.
The question is whether Apple is willing to cut into its iPhone sales to get a jump on the next big thing.
Check out some of the coolest ARKit demos below:
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.