Enterprise AR will be dominated by Apple and Magic Leap

Magic Leap just unveiled an advanced prototype of its Magic Leap 2 headset and the consensus among reviewers is that it’s a great product.

Founded 12 years ago, Magic Leap first offered up a series of proof-of-concept prototypes that started out being bigger than a big refrigerator. Then, four years ago, the company introduced its first headset, aimed also at the consumer market. The technology wasn’t ready for the world, or maybe the world wasn’t ready for the  technology, but the company sold only a few thousand units. Magic Leap was barely hanging on until it raised more money to continue.

The prototype, unveiled last week, delivers universal improvement in all aspects of the device’s technology, usability and functionality. And two features put Magic Leap into contention as a device that can co-dominate enterprise augmented reality (AR), along with Apple.

How to think about the AR market

It’s helpful to divide the enterprise AR market into five general categories:

1. AR, but not glasses. This is the leading category, as smartphones can perform basic AR, but the non-wearability of phones makes this category uninteresting.
2. Glasses, but not AR. Alphabet’s Glass Enterprise Edition 2, the headset formerly known as “Google Glass,” is an example of a wearable device that places contextual information in the wearer’s field of view. This category is a heads-up display, as the virtual information visible to the user is positioned based on the movement of the head, rather than anchored to physical objects.
3. Full AR glasses. This category, represented by Magic Leap’s first product and by Microsoft’s HoloLens 2, gives the user an unobstructed view of the world, with virtual objects or words anchored to physical objects — for example, with the virtual 3D model of a building sitting on a real desk.
4. AR/VR glasses. In this category, VR hardware provides an AR experience. Instead of an unobstructed view, the user instead sees a real-time video of the surrounding environment with virtual objects superimposed on that video.
5. All-day AR glasses that look like regular glasses. This is the Holy Grail of augmented reality, which is still years away from being real.

Over the next few years, I’m predicting Apple will lead with its category 4 headset — a VR headset designed to be used for AR.

Apple has been working hard on augmented reality for many years, and whenever Apple executives talk about AR, they obsess over the Bionic Virtual Meeting Room, which I’ve talked about before. Here’s Apple CEO Tim Cook back in 2016 describing Apple’s favorite AR scenario — the virtualized meeting.

As Cook describes it, Apple’s AR will enable people to meet with holograms of other people. Or, people will meet in the real world, but all have a shared view of virtual objects — holographic 3D presentations, essentially. Or both.

Apple obsesses over meetings as the killer app for the glasses I predict will be branded Apple Reality. In addition to a universe of consumer applications, industrial, medical, military and manufacturing uses will surely follow as well.

Apple recently won new patents involving the Bionic Virtual Meeting Room and updated some older patents with new claims and new technologies. For example, it is patenting methods for heat management in AR/VR glasses and noise mitigation to deal with electronic noise from radar, projection, and other elements of the glasses.

Apple is sweating the details in advance of what will surely be the biggest launch ever in the AR space, probably next year (with a possible announcement later this year).

Given Apple’s history with successful new-category launches, plus the depth of patents in the company’s portfolio, it’s reasonable to predict Apple’s dominance in this market for both consumers and enterprises.

Two great new Magic Leap features

While Magic Leap was once aimed at both businesses and consumers, the new version is 100% targeted at enterprise markets — especially military, manufacturing, and healthcare.

Reviewers say the new Magic Leap 2 hardware is greatly improved in every detail. It features double the field of view over the previous version, longer battery life, higher fidelity imaging, better hand- and eye-tracking, a more-powerful processor, and a lighter power pack.

Magic Leap 2 has nine cameras, including two on the hand controller and four that track eye movement. The hand controller also uses infrared sensors to track hand movement.

As with the first version, the Magic Leap 2 has a “puck” component to offload weight from the headset. It contains the battery and main processor and can clip to a belt and which is connected to the headset with a physical cable. It’s got a quad-core Zen 2 processor from AMD that offers triple the processing power of the original version.

Battery life is now 3.5 hours (it used to be roughly two hours). A larger optional pack offers more battery time — possibly as many as eight hours — but adds weight.

Magic Leap 2, which is scheduled to ship later this year, has two great features for enterprises that may enable it to successfully co-exist with Apple Reality. The first is unique among major headsets: intelligent dimming.

First-ever AR dark mode

The glasses have a new dimming feature, becoming like sunglasses. While the dimming darkens your view of the world around you, virtual objects remain bright. This contrast radically improves visibility and legibility and enables the headsets to be used in bright rooms and in direct sunlight — a must-have feature for field enterprise applications.

Better still, it can selectively darken parts of the room to make AR objects clearer and sharper, and the user can adjust this dimmer with sliders. The effect can turn an AR object, which looks like a see-through hologram, into a VR object, which appears to be solid. It can make VR objects look like they’re in a spotlight in a dark room, even in a bright room.

The Magic Leap 2 has three categories of dimming. Global dimming, which is controllable by the user; automatic dimming, which adjusts to the level of light in the room; and dynamic dimming, where you can dim any part of the field of vision.

Unlike Apple’s Reality glasses, which are technically VR glasses that function mainly as AR glasses, Magic Leap’s dimming feature enables AR glasses that can function like VR glasses.

Spacial audio helps make virtual meetings more natural and can provide direction for instructional content. For example, a sound can lead the user to a specific place or in a specific direction. It can not only place sound up and down, left or right, but it can even locate sound closer or further away.

When you’re having a virtual meeting, and hear a holographic colleague speak to, say, your left, you can hear them better by turning your head to face them.

Magic Leap 2’s second killer feature for enterprises is that it’s truly open source. Magic Leap’s operating system is based on the Android Open Source Project, which is maintained by Google. Magic Leap hopes this openness will encourage the development of a robust ecosystem of enterprise developers. I think they’re right.

Magic Leap will probably reap the benefits of using a non-proprietary operating system. It’s not at all clear that organizations like the Pentagon or major healthcare providers will want to jump through the hoops of a proprietary Apple ecosystem. So Magic Leap will offer a welcome alternative.

Microsoft could have been a contender

For a while, it looked as if Microsoft would dominate the high-end enterprise AR market. Even as recently as a year ago, Microsoft announced a $22 billion contract for the US Army. Together, Microsoft and the Army are working on a HoloLens-based military system called the Integrated Audio Visual System (IVAS). But the project is in disarray. Congress has since reduced the funding. One report suggested that the Army might cancel the contract altogether.

Another report claims that Microsoft has canceled version 3 of the HoloLens. The HoloLens 3 project, code-named Calypso, was intended as a full-blown wearable computer. (Microsoft denies the report.)

Yet another rumor has Microsoft pivoting to develop mixed reality in a partnership with Samsung. It’s not clear what’s happening with HoloLens at Microsoft, but it doesn’t appear that things are going well.

Why I expect a market dominated by Apple and Magic Leap

Four years from now, it’s likely that Apple will dominate AR glasses the way it currently dominates smartphones. And like smartphones, Apple’s attention will focus on the consumer, with the enterprise as a relative afterthought.

Apple’s entry into this space will prove a mixed bag for mixed-reality companies like Magic Leap. It will capture market share, but also legitimize and mainstream the larger market.

Magic Leap is actually in a very good position to co-exist with Apple. The reason: Magic Leap is beating Apple to market with actual augmented reality, where the user is looking at the real world through glass, rather than watching a video of the real world, as will be the case with Apple’s first offering.

In other words, while Apple’s product may dominate overall, Magic Leap’s won’t compete directly with it. It will be real AR, aimed at the enterprise exclusively and offering open-source Linux as the OS. That combination — real AR, plus screen dimming — means Magic Leap will be vastly preferable for field and factory work over Apple Reality.

Meanwhile, Microsoft is lost in the weeds. Samsung will probably partner with it or someone else and fail to make a serious impact. Google is way behind. Snap is too obsessed with consumers. Meta really believes in VR instead of AR. And the dozens of other players are too poorly funded and will end up mostly getting acquired.

That leaves Apple and Magic Leap as the most likely contenders to dominate enterprise AR.