It’s no secret that Apple (NASDAQ:AAPL) is interested in augmented reality (AR). The company continues to develop and promote its ARKit technology that brings augmented reality to iPhones. The end game is AR glasses and a new avenue of growth for AAPL stock.
Apple has long been rumored to be working on just such a product, and just confirmed its interest through an acquisition. The company confirmed it has purchased Akonia Holographics, a Colorado-based startup that specializes in lenses for AR glasses.
With the market for augmented reality predicted to hit $60.55 billion over the next five years, the possibility of Apple grabbing a chunk of that with AR glasses has significant long-term upside for AAPL stock holders.
Report: Apple Purchases AR Glasses Startup Akonia Holographics
Reuters reported yesterday evening that Apple has confirmed it acquired Akonia Holographics, a startup based in Colorado. The company launched in 2012, initially focusing on holographic data storage before switching gears to focus on lenses for AR glasses. The company holds over 200 related patents. On its website, Akonia Holographics describes its AR lens technology:
“Our HoloMirror technology suite employs our proprietary volume holographic media and know-how to uniquely enable thin, transparent smart glass lenses that display vibrant, full-color, wide field-of-view images.”
As usual, Apple refuses to comment on details, such as the purchase price or even the date of the deal, and Akonia Holographics isn’t talking either. According to Reuters, the deal likely took place early in 2018.
What Does Apple Gain?
Augmented reality is on track to become a very big market. While virtual reality has had much of the spotlight in recent years — including Facebook’s (NASDAQ:FB) $2 billion acquisition of Oculus in 2014 — AR is predicted to have a market nearly double the dollar value of VR, which is estimated at $34 billion by 2023.
That’s based on AR being held back by current technology limits. Solve those issues and $60.55 billion may turn out to be a lowball estimate.
In terms of potential revenue and a pop for AAPL stock, AR makes sense instead of wading into VR.
While VR is a standalone, isolated experience that’s best suited to entertainment, AR has much wider applications. Because AR superimposes digital content over top of the real world and allows it to interact with that live view, it has medical, industrial and consumer appeal, as well as entertainment.
We got an early taste of that entertainment potential with the runaway success of Pokemon Go.
As much as Apple is pushing ARKit for the iPhone, the company knows that the real key to augmented reality is glasses. AR on a screen is never going to match the immersive experience of AR glasses that overlay the wearer’s real-time view of the world with interactive digital content.
Companies like Microsoft (NASDAQ:MSFT) with its HoloLens and the greatly hyped Magic Leap are hard at work on AR headsets. But they’re being held back by glasses that are big, goofy looking, expensive, and rely on lenses that are darkened for use indoors only. Alphabet’s (NASDAQ:GOOGL) Google Division tried to go with standard glass frames for its failed Google Glass, but those were smart glasses that overlaid info in a limited fashion — they didn’t attempt to interact with the background in the way AR does.
With the purchase of Akonia Holographics, Apple gains technology that could give it key advantages. That includes thin and transparent AR lenses. If Apple can leverage what Akonia Holographics has been working on to create AR lenses that are thin enough to fit in standard eyeglass frames and transparent so they can be worn at all times, Apple’s AR glasses could be at the forefront of an augmented reality revolution.
Bloomberg is calling for Apple to release its AR glasses as soon as 2020, and reports the company already has a version of iOS-specific to the product — similar to the way it customized iOS versions for the Apple Watch and Apple TV.
With ownership of Akonia Holographics AR lens technology and its experience with ARKit, Apple is in a position for a breakthrough in augmented reality. If it can come up with the Holy Grail — AR glasses that look like regular glasses instead of a steampunk headset, function outdoors as well as indoors, and are priced low enough that consumers can afford them? Apple AR glasses could become the next iPhone in terms of impact on AAPL stock growth.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
