The smartphone has become the central personal computing device of the last 10 years and it has already started to show signs of slowing. However, last quarter smartphones still grew at a healthy 4.3% percent pace, which makes them a mature market. Some industry players have already talked about the death of the smartphone, but those groups also missed out on the smartphone altogether so they’re ambitious to move on to the next platform. With technologies like 5G, smartphones are still going to be the place where we see the leading edge of innovation occur with the benefits trickling down to the fledgling industries. Because I am so intimately involved with both AR/VR and smartphones in my daily duties as an analyst, I am uniquely positioned to explain why smartphones are not dead, yet.
User Experience Is Sub-Par So Far
One of the biggest reasons the smartphone is not dead yet is because the hardware to replace them still hasn’t reached a point where the user experience is comparable. The lowest-power and highest performance chipsets necessary to make standalone AR and VR headsets are still too hot and too power hungry to deliver all day battery life that we currently experience with smartphones.
Additionally, the current standalone solutions do solve the thermal issues of AR and VR headsets, but to keep thermals in check they tend to be larger than what consumers consider fashionable. The best examples of this are the Magic Leap prototypes, Microsoft Hololens and Qualcomm’s VR reference design. While we know that companies like Facebook and Google are hard at work on their own standalone prototypes, there is very little expectation they’ll be any smaller than the current AR/VR headsets out today. Right now companies like ARM, Intel and Qualcomm are supplying the bulk of the low-power AR and VR chipsets and based on the current levels of performance and power I don’t see that changing much other than maybe Apple entering the arena with their own custom designs.
Applications Aren’t Where They Need To Be
There is an even more pressing issue when it comes to AR and VR headsets replacing smartphones and that is the fact the applications are not even remotely close to where they need to be. Specifically, there aren’t anywhere near enough applications available for AR or VR headsets that will allow a user to choose their primary computing device to be an AR or VR headset. Simply put, nobody is going to go out and spend upward of $900 on an Apple AR headset if they cannot get the same or better applications that they had on their smartphone. Without the right applications, very few people are going to go out and replace their laptop or smartphone with an AR or VR headset. Additionally, the user experience needs to be the same or better than what is currently available on smartphones, which won’t be easy to do and will take some time.
This is where I believe that Google and Facebook have the right idea. They are harnessing their massive mobile ecosystem with smartphone AR and VR applications to drive the applications and developers toward the AR and VR future. Both companies have aggressive plans for both AR and VR and may very likely have an extended reality platform that incorporates both. Both companies are making major efforts today to help develop both AR and VR applications for smartphones that can easily be used on standalone headsets at a higher performance and user experience level in the future. That’s the point of what both companies are doing, they are pushing us toward a future where smartphones are no longer the dominant platform.
Companies like Microsoft completely missed the smartphone market, even after trying to buy into it with their acquisition of Nokia, which was too little too late. Microsoft refuses to allow themselves to be left behind by this new platform and that’s why they have been so aggressive to push Hololens and Windows Holographic Mixed Reality. Microsoft’s biggest problem is that while it does have the entire PC ecosystem and Windows 10, it still needs to have developers commit to the platform to be successful. Hololens is Microsoft’s most mobile product as of recent and the PC VR and AR headsets need quite a bit of horsepower to run smoothly. Additionally, with the exception of Hololens, everything Microsoft has shown has been wired and they are going to need to lose the wire quickly if they are going to compete with the smartphone guys. Companies like AMD, Intel, Peraso and Qualcomm are working on 60 GHz solutions for wireless VR headsets and while I understand that Microsoft is desperate to keep the price of Windows Holographic headsets down, the wire will not work in their favor.
This journey will take time, and some companies will be left behind, but it may take upwards of 10 years for the industry to truly transform itself into what we see with smartphones today. Just remember that smartphones were first introduced in the 90s and then again in the 2000’s as PDAs and only once Apple perfected the applications ecosystem that Nokia created did they really take off. AR and VR are still quite in the early stages of things and it will take a long time until we see the market blow up like the smartphone market did. However, I believe AR and VR will be bigger than the smartphone and PC market, they will create an explosion of digital goods unlike we’ve ever seen before. As some people have said, this new extended reality will be more like the size of the internet itself rather than any one specific hardware industry.
Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry, including ARM, Google, Intel, Microsoft, Peraso, Qualcomm and Samsung Electronics cited or related to this article. I do not hold any equity positions with any companies cited in this column. Find more from Moor Insights & Strategy on their web site, Twitter, LinkedIn, Facebook, Google+ and YouTube.
