Predicting what the world’s favorite tech-design firm will do is dangerous business. A few years back, we forecast that Apple would launch a tablet called the “iPad” in Businessweek, and were correct. But we’ve also suggested Apple might sell displays for holographic imagery, and nothing’s happened yet.
So this week we were intrigued when Apple bought PrimeSense, a 3D sensing company that specializes in human motion capture. PrimeSense was the brains behind the cameras inside the Microsoft Kinect game gizmo, which captures your movement in a room so your avatar can dance or shoot things on screen. PrimeSense would give Apple a perfect input for holographic image capture. Apple has its own patents for human facial capture from different angles. And most intriguingly, Apple went to the trouble to patent a holographic screen display that would beam different images to the two eyes of each person in a room — creating the illusion of a floating hologram, without you needed to wear one of those awkward 3D headsets. Inputs and outputs are aligned for Apple to push holograms through screens.
Apple needs to reboot its slowing growth
So, why would Apple do this? The tech wizard is starting to stall. iPhone sales growth, measured year over year, slowed from a whopping 140% growth rate in spring 2012 to just 20% in Q2 of this year. iPad sales growth has slowed even further, down from 90% to -10% in the same periods. And as Business Insider recently noted, Android — the main iOS competitor in mobile — has won the real game, now owning 80% of global smartphones and 60% of tablets. With the world of consumers moving to glowing mobile screens, iPads and iPhones risk becoming shiny commodities, easily replaced by the next piece of glass. Apple shipments of iPhones peaked in Q4 2012 and have not recovered since. The mobile gadget market is tipping away from Apple.
(Savvy observers will note China remains a large growth opportunity in mobile, and Apple just redesigned its entire mobile operating system with a flatter, cleaner, almost Asian motif. Hm.)
Beyond gadget competitors, the cost of mobile gadgets is falling, also squeezing Apple. Prices for smartphones globally are expected to drop from $300 on average in 2012 to $200 in 2014, a whopping 33% decline in two years. In its most recent annual report, Apple lists under “Risk Factors” (the most interesting thing in any annual report) that the company is unique in that it provides the entire hardware and software solution for its products and “as a result, the Company must make significant investments in research and development… if the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected.” In non-lawyer speak, this means Apple is worried about how to maintain margins on its current gadgets.
Solution: 3D content for iGadgets
Now, let’s look at where Apple could go. Wearables or smart TVs? While growing, those sectors combined still account for less than 10% of all global Internet device sales. Apple might launch an iWatch, but sales would be meh. Content? Well, Apple did revolutionize the music business with iTunes, and has built a significant cash stream there. iTunes revenue is running at about $20 billion a year, which, if broken out as a separate company, would put iTunes at No. 145 on the Fortune 500 list just above United States Steel.
If gadget device growth is stalling, perhaps Apple could break into another content industry? Content so sexy it jacks up all iProduct sales?
The telecommunications industry could be that target. The total telecom market is $1.8 trillion, and consumers are none too happy with their wireless, cable or phone providers. If Apple built (and held onto the intellectual property of) a revolutionary new holographic transmission display, every iTV, iPad, or iPhone would suddenly be vastly more desirable. It might also be able to charge something for transmission. Rather than build an entirely new hardware product — which is getting more difficult as designs converge to little glass panes — Apple would reinforce the uniqueness of its current gadget portfolio.
And of course, content should push gadget sales. The actual Apple patent for holography has an intriguing feature that could require hardware upgrades. It describes how a sensor, pointed at the room to find where your head would be, would also pick up ambient lighting in the room. So if the image beamed a business colleague from the West Coast into your conference room, the sunlight coming in the window could be captured to adjust the image so John Henry has a shadow by his nose. The verisimilitude would be complete. Such high-resolution output would require faster hardware gadgets … because as Apple notes in its patent, “although much more realistic, a dynamically presented holographic image also requires far greater computational ability and bandwidth than is generally required for a two-view stereo display.” Hello, future iPhones and iPads with faster chips.
To project all this 3D nuance, Apple would need the best imaging capture technology. PrimeSense has a good track record there, doesn’t it?