Sacconaghi: Apple Smartglasses could be bigger than the iPad

“I am so excited about [augmented reality], I just want to yell out and scream.” —Tim Cook

I missed this bullish note on Apple smartglasses last week. It’s from a note to clients by Bernstein analyst Toni Sacconaghi that Barrons‘ Tiernan Ray excerpted Friday:

It is evident that most players remain content to fiddle with prototype and beta products, which are still years away from commercial viability. We believe this state of persistent fragmentation provides a potential opening for Apple. Given the relative infancy of AR, Apple does not seem to be behind any of its competitors from a technological perspective: ARKit appears to be just as capable as any other solution within the AR space…

We believe that actual applications for AR will be very limited in the next 1-2 years, as long as the technology remains constricted to smartphone hardware… From an end-user perspective, smartglasses would allow users to take better advantage of AR compared to smartphones…

Smartglasses could potentially generate tens of billions of dollars in annual hardware sales for Apple. Comparing it to Apple’s last blockbuster product launch, the iPad, we believe that smartglasses could have just as wide (if not wider) appeal over time. Assuming a $500 ASP and an annual adoption rate of 2% in Year 1, ramping up to 5% by Year 3, we estimate that Apple smartglasses could generate over ~$25B in annual hardware sales within 3 years of release, with minimal cannibalization of other Apple products.

Apple would subsequently take a majority of profits within the resulting market for smartglasses, just as the iPhone, iPad, and Apple Watch have done so in their own respective markets.

4 Comments

  1. David Emery said:
    I’m just not seeing it. (pun intended)

    I do wear glasses, but I can’t see myself buying or wearing these.

    But then I haven’t worn a watch in more than 35 years.

    1
    August 28, 2017
  2. Fred Stein said:
    The AR application on the iPhone may not be “very limited”, as Tony states.

    Developers will snap up the new AR-capable iPhones, boosting sales. Later we’ll see what they create. A bit later still, those Apps will stimulate upgrades sales of iPhones and augment Apple’s fastest growing and most profitable business, the App Store. While Pokemon Go may have been a fluke, don’t underestimate what a million creative developers can come up with.

    Apple will stay ahead of Android since AR Apps will be much tougher to optimize due to fragmentation.

    So limited? Sure, limited to iPhone ecosystem which will approach 1 billion when and if we see Apple eyewear products.

    2
    August 28, 2017
  3. William Kortum said:
    Sounds like a change in tone from that abusive conference call Tim Cook had to field a few quarters back.

    0
    August 28, 2017

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