Apple Metaverse – Short-Sighted

Zuck has the last laugh.

• Apple is following Meta down the smart glasses route, but it will need to be more open in terms of partners and brands if it wants to see success, as I think that it is unlikely to shake up the glasses industry, as it has the mid-tier of the watch industry on its own.
• Mr Zuckerberg has finally wrong-footed Apple as it appears that Apple is pivoting towards smart glasses and away from the Vision Pro as a result of the success Meta is seeing in this space, which is a must-address for Apple, just in case this is the next big thing.
• Apple’s “Metaverse” activity was engaged in making a smaller and lighter version of the Vision Pro, but this has now been shelved in order to enable a pivot towards the smart glasses segment.
• Two glasses devices are reportedly in the works.
• First, an accessory like the Meta Ray-Bans (and now Oakleys) and second, smart glasses with a display very much like the Meta Ray-Ban Display that is available for $800.
• This would match pretty precisely what Meta has launched, and I don’t doubt that technically they will be just as good, if not better.
• However, the big question is price, as Meta is heavily subsidising these products to stimulate market adoption.
• As of Q2 2025, Meta is losing an annualised $18bn from its Reality Labs division, whose task is to create the devices and services for the Metaverse.
• There are a lot of people in this division, but I am pretty certain that the large majority of this loss is hardware subsidisation and would not be surprised if it turned out that gross margins on the Meta Ray-Ban Display were negative 100% or more.
• Hence, any product that Apple produces will be far more expensive than Meta, meaning that, like the Vision Pro, it might struggle to compete against devices from other manufacturers.
• Furthermore, Apple will also need to get far deeper into the fashion part of glasses, as I think that Luxottica is a major reason why Meta is seeing good traction with its glasses.
• Without a known brand affiliation, I think Apple may struggle to sell significant volumes of glasses, although its single-handed take-down of the watch industry is a sign of just how strong its brand is.
• I suspect that it is this example that may lead Apple to believe that it can go it alone, but I remain far from convinced that its brand will work as well in this category.
• This is especially the case when one looks at the variety that is now available on Meta’s glasses, which is likely to continue growing given that Luxottica has around 30% of the global glasses market and owns many brands.
• This leaves 70% of the market up for grabs, and so the door is wide open for Apple to do a deal of this nature should it choose to do so.
• Apple will also need to fix the execrable Siri as AI is a large part of what makes the user experience enjoyable, and this remains something it is really struggling with.
• Siri is not nearly good enough to be the main user experience for a pair of smart glasses, and so if Apple wants to compete with Meta, it will have to fix it sooner rather than later.
• Either way, this category is a must-have for Apple because there is a risk (albeit still very low) that glasses really take off and over the next 10-12 years users end up doing everything on glasses and very little on smartphones.
• This would mean the migration of the entire app ecosystem and industry to a glasses like form factor and the obsolescence of the smartphone.
• Many observers scoff at this proposition, but then many also scoffed at the idea that more than a few million people would ever own a  mobile phone in the early 1990s.
• Even in the most optimistic scenario, this is many years away, but the technology is evolving quite quickly and the idea of wearing a computer on one’s face is far less outlandish than it was 10 years ago.
• This scenario is Apple’s Nokia moment, which is why it must have an offering and be ready to address the segment just in case it takes off.
• Given the profits generated by the iPhone business, even if its Metaverse efforts cost billions, it is an insurance policy that Apple must have, as it will bear huge dividends if the smartphone segment becomes irrelevant.
• Mr Zuckerberg is clearly very comfortable at the moment and must be revelling in the discomfort of Apple now that the shoe is on the other foot.

Qualcomm vs. Arm – Short but Sharp pt. IV – ERRATUM.

• It turns out the “full and final” judgment doesn’t mean what the average person would expect it to mean, and so the comment from yesterday, “there is no way for Arm to relitigate or appeal any of these findings” (see here) is not accurate.
• In fact, Arm has already filed its intention to appeal the final judgment, and its arguments will follow sometime in the future.
• Arm also remains confident with its position in the current dispute.
• This means that the battle will now continue on two fronts, with this case continuing in conjunction with Qualcomm’s countersuit that is due to come to trial next year.
• In terms of the opinion and expectations expressed in yesterday’s daily, these remain unchanged, other than that the scope for some form of settlement or rapprochement is now even lower than it was yesterday.