The headset launch has been a source of tension since the project began in 2016, with Apple's operations team wanting to ship a "version one" product while the industrial design team urged patience to wait for a more lightweight version of AR glasses to become technically feasible. However, Cook has sided with operations chief Jeff Williams and overruled the early objections from Apple's designers to wait for the technology to catch up with their vision. Apple is only expecting to sell around one million units of its headset in its first 12 months, with a price tag of about $3,000, potentially limiting its appeal. Nonetheless, the success or failure of the headset could have significant implications for Cook's reputation and Apple's perceived ability to innovate.
Although Apple's modest sales target for its new product may suggest a lack of confidence, the company has a history of starting slowly in new product categories before making a significant impact in a few years. Sources close to Apple have revealed that the company is planning an effective marketing campaign for the new product despite the low target.
According to a note by Morgan Stanley analysts, the market has historically underestimated the long-term impact of new Apple products and service launches. With Apple typically selling over 200 million iPhones annually and shipping an estimated 50 million watches last year, selling 1 million headsets would account for around 10% of the still-growing VR market. This is based on CCS Insight's estimate that fewer than 10 million mixed-reality headsets were sold worldwide last year.
Amit Daryanani, an analyst at Evercore ISI, noted that Apple often uses a first-generation product to engage loyal Apple users and as a catalyst for its extensive developer community.
"The product allows app developers to gain insight into how users interact with it and identify the most promising areas for development," he explained.
Apple reported having 34 million registered developers creating apps for its devices last year, according to Cook. This allows Apple to adopt an "if you build it, they will come" strategy, paving the way for more successful product launches in quick succession.
"As the developer community grew and consumers experienced the power of apps, we saw the iPhone flourish," said Hanish Bhatia, associate director at Counterpoint research group. "We anticipate similar exponential growth patterns for the headset market, with each new generation improving on the previous one."