What device will displace smartphones?
The allure of the next consumer electronics boom is a hot topic among investors.
After all, there were almost 1.4 billion smartphones sold in 2023. A billion-plus units annually – and of an expensive consumer electronics device…
This is a massive market.
Which is why augmented reality technology has gained so much attention.
The idea of being able to “interface” with our computing systems hands-free – just by using our voice, eyes, and hand gestures – feels liberating.
The first keyboard, in the form of a typewriter, was invented in 1868. And those keyboards became commonplace in the 1880s.
Now, here we are more than 150 years later, and we’re still pounding on our keyboards, even if they are virtual keyboards on our smartphones.
I think we’re overdue for a change.
And we got a glimpse of what that might look like last week with recent announcements from Meta (META) at its Connect 24 conference.
The most interesting announcements surrounded new details about Meta’s prototype augmented reality (AR) glasses, dubbed Orion (Note: There’s no relationship to OpenAI’s forthcoming Orion large language model).
Meta’s Orion AR System | Source: Meta
As we can see in the image above, the Orion AR glasses aren’t just a pair of glasses.
The black device shown on the table houses much of the computational horsepower required to deliver high-quality AR to the glasses – this is often referred to as a “puck.” And the wristband on the left is also loaded with technology that helps the user interface with the computing system.
The technology behind the wristband came from CTRL Labs, a private tech company that Meta acquired for $1 billion back in 2019. This is the first time we’ve seen signs of commercializing the technology since the acquisition.
CTRL Labs had been building a non-invasive neural interface for computing systems before its acquisition. The electromyography (EMG) technology embedded in the wristband can read electrical signals traveling between the hands and the brain. It decodes the output of our motor cortex.
Those signals from the EMG wristband are then wirelessly transmitted to the “puck,” which wirelessly connects with the AR glasses, to control the AR software applications.
The wristband is an important piece of technology, as it enables another method of user interface through a variety of hand and finger movements.
It’s easy to imagine the wristband technology shown above becoming somewhat of a fashion accessory that looks like a bracelet or is incorporated into a smartwatch, providing even more utility.
A perfect example of how these controls come in handy is shown in the short video below.
The Orion technology enables users to multitask across several windows of applications. Shown in the middle is an ongoing video call, with other windows for messaging and browsing open on the left and the right.
Source: Meta
One of the more interesting features of the AR software is the ability to incorporate Meta’s multi-modal artificial intelligence (AI). A simple example is shown below.
The AI can “see” available ingredients on a tabletop and then suggest a recipe using those ingredients.
Source: Meta
While the software and use of AI with Orion are exciting and easy to understand, arguably the most important advancement with Orion is its lens technology.
Meta took a big step in developing optics for Orion using silicon carbide (SiC), a material typically used for producing semiconductors for high-power applications.
Orion’s silicon carbide lenses help keep the AR glasses lighter weight and enable a 70-degree field of view when using the glasses. While that might be a long way from our ability to see about 180 degrees with our eyes, it’s quite good for AR technology.
This is an impressive prototype with incredible potential. And while bulky, the form factor isn’t bad, and we can expect more miniaturization over the next couple of years.
There is one problem, however… it costs roughly $10,000 to produce them.
The computing system, the silicon carbide lenses, the EMG wristband, the cameras, sensors, and wireless technology are all expensive.
And today, the cost is nowhere near something that could be priced for the mass market.
Meta didn’t provide any guidance for when Orion will become commercially available. One estimate suggests it will happen around 2027.
The technology is ready today, so the grand challenge to solve for now is: how to mass produce something at a price point similar to that of a high-end smartphone today.
This is a major initiative for Meta and a time-sensitive one at that, despite the company not giving guidance on a timeline.
On the surface, these developments might look like an effort to develop some expensive, cool AR technology. But that would really miss the underlying battle that is going on in tech and why this is so important to Meta.
This is an entirely new user interface for computing systems.
For decades now, personal computers have been dominated by Microsoft, and to a much lesser extent Apple software. It’s either Windows or MacOS as our operating systems for our laptop and desktop computers.
The same is true with smartphones. Alphabet’s (Google’s) Android OS dominates the global market for smartphones with Apple a far distant second with its iOS.
These three companies define and control how we interface with our computers and our smartphones. With the advent of augmented reality software and its user interface, there is a massive opportunity to redefine which company, or companies, control and dominate the augmented reality operating system.
And the value of that is more than a trillion dollars.
I read an absurd article from a major financial media outlet titled, “Zuckerberg’s Metaverse Gamble Pays Off With $201 Billion Fortune.”
Like the headline, the article suggested that Zuckerberg’s bet on the metaverse was a stunning success. The author’s “evidence” was the rise in share price and Zuckerberg’s increased net worth.
It was so preposterous as it demonstrated a complete misunderstanding of Meta’s business and what happened with its investments in metaverse, which have been a horrible failure. We explored this in The Bleeding Edge – There Is More Than One Metaverse.
Meta’s efforts to create a Meta-led, online virtual world that it would control – and everyone would develop software and applications in – was a disaster.
Zuckerberg was forced to throw the towel in on its metaverse in late 2022 and redirect its resources to artificial intelligence and its social media platforms, which has been an incredible success.
Almost 99% of Meta’s total revenues come from its social media platforms. And almost 98% of all revenues come from advertising revenues generated by selling access to our data to advertisers.
Its business success has zero to do with Zuckerberg’s “bet on the metaverse.”
The fact is that Meta’s revenues have jumped from $116 billion in 2022 to more than $161 billion this year. Better yet, its free cash flow has popped from $19 billion to $46.4 billion in the same time frame.
That’s why Meta’s share price is up 510% from its 2022 lows and Zuckerberg is now worth more than $200 billion. Nothing to do with any metaverse… and everything to do with advertising.
Meta is an absolute powerhouse when it comes to advertising. And that’s the point of augmented reality…
If Meta can be successful in dominating the market with AR, it will control the next-generation computing interface. That means it will have the ability to box out Alphabet and Apple with its own operating system.
It would become the gateway for software applications and even more advertising revenues. And that’s why it is investing so heavily in AR.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
