PC Technologies and Product Categories to Watch in 2021

As the year winds down, I’ve been thinking a lot about the big product announcements and technology shifts we’ve seen inside this tumultuous year. While we’re all hoping 2021 will at some point bring our lives back toward something more like normal, the impact of COVID on the technology markets will carry on throughout the year. What follows is not so much a list of predictions but a list of PC-focused topics worth continuing to watch closely in the new year.

Sustained PC Growth
As we entered 2020, the conventional wisdom pointed to a flat to modestly down year for traditional PCs, which had just seen the final commercial laggards make the move from Windows 7/8 to Windows 10. Early in the year, as China faced the first pandemic-forced shutdowns that would impact the supply of PCs (for the world) and demand for the products inside the country, it looked as if the pandemic might have a broadly negative impact on the PC Market. We know now that wasn’t the case, and as consumers, businesses, and schools around the world moved to live, work, and learn from home, demand for especially notebook PCs skyrocketed. Throughout the year and into December, we’ve seen demand far outstrip supply, and as we head into 2021, a great deal of that demand is still waiting to be filled.

Expect the first half of 2021 to drive very good PC volumes. At present, the second half is less clear, but assuming the supply chain can finally catch up with existing demand, we are likely to see volumes drop off some by then. The real question: Once we’ve widely distributed vaccines, and the world returns to whatever the next normal looks like, will the PC retain its newly reestablished important role? Or will it slide into the background again as people shift back toward greater mobility, putting down their notebooks and picking up their smartphones again? We’ll be watching closely to determine if 20/21 sets a new, lasting TAM for PCs or if the market quickly reverts to its pre-2020 rhythms and market totals.

Expanded Silicon Diversity
One genie that’s not going back into the bottle is the industry-wide shift toward great silicon diversity in PCs. For a very long time, Intel ruled the PC space, with AMD playing the foil to its total market dominance. After several years of process challenges, missed deadlines, and product shortages, Intel finds itself in a dramatic battle with a newly resurgent AMD that not only has highly competitive products but the institutional patience to grow its share at a deliberate, sustainable pace. Of course, in the past, Intel has often done its best work when under challenge. With its first 11th Gen Core products shipping now to consumers, a new Evo platform story to tell, and the Vpro-branded commercial products set to hit in 2021, Intel is ready for battle.

Beyond X86, we’ve got smartphone silicon behemoth Qualcomm continuing to iterate on its PC-focused Snapdragon chips, too. While it has yet to have a breakout hit in the space, product wins with vendors including Microsoft, Samsung, Lenovo, and others suggest there is market viability if it keeps iterating.

Finally, this quarter Apple began shipping its first Apple Silicon-based products in new Macbook Airs, Macbook Pros, and Mac Minis. Many were disappointed Apple didn’t target a lower price point with these new products. Still, I expect they will do just that at some point in the future, as the company shifts toward a model comparable to their iPhone lineup that sees the current lineup shift downward in price but stay in the market, as the next generation of products launch. In the meantime, Apple seems to be driving substantial performance gains from its new chips, although there will be heated discussions about the veracity of those claims and the benchmarks that drive them well into the new year. All told, 2021 should see some fascinating movements in silicon.

5G PC Attach Rate
Another silicon-based area to closely monitor in the new year is the growth in cellular-connected PCs. This has long been a favorite topic of mine, as in the “before days,” I traveled extensively and had little use for a PC without an LTE connection. While few of us are traveling at present, an unexpected side benefit of an always-connected PC has been the ability to use the LTE (or in some cases now, 5G) modem instead of connecting to an overcapacity home broadband network. While your partner, children, relatives, and others fight over limited throughput on the router for Zoom calls, Youtube streams, and the like, a user with a connected PC can collaborate with relative ease.

I don’t expect a radical shift toward LTE/5G enabled PCs for employees working at home. Still, I expect many companies to look at this option as they continue to figure out where their workforce will sit in the future and how they will pay for connectivity. As more organizations shift toward smaller office setting designed to facilitate meetings versus housing the entire staff every day, connected PCs make even more sense from an infrastructure built-out perspective. One thing is clear: The PC vendors need to build better relationships with the powerhouse carriers in all regions to make these types of technology shifts possible.

Accessories Bonanza
PCs have seen the most headlines, but accessories are a category that has also enjoyed a banner year in 2020. With so many people outfitting home offices, or kitchen tables, with all the pieces necessary to drive productivity, we’ve seen huge growth in monitors, webcams, microphones, keyboards, mice, and headsets. For a time, midyear, it was literally impossible to buy a brand-name webcam anywhere.

I expect these categories to continue to see substantial volumes through much of 2020 as consumers, companies, and schools continue to adapt to what will likely be a mix of in-person and from-home activities throughout this year. Hastily purchased accessories will get replaced by better quality ones. And in many situations, we may see people looking to procure one set of accessories for use at home and another for us at work. Products that help users efficiently shift between smartphone and PC, PC and tablet, and tablet and smartphone will be in demand. Expect growth in the ear-worn wearables category to continue to grow by leaps and bounds.

Here Comes DaaS
Finally, to close out, I return to Device as a Service (DaaS), one of my favorite topics. All signs point to the pandemic as a driving force in many company’s broader digital transformation efforts, of which DaaS can be a crucial part. For many, shifting from a traditional model of procuring, deploying, and managing devices themselves to one where they pay an OEM or MSP to do this work offers clear advantages in terms of efficiency and workload. Based on my conversations with players in this space, COVID has accelerated many companies’ interest in DaaS, especially as they look toward the future of their distributed workforce and how they equip them to drive productivity. Expect to hear a great deal more about DaaS in 2021 as companies of all sizes take a closer look at the benefits it offers.
This has been a very challenging year, and like most people, I’m eager to close out 2020 with an eye toward a challenging but hopeful 2021. Many thanks to all who read me here at Techpinions. Happy Holidays and I look forward to seeing you all in 2021.

Custom Mac Silicon Frees Apple to Iterate, or Not, as it Pleases

Apple’s event this week brought a few surprises (three new Apple-Silicon based Macs, not just one) as well as some frustrating nonsurprises (no touchscreens, no LTE or 5G, and no new entry-level starting prices for notebooks). Based on Apple’s deliberately vague testing proclamations, the M1 system on a chip (SoC) certainly appears to be a powerful performer that will also offer substantial battery life improvements. We will know more about both in the coming days as reviewers begin the process of benchmarking and real-world testing. What is clear, however, is that the M1 has already caused Apple to radically rethink the role the processor plays in differentiating products in its lineup. Just as important, I believe it will give Apple significantly more freedom to iterate around its Mac form factors, features, and, eventually, prices.

Three New Macs
I won’t go into too much detail about the new Macs, as Carolina covered those details in her excellent day-two column. Like her, I wasn’t surprised that Apple chose to effectively hold the line on its pricing (with the exception of the $100 drop on the Mac Mini) because it needed to establish out of the gate that the M1 isn’t a low-cost alternative to Intel, but a powerful custom-designed replacement that merits like-for-like pricing.

What’s truly remarkable about this product launch is that by using the same chip across a new Mac Mini, MacBook Air, and MacBook Pro, Apple effectively eliminated one of the key ways the PC industry (and Apple itself) has traditionally segmented its products. Processor performance level and branding have always been a primary differentiator in the market. With the M1, Apple says the quiet part out loud by acknowledging that a single chip, placed into three different thermal envelopes, will drive three different performance levels.

That last part is going to fry a lot of people’s noodles, especially those who have traditionally made buying decisions based on the often small but highly marketed speeds and core count of one system’s processor over another. You can see it now as buyers wrestle with a decision between buying a fanless MacBook Air or a MacBook Pro that offers improved performance predicated entirely on the fact that it has a fan that lets the M1 processor run faster, longer than the one in the Air. Ultimately, I expect that the M1 and Apple’s subsequent Mac processors will lead an increasing percentage of their customers to think less about the processor and what its esoteric speeds and feeds mean to them. But this transition will take time, and it will cause some hand-wringing along the way.

One of the early issues with the shift to the M1 is RAM limitations. All the new Macs offer a standard starting RAM allotment of 8GB and a maximum of 16GB. For years it has been notoriously hard—if not impossible—to add aftermarket RAM to a Mac, but with the M1, it is simply not possible because the memory is part of the SOC. This 16GB limit likely isn’t a dealbreaker for most MackBook Air buyers. Still, it has caused a small but vocal minority of Mac diehards to pump the brakes on new MacBook Pro and Mac Mini purchase because they are unwilling to buy a system with less than 32GB of RAM. Here’s the thing: Conventional wisdom (and experience) may dictate that power users need 32GBs, but that may not be the case with the M1’s Unified Memory Architecture. We will have to wait for the benchmarks and real-world testing to know for sure.

Another notable thing about the new M1-based Macs is that they all support just two Thunderbolt/USB 4 ports, whereas some previous versions of both the Mac Mini and MacBook Pro offered up to four. It is unclear if this is an M1 limitation or an Apple design decision. However, this too may be a dealbreaker for some users, who—in the case of the Mac Mini or MacBook Pro—will then need to look back at the legacy Intel-based products still on offer or wait for subsequent product launches.

No Touch, No LTE, and No New Form Factors…Yet
I was not surprised that Apple opted to go with its existing chassis for these product announcements. Particularly in the Tim Cook era, Apple tends to be quite deliberate when it comes to new product designs, so it made sense that the new products look just like the old products. It was also not shocking that Apple did not add a touchscreen to the Mac and did not roll out an LTE or 5G option for the MacBook Air or MacBook Pro. And to many people’s disappointment, the company did not introduce a new lower-priced notebook. However, the fact that Apple did not do any of this week doesn’t mean that it won’t in the future.
In fact, I see that as one of the great benefits of the move to Apple Silicon. While the company decided the shift to the M1 was enough change for 2020, the flexibility inherent in rolling its own silicon—and knowing the ramifications of a future chip in terms of battery life, performance, heat, I/O, and cost—uniquely positions the company to iterate on the Mac in ways it has never done before.

Obviously, there will be new designs, likely in the service of Apple’s obsessive drive to make everything thinner and lighter. With its own silicon on board, Apple will be free to make design changes without waiting on a partner or making concessions for features it deems unnecessary for the Mac. I’m less convinced Apple will add a touchscreen to the Mac, even though many of us have pushed for it for years. However, the support for iOS apps, enabled by the M1, could mean Apple rethinks this position in the future. There is a slightly better chance that Apple eventually rolls out a Mac with cellular connectivity. This would require a fundamental redesign of its notebook chassis, and if it were to happen, it would likely occur using a 5G radio. There is a great deal of interest in connected PCs today due to the massive shift to work from home, but it’s clear Apple won’t be moving quickly to try to catch that wave.

Finally, I expect Apple to eventually roll out more affordably priced Mac notebooks (note I didn’t say low-end). It is instructive to look at how Cook has approached this in his other categories. Traditionally, it was with waterfalled products—last year’s iPhone drops in price, the previous year’s product also decreases in price, and Apple keeps selling them to reach a wider audience. More recently, the company has launched purpose-built products designed to appeal to more value-oriented buyers, such as the second-generation iPhone SE and the Apple Watch SE. I suspect Apple will begin the process here by waterfalling M1-based products into lower price points as it announces new products with next-generation M-Series processors.
By shifting its lineup away from Intel, Apple will no longer have to deal with people always pointing out that it sells products with years-old chips that look dated versus the other PC players. Yes, Dell, HP, Lenovo, and others will always ship products with the latest Intel processor. But, Apple will argue, this two-year-old M Series processor is still competitive because it is custom-designed to run this product.

I’m eager to see the first benchmarks and to test out one of the new Macs myself. If the new M1 performs as well as Apple suggests, then this silicon transition is likely to have a much more significant impact on Apple (and its competitors in the market) than any previous transitions. This has been a resurgent year for the PC category, and things just got a whole lot more interesting.

Oculus Quest 2: Ready For PrimeTime?

I recently started testing the new Oculus Quest 2 virtual reality (VR) headset from Facebook, and it’s a very good product. As I noted back in September, it’s an evolutionary step up from the original headset, with a handful of technical improvements, delivered at a substantially lower starting price ($299). I expect the Quest 2 to sell very well, bringing quality VR to a much wider audience than ever before.

Smooth Setup Experience
The Quest 2 is slightly lighter and smaller than its predecessor, and I found these decreases made it noticeably more comfortable to wear. Some reviewers have complained about the Quest 2 head strap, which is all fabric versus the plastic one on Quest, but I didn’t have any trouble adjusting the fit to my head. That said, it’s clear the new head strap was an area where Facebook shaved cost, and the company offers several after-market versions (starting at $49) for those who want something more robust. The other area where Facebook saved some money is the inter-pupillary distance adjustment. While the original Quest had a slider that allowed for precise adjustments, the new Quest has just three settings. I used the default middle setting, so this also wasn’t an issue for me.

After completing the physical adjustments, running through a setup tutorial, and installing a system update, I was off to the races. I don’t remember much about setting up the original Quest, but with the Quest 2, Facebook has created a smooth and mostly frictionless experience that should be straightforward for even a VR novice.

Notably Better Display and Next-Gen Silicon
One of the significant changes with the Quest 2 is the shift from dual OLEDs to a single, fast-switching LCD that offers 1832 x 1920 resolution per eye. The display supports a 72Hz refresh rate at launch, and a future software update should enable a faster 90Hz refresh rate. In a word, the display looks fantastic. I found the new screen to be even more immersive than the Quest, although when you’re fully engaged in a great game or app, you stop paying too much attention to the pixels. After spending about 30 minutes in the Quest 2, I put on the original Quest, and at this point, the screen enhancements were much more noticeable. Perhaps the most significant improvement on the new headset is the much less perceptible screen door effect.

The Quest 2 also includes a faster processor, Qualcomm’s Snapdragon XR2, and more RAM than the original Quest. I didn’t notice better performance with my existing apps, but I suspect that we’ll see more software take advantage of the better silicon over time. I also expect the new processor to help drive a better PC-tethered experience through the Oculus Link. I haven’t yet acquired the right USB Type C cable to test this feature, but I look forward to doing so soon (and playing Half-Life: Alyx).

The other update to the Quest 2 is to the touch controllers. The new version has a slightly wider, rounder surface area where you place your thumbs. I don’t find them to be noticeably better than the original versions, although I do wish they were plug-in rechargeable versus a standard AA battery. One thing worth noting is that since the launch of the original Quest, Facebook has rolled out hand-tracking capabilities, and I was able to set this feature up in the Quest 2. At present, the apps I’m using require controllers, so I used hand tracking primarily for navigation. But I’m excited to see more apps use hand tracking, as it has the potential to increase the feeling of immersion inside VR dramatically.

Ready for Prime Time?
All told, I’m very impressed by the Quest 2, and the product should sell very well for Facebook this holiday season. In fact, in many countries—including the United States—we are still dealing with a pandemic where the infection rates are going up instead of down, which means smart people will be spending more time at home in the coming months. Throughout much of 2020 VR headsets and the Quest, in particular, have been nearly impossible to buy as demand radically outpaced supply. Our view into the supply chain suggests Facebook has placed massive orders for the Quest. Even so, the headset initially sold out (it’s available again now). However, accessories for the device, including the previously mentioned headstrap, are pretty hard to come by.

So I think the Quest 2 will sell very well through the end of 2020 and into 2021, even as it faces stiff competition from the launch of new consoles from both Microsoft and Sony shipping this month. The Quest 2 should please existing VR users looking for an upgrade, and it will delight anyone who has never used VR or whose only VR experience was in an early smartphone-based product. The Quest 2 is also poised to help drive the continued robust adoption of VR in business.

Is the Quest 2, and VR more broadly, ready for a move into the mainstream? That’s still unlikely. But with each iteration, the hardware gets better and less costly, and the experience more immersive and enjoyable. What the market needs now is more mainstream content. To date, gaming remains the primary consumer driver, and while it is obviously a lucrative market, it’s not going to win over everyone. To date, there’s still no killer app that would make the average consumer buy into VR. Facebook has long suggested that social could be that use case, and there’s no doubt that games with a social aspect have legs in VR. When Facebook launches its upcoming Horizon social platform (currently available as an invite-only beta), we’ll get a chance to see if that is what VR needs to win over the masses.

Apple Takes Another Swing at the Smart Speaker Market

Apple kicked off its annual iPhone launch event this week by announcing the $99 HomePod mini. I’m excited to try the product, which utilizes several pieces of custom silicon, leverages the company’s strong position in categories such as smartphones and wearables, and once again emphasizes Apple’s research into delivering high-quality sound. All that said, while I’m sure a good number of consumers entrenched in the Apple ecosystem will buy the HomePod mini, I’m still not convinced the product will dramatically change Apple’s overall fortunes in the smart home market.

Impressive Tech
The HomePod mini is an impressive bit of tech, all wrapped up in a 3.3-inch tall, acoustically designed seamless mesh fabric that comes in space gray or white. It leverages Apple’s S5 chip, which first shipped in the Apple Watch Series 5, as the brains of the operation. That’s a notable change from the full-sized HomePod, which uses an A8 chip that first shipped in the iPhone 6. In addition to driving smart assistant functions, Apple says the S5 drives computational audio that adjusts dynamic range and the speaker hardware to optimize sound based on the content that is playing.

The HomePod mini also includes Apple’s U1 ultrawideband chip, which Apple started including in iPhones in 2019, and added to the Series 6 Apple Watch. When you bring a U1-enabled iPhone close to the HomePod mini, it sees the phone and offers up handoff opportunities. For example, if you are listening to music on your phone as you enter the room with the HomePod Mini, you can transfer the audio over to the smart speaker.

Perhaps the most compelling new feature is Intercom, which lets you leverage multiple HomePod speakers (including the original) to make house wide-announcements using a new feature called Intercom. Yes, competitors such as Amazon’s Echo already do this, but Apple’s special sauce is that in addition to its smart speakers, the message will also play out over all the iPhones, iPads, Apple Watches, and AirPods in the house, as well as through CarPlay.

Like the original HomePod, which sells for $299, the mini will offer multiroom audio, stereo pairing, and smart hub features. However, it does not support spatial awareness or home theater with Apple TV 4K like its bigger brother.

Apple’s Challenges
The new HomePod mini is a huge step in the right direction for Apple and should help it make inroads into the smart speaker category where its original, high-priced HomePod has languished. But as Ben noted earlier this week, the elephant in the room remains the issues with the “smarts” behind its smart speaker: Siri. As a smart assistant, it is still not very good. And while Apple can point to stats about how much better Siri is than before, the fact of the matter is that the company has a huge job ahead of it in convincing people who have had poor experiences with Siri to keep coming back and trying it again.

I test a great deal of hardware, and I have easy access to the smart assistants from Amazon, Google, and Apple. And in my personal life, I always use the first two before I turn to Siri. In fact, the only time I use Siri is on the Apple Watch, when I’m on the go. My experiences with Siri have been so frustrating that I took the extra step of installing Amazon’s $50 Echo Auto in my vehicle so I can access Alexa there instead of using the Siri on the iPhone sitting on my passenger seat.
And it is easy to fixate on Siri’s issues versus the smart assistants from Amazon and Google, but Apple’s challenges extend beyond that. In China, for example, companies such as Xiaomi, Alibaba, and Baidu all have voice assistants that my colleagues there say perform better than Siri. According to IDC’s Smart Home Tracker, China is the second-biggest smart speaker market behind the U.S.

Beyond the Siri issues, one of the other significant challenges Apple faces is the fact that many early adopters have already chosen their smart assistant. We have standardized on Echo (seven and counting) in my house, and our utilization has only gone up during the pandemic. It is mostly basic stuff, loads of timers, weather reports, music and podcasts, and occasional questions about store closing times or random facts. We also use Alexa to turn off lights, and we use it all the time to call other rooms or make household announcements (which now show up on our iPhones running the Alexa app).

And while the HomePod mini’s $99 price is way more attractive than the HomePod’s current $299, it is nowhere close to the Echo Dot’s list price of $50, and the fact that you can often buy the Dot for $30 or less. And that is a bit of an issue, as smart speakers really begin to show their value when you have more than one. Part of the reason we standardized on the Echo was the simple fact that it was affordable to put them throughout the house. I have no doubt that the HomePod mini will sound better than my current third-generation Dots, but in my house, sound quality is important only in a few rooms, and frankly only matters to me.

Finally, it is important to note that while Apple did say that the new HomePod Mini would support some third-party music services, it doesn’t include currently offer support for Spotify. For many, that will be a dealbreaker, and I hope it is a fix Apple can make soon after launch.

Still a Growing Market
While Apple certainly faces some serious challenges in the smart speaker market, the HomePod mini’s introduction puts it in a much better competitive position. And its ability to leverage the iPhone to drive interactive experiences with the speaker could be a difference-maker for many. If the company can better leverage its HomeKit capabilities to make its smart speaker a more capable home automation hub, that should resonate with many people, too. Finally, there are undoubtedly plenty of Apple customers who have waited on the smart home sidelines for the company to field something more competitive before jumping in.

In fact, while we’ve seen the smart speaker category expand at a very rapid pace in the last few years, we still plenty of growth in the coming years. According to IDC’s Smart Home Tracker, smart speaker volumes will grow at a double-digit pace next year, pushing toward 160M units worldwide. With the new HomePod mini, I expect Apple will grab a more significant share of that pie. To do so, however, the company must keep pushing. In addition to continued work on Siri and the inclusion of Spotify, one other thing I’d like to see Apple do is to iterate faster in hardware. It announced its original HomePod way back in 2017 (and launched it in early 2018). This market—and its competitors—are evolving too fast to wait years between product announcements.

Microsoft Expands Surface Lineup; Announces Updates to Windows on Arm

This week the Surface Team at Microsoft announced a new, more affordable notebook called the Laptop Go and an update to the Qualcomm-based Surface Pro X. The former fills a gap in the company’s lineup and is going to appeal to many buyers. The latter reaffirms Surface’s commitment to Windows on Arm and will take advantage of several software updates the company also announced this week, including new and updated native apps and new 64-bit x86 emulation capabilities.

Expanding the Lineup
The Surface team has had a monumental year and a very busy Fall. Back in September, they announced the Surface Duo, its category-launching, Android-running, dual-screen having re-entry into the don’t call it a smartphone, smartphone. I’ve had the privilege of using that product at length, and it’s made a believer out of me in terms of the utility of a two-screen mobile device. Similarly, last year’s Surface Pro X helped cement my long-held belief that there is a place in the market for Windows on Arm. This week’s new hardware does not usher in any new categories but is monumental, nonetheless.

The Surface Laptop Go starts at $550 and includes a 12.4-inch touchscreen display, an Intel 10th Gen i5 processor, up to 16GB of RAM, and 256GB of storage. It comes in three colors (Ice Blue, Sandstone, and Platinum) and supports One Touch sign-in through Windows Hello and a Fingerprint Power Button. I’ve long been a big fan of the design of the existing Surface Laptop, now on version 3, which starts at about $960. The new Laptop Go brings many of those same design sensibilities to a lower price point. And like the Surface Go detachable—which brought to market a lower-priced Surface tablet—I expect the Surface laptop to appeal to a wide range of buyers and to ship in notable volumes.

With the Laptop Go, Microsoft is attempting to bring the Surface brand downward into the mid-priced market without tarnishing its premium status. It pulled it off with the Surface Go, now in version 2, and starting at $399, and I expect it to do it here, too. We watched Apple do something similar with the launch of its $399 iPhone SE, which I suggested might just be its most important iPhone launch of the year.

Microsoft’s timing of the Surface Laptop launch bodes well, too. As I noted earlier this year, as COVID-19 swept the globe, the first technology product many people, companies, and schools moved to purchase was the PC. That resulted in a blockbuster second quarter, and all signs point to the just-completed third quarter as being similarly robust. We should see those strong volumes carry into the holiday quarter, even as the world continues to contend with the pandemic and the resulting economic hardships. All told, it seems a very sensible time to launch a well-designed but affordable notebook product into the market.

Focus on Windows on Arm
In addition to the Surface Laptop Go, Microsoft also announced an update to its flagship tablet, the Surface Pro X. The first Pro X launched last October, leveraging a custom processor Microsoft partnered with Qualcomm to design called the SQ1. This year’s refresh offers an update to that processor, called the SQ2, as well as a new platinum exterior finish option. The new device slots in at the top of the Surface Pro X lineup with a starting price of $1,500, while the existing Matte Black version 1 with the SQ1 chip remains in the lineup with a starting price of $1,000.

The updates to the Surface Pro X line will appeal to buyers looking for the best performance they can get from an Arm-based Surface. But perhaps more important was the news that dropped just before the Surface announcement, which was that Microsoft was bringing a host of improvements to the broader Windows on Arm platform and its supporting apps. Chief among them: Plans for an updated version of the Edge browser it promises will run faster and use less battery and a new native Microsoft Teams application. Finally, starting in November, it will roll out support for 64-bit x86 emulation to the Windows Insider Program. That last part is incredibly important, as to date the platform has only supported emulation of 32-bit Windows apps. That lack of 64-bit X86 emulation left out many modern desktop apps. This support, which will roll out widely next year, could be a game-changer for the platform if the performance of those apps is good.

With the updated Surface Pro X and the upcoming enhancements to the Windows on Arm platform, Microsoft clearly affirms its plans to support the platform going forward. To date, industry support for Windows on ARM has been tepid at best, with Lenovo being the only other major PC OEM to consistently ship products utilizing Qualcomm’s newest PC parts. However, as Apple moves to ship its first Macs using Arm-based Apple Silicon later this year, I can tell you that the broader PC industry is watching closely. With these improvements to the Windows on Arm platform, Microsoft makes it much more compelling for these OEMs to move to support it with new products down the road.

And those same OEMs will also be watching closely to see how both the updated Surface Pro X and the new Surface Go Laptop perform in the market during the all-important holiday quarter. Over the years, Microsoft has built up an impressive portfolio of devices that spans form factors, technologies, and price points, silencing anyone who doubted the company’s commitment to hardware. With these latest products, Microsoft expands its lineup again, positioning Surface for a big holiday quarter and continued growth into the new year.

Facebook Doubles Down on VR with Oculus Quest 2

At its annual Virtual and Augmented Reality-focused event, now named Facebook Connect, Facebook announced that the Oculus Quest 2 would begin shipping in October with preorders open now. In addition to announcing the Quest 2 at the virtual event, the company also took the opportunity to talk about upcoming VR software (including an early-stage desktop experience), its research projects around AR, and its plans to ship a pair of smart glasses in partnership with Ray-Ban next year. Today I will focus on the Quest 2, its technical specs, its price, and its potential ramifications for the VR market.

Standalone VR
Today’s VR market offers three headset types: screenless viewers that use your smartphone screen (such as Samsung’s discontinued Gear VR); tethered headsets that connect to a PC to leverage its processing and graphics capabilities (such as the Rift S); and standalone products that are self-contained units. Since the launch of the original standalone Quest and competitive products from a growing list of other vendors, we’ve seen the standalone market explode in popularity with Facebook leading the charge and products a wide range of other vendors gaining momentum.

Standalone VR cannot push as many pixels as a tethered headset that can leverage a PC with a powerful CPU and GPU. But I find that standalone products help drive a more immersive experience because you are not dealing with the physical cable connection to the PC, which is constantly yanking you back out of the immersive experience. And last year, Facebook launched a beta version of Oculus Link that lets you use a USB cable to connect the -first generation Quest to a PC to achieve tethered-like performance for apps that only run on the PC.

Throughout the pandemic, as my family and I have sheltered and worked from home, my kids and I have been using the original Quest to play a growing list of games. I have also been enjoying the fitness app Supernatural. What I have not really done is use it for anything related to work. The fact is, if VR as a technology and a platform had been further along at the start of 2020 (and headsets had been more widely available), the pandemic could have been the catalyst for a significant shift to VR for virtual meetings, training, collaboration, events, and more. To be sure, all these things are happening, but not at scale. However, the shifts set in motion by COVID-19 will be a major catalyst for both consumer and commercial adoption; it will just take some time. The Quest 2 positions Facebook to drive much of that next wave of adoption.

Evolutionary Updates
As noted, I have used the original Quest extensively, and it is a very good product that Facebook has made better with regular updates. With Quest 2, Facebook clearly focused on iterative improvements rather than a radical rethink. Perhaps the most notable specification changes are the processor and the screen. Quest 2 features Qualcomm’s new XR2 processor supported by 6GB of RAM and a single, fast-switching LCD rated at 1832 x 1920 per eye, versus the Quest’s dual OLED panels. Facebook says the display can support a 90Hz refresh rate (but it won’t at launch). Facebook also tweaked the Touch controllers and says the new ones will be more ergonomic than the current ones.

These evolutionary changes should drive a better experience when it comes to both consumer uses cases such as gaming, as well as commercial use cases such as training and collaboration. Facebook clearly believes the Quest 2 has enough horsepower to be its primary VR product, as it announced that it would discontinue its tethered Rift S hardware in 2021.

Perhaps the most important news around the Quest, though, is its price. Facebook chopped $100 off the price of the new headset versus the original Quest, which means the entry-level version with 64GB of storage starts at $299 versus $399. A version with 256GB of storage sells for $399. The company is taking orders now, and the product will ship in late October.

I have yet to test the new Quest 2, but initial tech press reviews are mostly positive. However, not everyone is enamored with some of the changes Facebook has made to the physical design of the headset or the new touch controllers. Some complain that to hit the new price point Facebook had to cut too many corners in the design.

Too Much Social?
Facebook has worked hard since the launch of Quest to drive VR adoption and has stood up its Oculus for Business group to focus on commercial use cases. However, in the end, it is still Facebook, and at its core, it is a social networking company. As such, it has recently decided that in October, all new Oculus headsets must log in using a Facebook account, versus using a new or existing separate Oculus account. This will allow Facebook to serve up personalized content and ads inside the Oculus experience.

As you might imagine, many Oculus users are not happy about this move. It is not clear if this will impact Oculus for Business users, but I know from talking to many organizations looking at VR for commercial use cases that they find any ties to social problematic at best. I also have mixed feelings about the Facebook account requirement but will reserve judgment until I see the implementation.

Based on the information we are seeing from our supply-side analysts, Facebook expects to ship a huge number of the Quest 2s in the second half of this year. I expect that to be a mix of consumer and commercial shipments, as the company leans into its Oculus for Business offering. I’ll be watching closely to see how the market reacts to this new offering, and how Facebook’s competitors respond as we close out 2020 and head into a new year.

How WFH Could Spur Always-Connected PC Adoption

As the fall semester begins with many k-12 and college students still learning from home, while many parents are still working from home, a technical issue looms for many households: slow broadband. Many home Internet connections are not up to the task of supporting multiple concurrent Zoom and Teams calls, along with the other broadband-taxing software and services a family utilizes when everyone is connecting from home. I believe this could drive interest in always-connected PCs. But this will only happen if all the requisite players—including PC vendors, carriers, and platform owners—take some necessary actions.

Slow Adoption of Connected PCs
I’ve written in the past about the value of always-connected PCs, and in the past much of the value I attributed to the category was predicated upon the user being highly mobile. Pre-COVID-19, I traveled a great deal, and the ability to stay connected in hotels, airports, taxis, Lyfts, client offices, and in the minutes leading up to the plane door closing drove immense productivity value for me personally. Add to this the security benefits of not dealing with sketchy, slow WiFi connections, plus the cost savings of not having to pay for WiFi, and for me, the connected PC became more than a luxury; it became a necessity.

Despite all of this, attach rates for LTE modems in traditional notebooks remains stubbornly low as a percentage of overall notebook shipments (it is notably higher in commercial versus consumer segments). Obviously, not everyone wants or needs an always-connected PC, but I do believe the volumes there could be much higher.

There are several reasons for this slow adoption, the most important being the most obvious: Cost. Both the cost of adding the modem to the notebook itself, plus the ongoing cost of service. Other inhibitors include hardware vendors who have been unwilling to deal with the challenges of offering modems across more of their product lines, carriers who have been disinclined to put in the work to drive better onboarding experiences, and platform owners that have been slow to evolve the always-connected experience for users.

As we barrel toward 2021, I am convinced we’ll see the industry begin to deal with these inhibitors, which could lead to a sizeable increase in connected PC shipments in the coming years.

IT Interest Plus 5G Rollout
When companies first started closing offices, the first and immediate need for many was simply acquiring notebook PCs to make sure all employees could continue to work and be productive from home. Now, as organizations move from triage to thinking about the long-term ramifications of some larger percentage of their workforce working from home some or all the time, IT is exploring the best ways to support these workers. One way many companies have helped support their employees is by offering to cover some or all their broadband costs, typically through expense reimbursement.

This is a wildly inefficient and costly way to provide connectivity for employees. Looking ahead, I expect many organizations will take a closer look at the cost of a connected PC, and the ongoing cost of providing connectivity to that PC through corporate bulk purchases and will find much to like. When you add on top of this the potential collaboration and productivity benefits of disconnecting from the overtaxed home broadband connection, the option becomes even more attractive.

In a recent IDC survey of U.S. IT decision-makers, we asked about interest in connected PCs before COVID and now, and the spike in interest was dramatic. And several of the major OEMs I’ve talked to say they also see a spike in interest from IT buyers. Note that I said there was a spike in interest. So far, there hasn’t been a comparable spike in orders. Yet.

Another big potential driver in the coming year is the rollout of 5G networks. There are two factors at play here: that 5G will eventually bring faster, lower latency performance, and the fact that the carriers have spent a fortune building out these networks, and they need paying customers to utilize them. I think these two things could drive more interest from both consumer and commercial notebook buyers.

I’ve been using Lenovo’s new Flex 5G, which is based on Qualcomm’s Snapdragon 8cx processor, with good results. During Intel’s big 11th-gen processor event this week, we saw a glimpse of Samsung’s upcoming Samsung Galaxy Book Flex 5G. Intel has said more products from vendors such as HP and Dell will ship in early 2021 using a combined Intel and MediaTek 5G solution.

What I’d like to happen over the next 12-18 months is for more hardware vendors to begin the challenging process of revamping more existing notebook designs to accommodate 5G modems. That is no small task, I know, but it is one of the critical things that need to happen if adoption is to grow. Concurrently, we need the carriers to work with the vendors and the platform owners (Microsoft, Google, and Apple) to find better, more frictionless ways to let users and companies sign up for, connect to, and utilize fast and affordable connections. Finally, we need the platform owners themselves to evolve their products to better leverage the capabilities that such a connection can bring.
The next few years are going to be very interesting in terms of the technologies that help drive both work and school from home. Even as we look forward to things eventually returning to some sense of normal, many things will have changed for good. One thing will not have changed: The need for a good Internet connection to get work done. I’m hopeful we’ll see some significant strides in making the always-connected PC more common in the future.

Chromebooks and Macs Enjoy Huge Quarantine Quarter in the U.S.

The entire PC industry experienced a very good second quarter. And here in the United States, we saw exceptionally strong results with a year-over-year growth rate of 18.8% in the traditional PC market comprised of desktops, notebooks, and workstations, according to IDC’s latest data. Inside that monster quarter, all the major platforms—Windows, ChromeOS, and macOS—saw growth, but the latter two saw massive expansion during the quarter that is worth exploring in more detail.

ChromeOS Growth
During the second quarter, Chrome OS saw 29.7% year-over-year growth, with shipments well north of 6 million units, which represented 27.3% of the U.S. market. What is notable about that number is that it spread across segments, including consumers, education, and business.

The success of Chromebooks in U.S. education is well documented. Google and its OEM partners have seen steady growth in the education segment over the years, thanks to a combination of low-cost devices, easy-to-use device manageability, and strong security. In the second quarter, as schools around the country shifted to school from home, many school districts began accelerating their purchase of Chromebooks. As a result, the education segment saw substantial year-over-year growth, and it continues to represent more than 75% of Chromebook shipments in the United States.

Based on my ongoing conversations with both OEMs and component vendors, there is strong reason to believe that Chromebooks will also enjoy a strong third quarter in education. Schools continue to buy devices in anticipation of a challenging fall semester that is likely to include at least some school-from-home elements. In fact, many inside the supply chain believe that we could see strong education shipments well into the fourth quarter, well beyond normal seasonality, as schools build out their fleets for ongoing 1-to-1 device requirements looking ahead to 2021 and beyond.

While the strength of Chrome OS in education may not be too surprising, the other area where we saw strong shipment growth was in consumer. That segment grew even faster than education, although from a much smaller base, to represent more than 15% of shipments. While some percentage of these purchases was undoubtedly consumers purchasing Chromebooks for personal use, I believe a sizeable chunk of these purchases through consumer-focused channels is for work purposes. That’s because as companies shut down and sent employees to work from home, many weren’t able to acquire the PCs they needed through their normal channels, and so they had to ask employees to go out and buy their own, to be reimbursed later.

I’ve long argued that I see a role for Chromebooks in business, and this current shift to work from home could be an inflection point. We’ve seen a wide range of enterprises test out Chromebooks, and even deploy them to a subset of their employee installed base. Many companies jumped into the Chrome OS pool in the second quarter and found the water just fine. I expect many to swim deeper in during the coming months and years.

macOS Growth
During the second quarter, MacOS saw a whopping 70% year-over-year growth, with shipments of more than 3.2 million units, which represented 14.5% of the U.S. market. In early May, Apple updated the 13-inch MacBook Pro with its new Magic Keyboard and more storage.

In the U.S., macOS enjoyed strong growth across all of the segments IDC covers, including all sizes of business. As you might expect, the consumer segment was the strongest of all, representing 80.1% year-over-year growth and more than half of total shipments. Apple also saw a nice education bump during the quarter, but nothing near the size of Chrome OS. That said, as we head into the third quarter and higher-education students and their families begin to prepare for what promises to be an interesting fall college semester, Apple is likely to see strong volumes. It’s worth noting that when an individual purchases a Macbook through retail, for use at college, it shows up as a consumer unit in our data. If a college makes the purchase and distributes it to students, it shows up as an education unit.

One interesting aspect to watch: During WWDC, Apple announced that the first Macs running Apple Silicon would ship in the fourth quarter. It is unclear yet if this announcement will cause some buyers to hold off on new Macs during the third quarter in anticipation of the new products. However, with Apple continuing to announce new Intel-based Mac products—including an updated 27-inch iMac this week—I suspect many Mac buyers won’t let the pending new product(s) slow their current purchases.

Outlook for 2H20
It is worth noting that while Chrome OS and macOS both had excellent quarters, Windows also saw good growth in the U.S. during the quarter. And Windows-based PCs still represent more than 58% of all units shipped in 2Q20.
Looking ahead, and based on ODM data, the third quarter is off to a strong start. The big question is whether that growth is sustainable through the quarter and into the final quarter of the year. At some point, the economic reality will set in. As companies downsize and consumers face steep unemployment, buying will drop off. It is too soon to say precisely when that will be, and even if buying remains strong through this year, it does set the market up for a challenging 2021.

M&A Activity Reflect AR’s Bright Enterprise Future

While consumer-focused augmented reality continues to be a bit of a slow burn in terms of interest and adoption, on the enterprise side of things, the technology continues to ramp at a faster pace. In fact, the pandemic—and many companies’ suddenly urgent need for remote assistance and “see what I see” capabilities—has driven a spike in interest and usage of the technology, primarily on smartphones and tablets. Enterprise AR on both mobile devices and head-worn products will be a huge market. And while it is still early days, we’re already seeing some interesting mergers and acquisitions happening in the space, including the recent acquisitions of two key players: Focal and Ubimax.

Google Buys North
In late June, Google announced it was acquiring smart glass vendor North, which had been shipping version one of its Focal products and was gearing up to ship version two. Google’s Rick Osterloh, senior vice president of devices and services, said in a statement that “North’s technical expertise will help as we continue to invest in our hardware efforts and ambient computing future.”

I had included North in an IDC Innovators writeup in 2019, noting that the company—founded way back in 2012 as Thalmic Labs—had brought to market a unique product that looked more like a regular pair of glasses than most AR headsets. I had a chance to use Focals 1.0. I was impressed by the technology, which focused less on dazzling visuals and more on simply delivering information to the wearer in a useful, unobtrusive manner. However, because the company required a personalized fitting for each pair of glasses and focused on selling to consumers versus enterprise, I had concerns about its ability to scale over time.

I did not have the opportunity to test Focals 2.0 but had heard good things. Google obviously felt the same way and moved to make the acquisition. Unfortunately, the company has opted to shelve that new product and refund the purchase price to those who had preordered them. It is not clear yet if Focals 2.0 will eventually make its way to market as Google-branded glasses, or if the company will instead leverage the technology in a future version of its own product line.

While many remember Google Glass as a failed early attempt at consumer AR, Goggle pivoted that product toward enterprise use where it has enjoyed a long and successful tenure in a wide range of vertical use cases. It shipped the first version for many, many years, and in 2019 it rolled out Glass Enterprise Edition 2 with improvements such as a better camera and Qualcomm’s Snapdragon XR1.

Google’s history of hardware acquisitions is mixed at best, so it will be interesting to see how it moves forward with North. I am hopeful that good things will come from this acquisition, and that North’s great technology makes its way into new products sooner rather than later.

TeamViewer Buys Ubimax
On July 15th TeamViewer announced it was acquiring Ubimax. Early this year, I wrote about Ubimax as part of another IDC Innovators document on AR Enterprise Platforms. I noted at the time that one of the things that made the company unique was that it offered customers a complete solution, not just hardware or software. Founded in 2011, Ubimax has evolved its Frontline product into four high-level segmentations: xPick for picking and packing, xMake for assembly, xInspect for service, and xAssist for expert remote support.

Ubimax does not make its own hardware, but it supports a wide range of hardware from other companies, including smart glasses, head-mounted displays, and even smartwatches. One of the other things I like about the company: It offers companies the whole package in an as-a-service model, which I think is a smart way to help organizations begin their AR journey. Called Everything-as-a-Service (XaaS), for $200 per month, Ubimax includes all necessary hardware, software, and services.

At first blush, TeamViewer acquiring Ubimax may seem a strange fit. The company is best known for its service that lets you “control, manage, and repair computers, mobile devices, network machines, and more—from anywhere, anytime.” But the company has, for some time, also offered an AR product called TeamViewer Pilot, a remote assistance service that lets workers connect to remote experts using their smartphone. In a statement on its Web site, TeamViewer says the Ubimax acquisition will help it to expand its AR and IoT offerings while accelerating its development of use cases focusing on data analytics and artificial intelligence. I’m excited to see where the combined company takes things.

Watch this Space
I expect more mergers and acquisitions, as well as interesting partnerships and collaborations, to take place in the AR market in the coming months. And companies continue to build out their offerings to serve this important market. This includes huge, well-established enterprise players such as Microsoft, PTC, and Lenovo, as well as startups and smaller firms such as Atheer, ScopeAR, Upskill, RE’FLEKT and dozens more. Plus, mega-startup MagicLeap continues its attempt to pivot from consumer to enterprise with the recent hiring of Peggy Johnson, formerly an executive vice president of business development at Microsoft, as its CEO.

COVID-19 has made clear the utility of AR for a broader range of companies, but unfortunately, the resulting recession could slow down some companies’ near-term rollouts. As a result, this market is likely to see some roller-coaster ups and downs in the coming few years. But make no mistake, enterprise AR is here to stay.

Strong 2Q Demonstrate PC’s Continued Importance

The early view of shipment volumes for the traditional PC market is in for the second quarter, and they are quite good. While COVID-19 caused companies, schools, and communities worldwide to lockdown during the quarter, demand for PCs went through the roof, growing by 11.2% year over year, according to IDC’s preliminary numbers for the quarter. Further proof that the PC remains not just relevant, but hugely important to businesses, students, and consumers.

Market-Wide Growth
While we are still early in the process of processing the data, one thing seems clear: All the major vendors grew their shipments of traditional PCs (notebooks, desktop, and workstations) during the quarter. Apple, Acer, and HP all enjoyed double-digit year-over-year growth, and HP’s more than 18 million units placed it at the top with a market share of 25%. Lenovo was right behind, followed by Dell, Apple, and Acer. Early in the quarter, we saw HP placing large notebook orders with ODMs, a seemingly risky bet during uncertain times that clearly paid off for the company.

Around the world, as communities headed into lockdown, purchases of PCs—specifically notebooks—ramped up dramatically. Across the market, we saw vendors working throughout the quarter to try to replenish channels that sold out of stock as companies rushed to outfit workers shifting to work from home, schools scrambled to equip students to learn from home, and consumers grabbed up PCs to make their shelter-at-home quarantines more bearable.

We saw some supply-chain challenges carry over from the first quarter in China during the early part of the quarter. But as production ramped back up, the bigger challenge proved to be around logistics and skyrocketing costs to transport finished PCs out of China to markets around the world. Today, most of those challenges have abated, thanks in part to an uptick in passenger airlines shifting their focus to moving freight.

One of the other key shifts during the quarter was a massive move by buyers to online purchases. As you might imagine, with many traditional PC channels closed or operating under restricted access and hours, both commercial and consumer buyers shifted their purchases to online channels. We are still working to understand the extent of this shift but will be watching to see if this change becomes permanent in the coming quarters.

Strong Chrome Volumes
Operating-system splits for the quarter are still a work in progress, but early indications show that all the major OSes—Windows, macOS, and Chrome—saw strong volumes in the quarter. However, early signs point to a particularly good Chrome quarter driven by education buying in the US, but with reasonable strength in both traditional commercial and consumer, too.

We saw education purchases of Chromebooks in the US pulled ahead to the second quarter, ahead of the traditional buying season, as schools moved to outfit students for learning at home. There are some indications that this buying has continued into the third quarter, as schools prepare for a challenging fall semester that could require additional distance learning scenarios. One of the critical questions, as we look ahead, is where school districts are going to find the money to continue buying large volumes of Chromebooks. Many face looming budget cuts driven by tax revenue declines. While current government stimulus helps offset this, it is unlikely to make up all the difference, especially for schools that were not already planning 1-to-1 device deployments for students.

While schools drove the bulk of purchases, we also saw businesses and consumers buying more Chromebooks during the quarter, too. And we also saw a notable uptick in low-priced Chromebooks based on Media Tek ARM-based processors.

Looking Ahead
Now, in early July, we have continued to see strong PC shipments into the channel. But, at some point, the global recession is going to impact the PC market. It has already slowed small-business purchases, and eventually, larger companies and consumers will slow their purchases as they make plans to weather the downturn.
Regardless, the degree to which both the commercial side of the business (including education) and the consumer side saw growth during the early days of this pandemic bodes well for the PC industry long term. When things took a turn for the worse, people turned to the PC. The PC remains crucial to how employees get work done, how students learn, and how many people relax, play games, and consume entertainment. While there are undoubtedly challenging times ahead, I am excited to see how the industry will evolve its offerings over the next 18 months to accommodate our next normal.

Apple Pushes Augmented Reality Forward with ARKit 4

While Apple didn’t talk much about Augmented Reality during the WWDC keynote, the company did release this week a new version of its software developer kit (SDK) that developers use to create AR apps. ARKit 4 brings new capabilities to iOS 14 that developers can leverage to create experiences on all current iOS devices. It also adds important new depth-sensing capabilities accessible on devices that have Apple’s LiDAR Scanner (currently shipping only on the latest iPad Pro products). And, perhaps most importantly, ARKit 4 introduces Location Anchors, which lets developers place a persistent virtual object in a specific place in the real world.

Leveraging LiDAR; Improved Face Tracking
Apple introduced the Scene Geometry API in ARKit 3.5, after the launch of the latest iPad Pro products with LiDAR scanners. I expect Apple to add LiDAR scanners to the next generation of iPhones shipping later this year, so the feature is likely to get a fair amount of discussion during the next launch event.

The front-facing LiDAR scanner works by shooting light onto the surrounding area and collecting the reflected light. The device uses this data to create a topological map of the environment. This information lets developers create a richer AR experience by driving more realistic occlusion. Occlusion occurs when a digital object appears in front of a real-world object and partially occludes the user’s view of that object. Good occlusion is key to creating a more immersive AR experience. The LiDAR scanner also brings enhanced capabilities such as more realistic physics-based reactions between real and virtual objects. It also offers improved virtual lighting on real-world surfaces.

In iOS 14, Apple further expands the capabilities of LiDAR scanner-enabled devices to articulate better the distance between the iOS device and objects in the environment. On-device machine learning merges the color RGB image captured from the device’s wide-angle camera with the depth reading from the LiDAR scanner to create a dense-depth map. This depth data is tied to a 60hz refresh rate, which means as the iOS device moves, the depth data reflects this movement.

LiDAR also enables improvements to a feature called ray casting, which is a rendering technique that uses computational geometry to create a three-dimensional perspective in a two-dimension map. In ARKit 4, developers can leverage the LiDAR scanner to use ray casting to place virtual objects more quickly and precisely into the real world.

Finally, Apple introduced face tracking capabilities in a previous version of ARKit, but the capability was limited to devices with a front-facing True-Depth Camera. ARKit 4 expands face-tracking capabilities to all devices with an A12 Bionic processor or later, including the recently launched iPhones SE. Face tracking lets developers create apps that place your face over virtual content, tracking expressions in real-time.
Location Anchors

While the new capabilities enabled by the LiDAR scanner are exciting, perhaps the most notable new feature Apple announced with ARKit 4 is Location Anchors. This new technology brings higher-quality AR content to the outdoors. Location Anchors let developers specify longitude, longitude, and altitude. Then ARKit 4 leverages these coordinates—plus high-resolution Apple Maps data—to place experiences at a specific location in the real world.
The process for driving this next-generation AR experience is called visual localization, and it accurately places your device in relation to the surrounding environment. Apple says this is notably more accurate than can be done with GPS alone. Advanced machine learning techniques drive this process and run locally on the device.
The end result is that when a developer places a virtual object in the real world—for example, a digital sculpture at the intersection of two streets—that object will persist in that location and will appear in the exact same location, in precisely the same manner, to anyone viewing it with a capable device. Apple says Location Anchors will first roll out in major cities such as Los Angeles, San Francisco, Chicago, Miami, and New York, with more appearing later this summer. To leverage location anchors, apps must be running on devices with GPS and Apple’s A12 Bionic chip or later.

The importance of Location Anchors cannot be overstated, and it speaks to the fact that, as per usual, Apple is playing a very long game here. There are entire startups, and market segments focused on the technology that underlies a feature capability that Apple quietly launched with zero fanfare this week. Because it owns its own map data, and because it has hundreds of millions of devices constantly capturing location data, Apple is positioning itself to bring location-based AR to the masses. These new features will enable developers to create next-generation apps that will eventually make AR a mainstream technology.

Slow, Steady AR Progress
Those of us closely monitoring the AR space sometimes lament the seemingly slow pace of advancement. While many of us would love to have our Apple Glasses now, the fact is this is a complicated technology, and doing it right is more important than doing it fast. In addition to the real-world device challenges associated with optics, battery life, wireless connectivity, and more, great AR content will require a deep understanding of the real, ever-changing physical world. Few companies have the resources to acquire that understanding on their own (see Microsoft’s Spatial Anchors and Niantic’s recent acquisition of 6D.AI). Fewer still own both the hardware and software platforms upon which that AR content will run. With ARKit 4 and iOS 14, Apple fortifies its position as the world’s largest AR platform, and it gives developers new tools to create the types of AR apps we’ve all been waiting to experience.

HP’s Reverb G2 Headset Positions It Well for VR’s Next Act

It has been an exciting week for those of us closely monitoring the Virtual Reality market, with numerous important new product announcements. Earlier this week, Carolina Milanesi talked about Qualcomm’s plans to work with partners to bring VR viewers to 5G smartphones and the new product and social platform coming from Perter Chou’s XRSpace. And yesterday, HP announced the next version of its Reverb headset, called the G2, which I’ll be discussing here. More broadly, however, these announcements reflect an industry that is finding its footing and figuring out what consumers and business users want and need.

HP’s Ongoing Commitment to VR
HP has been a player in the VR market since the launch of its original Mixed-Reality based headset called the VR1000 back in 2017. HP was just one of a number of PC OEMs that followed Microsoft’s reference design recipe for a mixed reality headset, hurriedly launched into the market in an attempt to grab some of the early-adopter market that the Oculus Rift and HTC Vive had cornered.

While very few of the PC OEMs followed up with a second headset, HP did. Its Reverb headset, launched in March 2019, saw the company get much more serious about VR. The new headset offered a much more refined and comfortable design, a higher resolution display, and integrated headphones. The Reverb was well received by the market, and HP found success in selling the device to both consumers and commercial users.
In addition to its focus on the Reverb, HP also brought to market purpose-built PCs for driving both its own headsets and others. In addition to high-powered desktop and notebook computers, the company has also continued to ship Desktop VR Backpack products that let gamers move around without being tethered to a stationary PC. These types of rigs are essential to location-based VR installations.

Finally, and perhaps just as important as the hardware launches, HP hired Joanna Popper as the global head of VR for location-based entertainment in 2018. Formerly a Hollywood producer who also held jobs at NBC Universal and Singularity University, Popper is an important player and thought leader in the VR space. Her hiring showed just how serious HP was about VR as a business.

Reverb G2
This brings us to the G2, announced this week, and set to ship later this year. I’ve yet to test out the headset, but all signs point to well-conceived product. HP worked closely with both Microsoft and Valve, which operates the SteamVR platform (and also, incidentally, ships its own Index headset). In fact, Valve designed the new lenses HP uses in the G2, which it says boosts the visual experience and better leverages the 2k by 2k per-eye resolution. Like the original Reverb, the G2 offers a 114-degree field of view.

Other new features include integrated speakers in the headset that support spatial audio, Four built-in cameras that HP says enables 1.4 X more movement capture than the previous headset. A new flip-up design makes wearing the headset more comfortable. And new controllers with an updated button layout.

HP says the Reverb G2 will be available in the Fall, selling for $599. I’m pleased by the pricing, but I do wish the headset was ready to ship now.

In fact, I would argue that right now, one of the critical challenges that VR is facing is not a lack of content, use cases, or demand, but a simple lack of supply. It is exceedingly hard to get VR headsets right now, with key products such as the Oculus Quest and the Valve Index consistently on backorder, due to supply-side challenges and very robust demand.

As the world headed into lockdown, we saw both consumer and commercial users come back to take another look at VR. On the consumer side, people stuck inside showed a renewed interest in the technology, helped by exciting new games (such as Valve’s Alyx) and use cases (such as the fitness app Supernatural). And on the commercial side, organizations faced with challenges around employee training and remote collaboration are looking ever more closely at VR. It’s notable that after some time in closed beta, Oculus Business is now open and accepting orders. The extent to which companies are leveraging VR is truly impressive. My colleague Ramon Llamas recently wrote about the growth of VR training for empathy.

All told, VR is having a moment. Broadly speaking, the industry has reset expectations. It’s not going to take over the world anytime soon (or, frankly, ever), but with new products like the Reverb 2 and a broadening range of use cases and content, the technology is becoming more relevant to more people every day. The missing element continues to be a widely available, universally known, safe place for people to meet and hang out in VR. That might be the upcoming XRSpace Manova or Oculus Horizon, or something we’ve yet to see. Once that piece falls into place, things are going to get very interesting in VR.

COVID-19 Hastens Some Industries Shift to Cloud

There is nothing like a crisis to make people and organizations shift their mindsets on cloud-based technologies from “that’s interesting, but we’d never do it” to “how fast can we turn it on?” Bob O’Donnell’s recent column talked about this shift as it relates to cloud-based apps and devices, and today I’d like to talk about two concrete examples that recently came to my attention.

PTC’s OnShape
During a recent call with PTC’s CEO Jim Heppelmann, he mentioned that his company’s OnShape product had seen a considerable uptick in usage since the COVID-19 pandemic had caused colleges and offices to close. OnShape is essentially a cloud-based Computer-Aided Design (CAD) and Product Data Management (PDM) platform suite.

CAD apps typically run on high-powered workstations that leverage high-end CPUs, specific types of high-dollar graphics cards, huge amounts of RAM, and lots of high-speed I/O. While mobile workstations exist, many organizations still rely on desktop versions that were left behind when states, counties, and cities began issuing stay-at-home orders. At best, users might have access to these systems through VPNs; at worst, they were off-limits entirely. The problem was particularly acute with higher education institutes, where engineering students typically physically go to computer labs to work on their projects. With those labs locked-up tight, it seemed the remainder of the school year would be lost for many.

PTC has a long-running academic program, and OnShape offers a version of its service free to educational institutions. When COVID-19 hit, a ton of them took up on that offer. According to PTC’s Jordan Cox, the company saw a 300% increase in registration for the service in March and a 400% increase in April. He says many universities pivoted to use the app to try to salvage the semester.

OnShape is a very interesting product that lets users access a full-fledged design application typically reserved for use on a high-power computer through any Web browser. This means you can access it from a standard Windows PC, Mac, or Chromebook. It also works through mobile browsers running on Android and iOS smartphones and tablets. And because it is also a PDM platform, it also offers integrated version control and release management, which ensures users are always working on the latest design data. That may not sound particularly revolutionary to those of us who have enjoyed these features in modern office suites, but it is not a trivial upgrade for most CAD users.

Like any platform shift, making such a move can represent some challenges, especially if an organization has a long legacy of using certain apps. But like tearing a bandaid off, once they’ve done it, they begin to see the opportunities inherent in the new technology.

Arch Platform Technologies
I read about this company in a recent Variety story, and this week it officially launched its platform: a cloud-based infrastructure for visual effects companies. The Arch platform lets companies “set up secure workstations, render farms and storage and workflow management without having to rely on machine rooms.”

Arch’s well-timed product launch has drawn the attention of studios that are grappling with the issue of graphics artists stuck working from home. Typically these employees work in studios that house high-end workstations as well as high-cost render farms that utilize a great deal of power and require a ton of cooling. Shifting these workloads to the cloud means an organization can accommodate employees working from anywhere with a good internet connection.

And there are some critical long-term benefits to leveraging a cloud-based system for visual effects, too. Namely, organizations can eliminate the substantial up-front capital expense of buying new hardware to take on a new job, spreading out the cost over time as they pay a per-month service fee. Another added benefit: Studios can put visual effects employees in places where they can maximize tax incentives.

Shifting workloads to the cloud is hardly a new phenomenon, so it is interesting to watch industries and higher education institutions that have dragged their feet on these types of advancements moving so quickly to embrace them in times of need. Now that many have made the shift under duress, I suspect many will be happy to continue using them once the dust settles, which could have notable ramifications for some hardware categories going forward.

Poor First-Quarter Results Foreshadow Challenging Year for Smartphones

At IDC, we released our preliminary 1Q20 smartphone shipment results this week, and they weren’t pretty, with units down 11.7% from the year-ago quarter, reaching just 275.8 million units. That number represents the most significant year-over-year drop we have measured in the market. Unfortunately, things are likely to get worse before they get better, as consumers tighten their spending in the face of continued economic hardship—including massive job losses—and ongoing COVID-19 concerns.

Top Five Vendors
Our prelim numbers put Samsung at the top of the market, with more than 58 million smartphones shipped during the quarter. While the company grabbed better than 21% of the market for the quarter, its volume still represented a nearly 19% year-over-year drop. As Carolina recently noted, Samsung has worked hard to grow its share of the mid-range market with its A-series phones. That line sold well in the first quarter and should serve the company well in a tighter economic environment.

Huawei grabbed the number two spot with a 17.8% share of the worldwide market, on volumes of about 49 million units. That represented a 17.1% decline year over year. The company moves a significant quantity of phones in China, which was the first country to be hammered by COVID-19, which impacted its overall volumes. The fact that the country is also out front in terms of emerging from initial lockdowns could give boost Huawei’s fortunes through the rest of the year.

We estimated Apple’s volumes at 36.7 million phones for a third-place spot with a 13.3% share. That represented a less-than-1% drop from the year-ago quarter. Apple also announced earnings on the same day, noting overall revenue growth during the quarter was up by 1%, and iPhone revenue was $29B, down from $31B a year ago. As I wrote a few weeks back, Apple’s fortuitously timed launch of the iPhone SE could position it well during the coming challenging months.

Rounding out the top five were Xiaomi, which grabbed a 10.7% worldwide share with 29.5 million units shipped on year-over-year growth of 6.1%, and Vivo, which grabbed 9% with 7% year-over-year growth. Both companies saw substantial volumes in India in the first quarter and will be negatively impacted looking forward due to the full lockdown happening there.

China’s Rebound, Plus 5G
At IDC, we are taking the unusual step of working on a prelim forecast well ahead of our regular quarterly cadence because our clients are seeking guidance in this challenging environment. It is no easy task forecasting right now with such a high level of uncertainty, and frankly, it is not looking great for the rest of this year. One thing worth noting, however, is that our analysts in China believe the fact that it was the first country to emerge from lockdowns could mean it’s the first to see some light at the end of the tunnel in terms of shipment volume declines. At present, they believe China could even see some growth by the end of the year.

It is an interesting perspective, and it made me think about something that the executives at Qualcomm said during its recent earnings call. While the company is forecasting total worldwide handset shipments to drop by 30% in the June quarter versus its pre-COVID-19 forecast, it did not change its outlook for 5G shipments. It currently believes 5G shipments will hit 175-225 million units during the year. In other words, it now expects the mix of 5G phones to be higher than in its pre-pandemic forecasts. A big part of that bet is on China, where the company said it exited the first quarter with 30% of devices shipped into the channel offering 5G. The company also noted that 71% of all new launch models carried 5G.

Qualcomm’s 5G number seems very aggressive, but the fact it did not back away from it this week seems to suggest they have strong reason to believe they can still hit it, and China will be a key driver there. I am very curious to watch how subsequent 5G launches happen here in the United States, especially as additional lower-cost options appear. As the COVID-19 crisis continues to play out here, it is unclear how many people will be ready to spend money on a new smartphone in the current quarter and the second half of the year. And it could be an especially challenging year for anticipated high-end 5G phones.

iPhone SE: Apple’s Most Important Product Launch of 2020?

This week Apple announced the launch of the second-generation iPhone SE, a brand new, $399 device with a design and feature set that runs counter to just about every current trend in the smartphone industry. And Apple is likely to sell a ton of them, as this may turn out to be the right product, at the right time, for an awful lot of people.

Next-Generation Internals; Comfortably Familiar Body
Apple built the new iPhone SE upon the chassis of the iPhone 8, but it includes fresh internals, including the A13 Bionic processor, the same processor it shipped in its high-end iPhone 11 Pro last year. That alone makes this phone noteworthy, as that chip enables a list of next-gen capabilities around photography, AI, AR, and other technologies. Apple also added WiFi-6 and gigabit LTE, dual sim with eSim, wireless charging, and fast-charge capabilities. This list of features ensures that anyone who upgrades from an iPhone that’s two to three years old will get notably improved performance, and a robust set of new features to enjoy. And the entry-level product ships with 64GB of storage, likely a good bump for many people.

Perhaps what is most notable about the SE, however, is the trends and technology Apple chose to ignore with the phone. For starters, it is a 4.7-inch phone in a world where everybody else is rocketing toward sizes closer to 7-inches. (My colleague Anthony Scarcella notes that in 2019 phones with smaller than 5-inch screens represented just 4.2% of the market.) That said, this is likely to be a key selling point to a subset of iPhone buyers who have lamented the industry-wide rush to larger screen sizes, and who prefer a more manageable sized phone. It’s a perceived negative that I expect many actual buyers will see as a positive.

The SE, as noted, is an LTE phone and not 5G. In 2020, most smartphone vendors expect to ramp up 5G shipments. While the first 5G phones have all carried premium price points, we will see a growing list of Android products land at sub $500. And we expect Apple to launch its first high-end 5G phones later this year. Despite all this, I believe SE’s LTE could be a selling point for many buyers. Most consumers looking to buy in this price range know very little about 5G, and its advertised benefits. And most are generally happy with LTE performance. Finally, some might be concerned that their carrier will charge them more for 5G coverage. Net net, LTE over 5G, may equate to a positive and not a negative for many.

Apple opted to retain the home button on the SE and with it, Touch ID (and the resulting large top and bottom bezels). Bleeding-edge users may see this as a significant compromise, but I’d argue that many people in the market for an SE will see this as a clear benefit. They like the iPhone home button, and they are comfortable with that interface mode. Moreover, they are just not that interested in using Face ID.

Perhaps the biggest perceived downside to the SE, and the trend it bucks the hardest, is its inclusion of a single, 12MP camera. At a time when most (but not all) Android vendors are shipping phones with two, three, or even four cameras, this might seem a deal-killer for many. But the new SE leverages everything Apple has learned about computational photography over the years. Combined with the A13 Bionic chip, I expect it will represent a notable leap in performance over what many buyers are using today, even if their current phone has more than one lens.

The SE’s combination of features, and, frankly, lack some features, makes it a strangely compelling new product. In uncertain times, you cannot overestimate the importance of appealing to people’s need for familiarity and comfort. I expect this product to fill that need for many iPhone buyers.

Starting Price of $399
Apple’s decision to ship a new iPhone at the sub $400 price point will have notably ramifications across its line. Some financial analysts will decry the downward push this will have on the average selling price of iPhones, but that is a short-sighted view. By shipping a new iPhone at this price, Apple is aggressively moving to capture buyers who often shop for iPhones in the secondary market.

In 2019, IDC estimated that over 200 million phones moved through the secondary market, and Apple phones represented nearly three-quarters of that volume. I am told Apple captures very little of the residual value of those reclaimed phones itself, leaving that for its refurbishment partners. Instead, it has focused on the installed-base benefits of getting those phones back into the market, and its ability to sell software and services to those owners.
With the new SE, Apple offers a brand new phone likely to appeal to those customers, and it could have a significant impact on the secondary market. Near-term, it will likely drive down demand for used phones, and causing prices to slip. Lower refurb prices mean even more, price-conscious buyers may explore the option of buying an iPhone, perhaps their first.

It is also worth noting that while the new SE starts at $399 with 64GB of storage, many buyers will acquire it for notably less as Apple is offering buy-back options on this phone, too. So, for example, you can currently trade-in your existing iPhone 8 and get up to $170 off the price, for a total cost of $229.
Finally, the SE positions Apple quite well for the increasingly important prepaid market, too.

The Right Phone at the Right Time
Apple has already shipped some important new products this year, and we expect it will launch more later in 2020. Future launches could include the first 5G iPhones, new Macbook Pros, and perhaps even the first A-Series based Mac notebook products. But with the SE, Apple has—perhaps through luck as much as planning—launched a phone that may turn out to be precisely the right product at the right moment in time. What may have looked like a cost-down device that lacked some modern features six months ago now looks like a familiar, comfortable product with a time-tested design. Combine that with a reasonable price, and the SE makes sense for buyers who desperately need a new phone, but who can’t justify a higher-end product during these challenging and uncertain times.

Niantic Buys 6D.AI as Battle to Own the AR Cloud Begins

This week a small startup that few people outside the augmented reality (AR) industry have heard about called 6D.AI was acquired by Niantic, one of the few AR-focused companies most people do know (thanks to its hit game Pokémon Go). So why is Niantic’s acquisition of 6D.AI important? Because it could represent the opening shot in an industry-wide battle to own an essential building block of our AR future, collectively termed the AR Cloud.

What is the AR Cloud?
The AR Cloud, as the name unintentionally implies, is a somewhat amorphously defined technology that is comprised of a 3D map of the world that enables AR applications to persistently tie digital objects and experiences to specific locations in the real world. Fundamentally, it is vital because mapping the real world is essential to the future of AR if it’s going to move from purpose-built applications in the enterprise to mainstream usage. The AR Cloud will be critical to driving a feature-rich, shared AR experience across all types of AR-enabled devices from smartphones and tablets to glasses and headsets.

How important is this technology to the future of AR? Many in the industry call it the operating system (OS) for AR. We know from history that the companies that own the OS of a new technology category—think Apple, Microsoft, and Google—are the ones that tend to capture most of the revenue generated there. So, it’s no wonder that many of the tech-industry majors have begun the work of building their own versions of the AR Cloud, some quite publicly and others behind the scenes. Concurrently, we’ve seen a ton of investment into startups, such as 6D.AI and others, that are racing to build their versions of the AR Cloud.

The well-funded startup Magic Leap calls its AR Cloud the MagicVerse. Microsoft calls its service Spatial Anchors, and it is in beta supporting HoloLens, Apple’s ARKit, and Google’s ARCore. Facebook calls its version Live Maps, Google’s is Anchors, and Niantic’s is the Niantic Real World Platform. You get the picture: Everybody is in the pool, and some are being more public about it than others.

Why the AR Cloud is Key to the Future of AR
One of the reasons that AR’s biggest successes, to date, have mainly occurred in the enterprise is because there is clear value to real-world use cases there, from knowledge capture and transfer to collaboration to accessing 3D models and more. And it’s not that enterprise use cases can’t use real-world mapping; it’s that they’ve mostly dealt with the lack of mapping by using next-gen barcodes, object recognition, and other technology workarounds. But for AR to expand its commercial use cases, and to take off with consumers, the industry needs to make all of this happen automatically. My AR device needs to know where I am, and when I’m there, and it needs to recognize the digital objects that others have placed there.

Another critical element that the AR Cloud will drive is something called occlusion. A person’s AR experience is significantly improved if the digital object they are viewing is spatially aware of the real-world objects around it. So, for example, if you are watching a digital rabbit run in front of you in AR, it shouldn’t run through the real-world light post, it should run around it. And just as important, when it passes behind the light post, it should briefly disappear and then reappear on the other side. Occlusion not only drives a higher level of immersion; in time, it will be instrumental in driving better forms of interacting with these digital objects, too.

One of the issues we’re going to run into as all these companies build out their own AR clouds and make them available to the developers who create the next generation of AR apps is that persistence only works if it is universal. If my map is different from your map, and each shows different landmarks and such, it diminishes the usefulness of both maps. That’s why the Open AR Cloud organization exists. It’s mission: “to drive the development of open and interoperable AR Cloud technology, data and standards…” The company has an impressive list of contributing companies, although there are some notable hold outs. Recently the organization announced plans to build its own reference Open Spatial Computing Platform (OSCP). Keep an eye on this working group, as its ability to bring companies together to create a truly useful AR Cloud will be important.

Why Niantic’s Purchase of 6D.AI Matters
So, at the end of the day, why is the purchase of a company most people haven’t heard about by one that many have heard of important? For starters, it means one of the upstart independents has been swallowed up by one of the more prominent players. That will have a meaningful impact on developers that have built or are building apps utilizing 6D.AI’s existing services. The company says its current SDK will only remain active for another 30 days, and it will wind down its existing developer tools during that same period. A note on its site says it is shifting its focus to “helping developers build realistic AR applications through the Niantic Platform.” I hope Niantic takes good care of 6D.AI’s existing developers.

We can speculate as to why 6D.AI opted to sell now, but the broader implication is that this likely signifies that additional consolidation in this space is coming. There are simply too many companies trying to build out their own AR Clouds, and the ramp of AR in the consumer space is, quite frankly, taking longer than many of these companies expected. It was just a matter of time before we started to see more acquisitions, and likely some closures.

My hope is that purchases such as this one will help speed the development of workable AR Clouds that will deliver the experiences that we’re all looking forward to having in AR. My concern, however, is that as bigger players capture more of the technology and developer mindshare, we could be headed toward a series of walled-off AR Clouds. If that happens, it won’t be good for the industry or users.

Apple’s Quiet Launch Brings Welcome Updates

Apple skipped the virtual press event and launched its latest updates to the iPad Pro, MacBook Air, and Mac Mini via press release. Without executives on stage, it may have felt like a quiet launch, but Apple is delivering some key updates here that should make some serious noise in the market.

iPad Pro with LiDAR Scanner
Apple continues to iterate on its world-class iPad Pro form factor. The latest 11- and 12.9-inch versions of the high-end tablet feature a new A12Z Bionic chip, a Pro camera system with a 12MP Wide and a 10MP Ultra Wide camera, and five studio-quality microphones. Perhaps the most notable new hardware feature is the LiDAR Scanner, which Apple says can measure the distance to surrounding objects up to five meters away. The company says the scanner, combined with the new camera and new computer vision algorithms on the A12Z, will drive improved augmented reality experiences.

Rumors last year suggested that Apple had hoped to add the LiDAR Scanner to at least one version of the iPhone, but it wasn’t yet ready. Its inclusion here suggests we can expect to see it ship on one or more of this year’s phones, too (although its placement where the iPhone Pro’s current third lens resides brings up some interesting questions). LiDAR is short for Light Detection and Ranging, and I’m a little surprised Apple marketing didn’t come up with a better name for its version of this technology. Others have called similar technologies “time of flight” sensors, which isn’t much more user friendly. While the naming isn’t sexy, the capabilities should be. Essentially the LiDAR Scanner should drive much more robust AR experiences on the device. Apple points to instant AR placement, improved motion capture, and people occlusion.

I’m pleased to see Apple continuing to push forward with AR methodically. These new hardware features, coupled with continued updates to iPadOS, should result in some of the best AR experiences you can have on a handheld device. It will be interesting to see how developers utilize these new features to improve their existing apps and create new ones. It’s worth noting that mobile devices like the iPad also continue to be a primary way many enterprise organizations are testing the waters of AR usage. I expect commercial-focused SDKs and applications—such as PTC’s Vuforia Engine and Vuforia Studio—will begin to leverage these new features straight away.

The other big iPad-related announcement was the addition of touchpad support to iPadOS and a supporting product, called the Magic Keyboard, which is due to ship in May. The Magic Keyboard may well represent the most wished-for product of many die-hard iPad loyalists. It attaches to the iPad Pro via magnets, and it allows for screen angle adjustments. In addition to the all-important touchpad, it includes scissor mechanism keys (with 1mm of travel) and—super importantly—a Type C USB port for charging that leaves the existing iPad Type C port open for accessories.

I can’t wait to try out the new Magic Keyboard, and I’m pleased to see that it will work with existing iPad Pro models. From a design perspective—and without having used it yet—the biggest issue I have is that Apple continues to leave out a place to store the Apple Pencil securely. I’ve been using a $10 case that brilliantly holds the pencil where it can charge, and it never falls off in my bag. Microsoft cleverly addressed this same issue with its Surface Pro X Signature keyboard. It boggles my mind that Apple won’t make this simple feature available in its cases. Beyond that design issue, my other biggest quibble is Apple’s pricing for the Magic Keyboard, which starts at $299. Yes, there are some great new features in the product, and I rarely criticize Apple for its premium pricing, but that price tag is too high. Yes, Microsoft charges $269 for the Surface Pro X Signature keyboard, but that price includes the Slim Pen, whereas you must buy the Apple Pencil 2 separately from Apple for another $119. That means, all in, a new entry-level 11-inch iPad Pro with all the accessories will cost $1,167. That feels too high at a time when iPadOS still feels like a work in progress. Will I buy one? Yes. But at $299, it feels as if Apple missed an opportunity to cast a wider net with this product launch.

Updated MacBook Air, Mac Mini
I’m not happy with Apple’s Magic Keyboard pricing for the iPad Pro, but I am pleased that the company lowered the starting price for its updated MacBook Air to $999. The new notebook features the new Magic Keyboard, faster Intel processors, and a new base-level storage allotment of 256GB.

Each of these new additions is incredibly important. One by one, Apple is replacing the products in its lineup that shipped with the former flawed keyboard design, and now its entry-level buyers can once again buy a notebook with a keyboard that should last the lifetime of the device. The processor upgrade is also huge and moves the lineup from Intel’s 8th generation to its 10th generation products. Apple says to expect a 2X performance boost plus 80% faster graphics. The $999 product is a 1.1GHz dual-core Intel Core i3 processor; an extra $100 buys the 1.1-GHz i5, or $250 buys you a 1.2-GHz i7.

Apple also updated the Mac mini, increasing the storage of the starting $799 product to include 256GB instead of the previous 128GB. I’m happy to see Apple showing the mini some love again, although I would have liked to see a processor bump here, too.

A Strong Lineup in Uncertain Times
As we head into the second quarter of the year, Apple’s iPad and Mac lineups are looking quite robust. Pricing complaints aside, the iPad Pro continues to be one of the most technically impressive hardware products on the planet. iPad OS still needs work, but I’m hoping to see it evolve into something on par with the hardware in the next 18-24 months. The new MacBook Air addresses some of the primary issues many people had about the product and should return it to its former “easy recommendation” status. And more storage for the Mac Mini is a plus.

The real question Apple faces–along with the rest of the technology industry—is what the market will look like for the remainder of the year. As an increasing number of countries move to address the ongoing threat of COVID-19, we already see dramatically negative impacts on the world economy. While we’ve seen an early surge in technology buying as consumers and companies buy products to facilitate working and educating at home, we’re likely to see a significant slowdown in the coming months as everyone waits to see how things play out. Strange times, indeed.
As we find our way forward, please be kind to each other and stay safe.

2020: Virtual Reality’s Next Big Moment?

The Virtual Reality (VR) market has seen its fair share of ups and downs over the last few years, but the technology is poised to have a very good 2020. This year we will see VR hardware and software come together in new, exciting ways that will help drive growth in both the consumer and commercial segments. While the market still faces substantial challenges, including hardware supply constraints due to COVID 19, the opportunities are significant.

Hardware Evolution
VR hardware continues to evolve and improve. In late February, VR pioneer HTC announced the launch of its VIVE Cosmos Series, focused on expanding the functionality of the original PC-based Cosmos product. By using modular, swappable faceplates, the company is now offering three flavors of the product. The Elite uses an external tracking faceplate that works with external SteamVR base stations and the company’s Vive or Vive Pro controllers to offer a precision experience that retails for $899. The original Cosmos, which uses six inside-out tracking cameras, will remain in the market at $699. And the upcoming Cosmos play will bring the platform to more value-focused users by utilizing four inside-out tracking cameras at a presumably lower—but not yet announced—starting price. Finally, the company also announced the Cosmos XR edition, which will bring high-quality pass-through cameras to enable a mixed reality experience. The modular nature of the Cosmos product line means that users can effectively move up the stack as their needs change by buying a new faceplate instead of buying a whole new setup.

HTC isn’t the only VR company to bring new capabilities to an existing product line. Last year Facebook’s Oculus announced it would bring a handful of new features to its shipping Oculus Quest headset, and since then, it has rolled those new features out. The first is called Quest Link, a free software update now in beta that lets you connect the Quest to a PC using a USB 3 cable. Link allows Quest users access games previously available only on the higher-performance, PC-tethered Oculus Rift. The second new feature is integrated hand tracking, which lets you put down the controllers and interact with VR content hands-free in the Quest, which tracks your hands using its existing cameras. Oculus rolled out the feature to consumers as a free update and has also now made the SDK available to developers.

HTC and Oculus aren’t the only ones making notable VR hardware moves. I wrote in November about Varjo, which announced four high-resolution headsets in 2019 that I expect to drive continued strong interest in 2020. Another big launch in 2019 that should have a positive impact in 2020 is the Valve Index, a high-fidelity VR experience focused on gamers. Two other companies to keep an eye on in 2020, as they moved significant unit volumes in 2019, are DPVR and Pico. Finally, we expect Sony to ship a follow on to its successful PSVR either later this year (in conjunction with the PlayStation 5 launch) or early next year.

Next-Generation Software
In 2020, expect to see VR software continue to evolve and improve. We’ll see more developers work to bring hands-free capabilities to headsets such as the Quest with hand-tracking capabilities. We’ll see others move to utilize the eye-tracking functionality in products such as the HTC Vive Pro Eye and Varjo VR-2 that radically change the way you interact with content in VR. And I expect to see more developers dip their toe back in the VR waters as the consumer and commercial installed base of devices grows, and it becomes easier to make money in VR. A recent piece noted that an estimated 100 VR apps have now crossed the $1 million revenue mark.

One of the key drivers around VR software will be the continued growth of commercial VR. As more companies embrace the technology, they’ll be engaging with developers to create an ever-increasing range of apps. These purpose-built VR apps don’t need to appeal to a wide audience, and this means developers can create them to run on a single hardware platform. Companies realize that they can quickly recoup the money they spend on the creation of VR apps that help speed training, eliminate unnecessary travel, and accelerate processes such as design and manufacture.
There are two big software-related VR launches to watch closely in 2020, one from Valve and another from Oculus. Later this month, Valve will release Half-Life: Alyx, perhaps the most highly anticipated VR game to date. Based on the much-loved Half-Life series, Alyx is a prequel build specifically for VR. And while Valve would encourage players to enjoy the game in its Valve Index headset, the game will be compatible with any SteamVR-compatible system, which includes HTC Vive, Oculus Rift and Quest (with Link), and Windows Mixed Reality. The success or failure of Alyx will have a notable impact on the near-term future of VR.

The second big launch to watch in the coming year is the rollout of Horizon from Oculus. The company is taking applications for beta testers now to be a part of what it calls a “new social VR world.” I expressed my reservations around Horizon when I first wrote about it last year. That said, Facebook—and CEO Mark Zuckerberg—clearly still see VR as a key component to the future of social. It will be interesting to see what the company has built and how people will respond to it.

Supply Constraints
I’ve painted a pretty rosy picture around the upside for VR in 2020, but I should note that this doesn’t mean I expect VR to be a huge mainstream technology anytime soon. And in the near-term, one of the biggest challenges the industry is going to face is a lack of headset supply. Anyone who’s been paying attention knows that key products such as the Oculus Quest and Valve Index have been in short supply for months. Demand outstripped supply late last year, and now we have the added issue of COVID 19, which is impacting the supply chain and creation of all manner of technology products, including VR headsets. As I noted in my recent piece, it’s very difficult to forecast the speed at which production in China will ramp up, even as the country contains the virus, and this could negatively impact the VR market for months to come. I’m hoping these near-term supply constraints don’t cause the market to miss what could be a key inflection point for VR in 2020.

Predicting the Unpredictable: Forecasting in the Wake of Coronavirus

The Coronavirus—now officially designated COVID-19—has infected more than an estimated 75,000 people and claimed the lives of more than 2,000. The human toll is staggering and far from fully paid, and that should be the first thought anyone has when discussing this topic, with the impact on industries and markets a distant second. At IDC, we issue quarterly market forecast updates across a wide range of categories, and this quarter’s device forecasts proved dramatically more challenging than usual. Today I’ll share some of what I learned through the process.

Dozens of Inputs, Loads of Uncertainty
At IDC, I have the privilege of working with analysts all over the world who are very good at their jobs. We have people looking at individual component manufacturers, tracking the creation of processors, graphics chips, memory, storage, and more. We have an amazing ODM team that tracks the companies that build the device for major OEMs such as Apple, Samsung, Dell, HP, Lenovo, and more. And, of course, we have device analysts that track the shipments of those final products into regional and country-level channels. Each of these teams has done a remarkable job of collecting information at every step of the manufacturing and shipment process. And here’s what we’ve learned: Nobody knows exactly what is happening, or what will happen.

In a highly fluid situation like this, the best way to approach a forecast is to build out scenarios using the best available information. My colleague Linn Huang issued a series of tweets yesterday based upon a pending document that spells out IDC’s current assumptions around the long-term impact of COVID-19 on the smartphone and PC markets. I’m not going to repeat what he describes there except to say that even our best-case scenario shows the virus impacting unit volumes in the first half of 2020, our probable scenario shows an impact lasting well into the second half, and our worst-case scenario impacts the full year and beyond. I encourage you to read Linn’s tweets, and when the final document does appear on IDC.com, I’d be happy to share it.

Look Beyond Factories Reopening
Over the last few weeks, I’ve been on dozens of calls talking to supply chain companies, vendors, and Wall Street, and one of the things many of these folks—especially the latter—have focused upon is the word from China that factories are reopening. Obviously, this is a key indicator, but I’d caution against reading too much into this single factor. While it’s true that many manufacturing plants have reopened after extending closures a week or more beyond the traditional Lunar New Year shutdowns, most of these factories are operating at well below capacity.

Why? Because the workers can’t (or won’t) return to work. In many cases, workers are stuck in cities far from home, in places where they traveled during the holiday break. In other cases, people are simply staying home, unwilling to risk infection. Until we have definite word that China has contained the outbreak, and infections have begun to decline, it is nearly impossible to predict the ramp in production. We know manufacturing for most of February will have been negligible, and whether it increases to one third, one half or more capacity in March and April remains to be seen.

It’s also important to note that China does much more than assemble the final goods. In many cases, the component flow through the country, too. For example, the fabrication of most PC processors happens outside of China, but some volume of those chips goes to the country for final packaging. In other words, even parts and products manufactured outside of China are likely to be impacted.
And production is just part of the supply equation. Another is logistics, and that too is and will continue to be impacted by the same factors. In other words, even as the factories begin to produce new products, there is a strong probability that shipment of those products could face delays as warehouse workers, truck drivers, ship captains, and others sit at home, waiting for the epidemic to play out.

Long-Term Impacts on China and WW Markets
Obviously, China is and will continue to experience the worst impact of COVID-19 as it decimates both production and consumption in the country. With streets empty and stores closed, people simply aren’t buying devices there this quarter. As a result. IDC’s China team has forecasted a notable drop in volumes there for the first quarter, a reality that Apple acknowledged in an earnings warning earlier this week. I expect to see more such warnings from other vendors in the coming weeks.

At a worldwide level, the virus isn’t impacting demand, but as noted earlier, it will undoubtedly impact supply. In fact, the timing for the PC industry couldn’t be worse. After a better-than-expected 4Q19, the PC industry headed into the new year with a strong head of steam that will now likely be constrained by supply. While it’s clear some of the strength in the holiday quarter was related to inventory pull in the US driven by fears of December tariffs, the Windows 7 EOS in January was also driving many small and medium businesses to buy new PCs. The industry is likely to struggle to regain this momentum.

Beyond the near-term, the crisis in China is already driving additional changes in the broader device industry. In the lead up to the outbreak, many companies had already begun to look to diversify their manufacturing beyond China. COVID-19 has many accelerating those plans. That said, there’s no chance that China cedes its dominant position as the manufacturer to the world any time soon, as no other countries have the environment or resources to do what China can do.

Inside China, I also expect the government to pull out all the stops to drive a rapid recovery once it has fully contained the virus. Expect to see huge investments that jumpstart the economy in a way that no other country could muster.

In the meantime, the keyword for the device industry: Patience. Don’t overreact to positive or negative news out of China. Take the word of factories opening with a grain of salt and remember that production is just one element of a complex supply ecosystem. Finally, remember that millions of people’s lives have been dramatically disrupted or worse, and at the end of the day, our concern should be with everyone’s health and safety first and foremost.

Apple’s Wearables Juggernaut

Apple had a very good holiday quarter, lead by strong sales of the iPhone and continued growth in its services business. But one of the key takeaways from this week’s earnings call was the expansion of its wearables business, which set new company records with 44% growth in the quarter. I’ve been saying for years that wearables have an important role to play in the future of tech, and Apple clearly sees it the same way. The market lead Apple is building, and the knowledge it’s accruing by designing and shipping these highly miniaturized products in volume, will help the company drive a wide range of new products and experiences in the future.

Expanding the Category
Two drivers of Apple’s success in the quarter included strong sales of its lowest price watch and its priciest set of Air Pods. When Apple launched the Series 5 Apple Watch in September, it also announced it would keep the Series 3 product in the market at a new lower price starting at $199. That watch was so popular during the holiday quarter Apple couldn’t keep up with demand. Similarly, Apple’s new Air Pods Pro, which sell for $249—a notable jump over the $159 of its existing Air Pods—were very difficult to attain. So in the space of a single quarter, Apple expanded its market downward by addressing customers who had $200 to spend on a smartwatch, and upward to those who were willing to spend up to $250 on a more advanced set of earbuds.

One of the more interesting stats that Apple executives noted during the call was that 75% of Apple Watch buyers were new to the product. In other words, there continues to be a long runway of growth in front of this category for Apple. And the company knows that once it has acquired a customer in a category, it is very likely to keep that customer going forward. Moreover, in the case of wearables, that customer is very likely to a) own an iPhone (with a strong likelihood of continuing to buy iPhones) and b) likely to subscribe to one or more of Apple Services, with a likelihood to continue to utilize that subscription over time. It’s a virtuous circle that nobody in the industry is currently replicating, and it will drive unit and revenue growth for Apple for years to come.

Scant Big-League Competition
While Apple has methodically built out its wearables business, other tech giants have struggled to field truly competitive products. From a volume perspective, the top five wearables vendors in 3Q19, according to IDC’s Wearables Tracker, were Apple, Xiaomi, Samsung, Huawei, and Fitbit. During that quarter, Apple-owned 35% of the unit shipment market share and nearly 60% of the revenue.

While major smartphone vendors such as Samsung and Huawei are playing in the wearables space, I’d argue they are not actively building out the same type of ecosystem that Apple has achieved. Some blame Google for this, as its work in the wearable space has been uneven at best, terrible at worst. (Samsung primarily utilizes its own Tizen OS.) However, Google seems to be refocusing its attention on wearables. It announced in November 2019 that it would acquire industry pioneer FitBit for $2.1B. It will be interesting to watch what Google does with Fitbit’s technology and how it leverages it to improve WearOS. I also expect to see Qualcomm bring new wearable-focused silicon to the table during the year.

While no vendors have achieved Apple’s level of success in wearables, there have been plenty of players achieving more modest success, and some of them have pretty grand plans (check out Amazfit’s CES announcements). As a result, the broader wearables market saw strong growth throughout 2019. Back in December, IDC predicted that the entire wearables market would reach shipment volumes of 305M units for the year, up 71% from the prior year. We expected the smartwatch category to hit 70 million units for the full year, and we put smart earwear at about 139 million units for the year. (The rest of the market is fitness bands and smart clothing.) The market should top 500M units by 2023, so there is obviously growth happening in this category outside of Apple. The question remains, will other vendors utilize that growth to drive broader innovation or just unit shipments?

Apple: Looking Ahead
Apple’s focus on Wearables has driven sizeable revenue growth for the company in the near term, and it has enabled a wide range of use cases that have helped enrich people’s lives today. But I expect its wearable products to drive an even wider range of experiences in the future. I’ve said for years that I expect one of those experiences to be around augmented reality.

Apple continues to build out AR capabilities in the iPhone, and I expect that device’s hardware to take another leap forward in terms of capabilities this year. Concurrently, the company is enabling developers to create AR experiences with a wide range of tools. All this work is leading toward the eventuality of a pair of Apple AR glasses, and I fully expect that one of the ways we’ll interact with the information presented on those glasses is through our Apple Watch and Air Pods. I expect those interactions to be a combination of gestures, head tracking, and voice.

And that leads me to discuss the one real weakness I see in Apple’s wearables portfolio: Siri. Carolina Milanesi tweeted during the earning call, “I was thinking about Apple wearables numbers and the success of AirPods and AirPodsPro and what a missed opportunity this growth has been for Siri. If only it had delivered a better experience, think about the popularity it would have reached through AirPods.”

I couldn’t agree more. Moreover, I would argue that down the road, if Apple doesn’t figure out a way to dramatically improve Siri’s usefulness, it could become a drag on the company’s ability to move both the wearables category and the upcoming AR segment forward over time. I hope over the course of the next few years, we’ll not only see Apple roll out interesting new wearables hardware, but we’ll see it lean into making Siri the first-class interface necessary to drive a new range of user experiences.

The Market for Used Phones, Tablets, and PCs Continues to Expand

The secondary market for devices (used and refurbished products) continues to grow, driven by a wide range of factors including increasing high-priced flagship products, changes in financing models, and hardware vendor’s increasing focus on adjacencies such as services and accessories. Another factor that will push growth of used markets outside of smartphones is the rise of Device-as-a-Service plans worldwide. Much of the industry is closely watching this space, as rapid growth here obviously has wide-ranging impacts across technology markets.

Used Phone Growth
Used and refurbished devices aren’t a new phenomenon, but the sheer volume of devices has increased dramatically in recent years. My IDC colleagues Anthony Scarsella and Will Stofega recently published a report that takes an in-depth look at the used smartphone market. In that report, Scarcella—an industry expert who has worked in and covered the secondary market for many years—estimates that the market for secondary phones grew to over 206 million units in 2019, up from about 176 million in 2018. And he expects the market to continue to grow, reaching close to 333 million phones by 2023. (Note: The secondary market consists of used and refurbished phones.)

That’s notable growth, especially when the market for new smartphones has seen growth slow or decline in recent years. But it shouldn’t be surprising to anyone who has been paying attention. One of the key reasons this market continues to grow is that most vendor’s top-of-the-line phones have increased in price over time. The result: These flagship phones are often out of reach for a big segment of the population, and they hold substantial value years after they launch into the market.

Another driving factor is the shift from subsidy models to financing, especially as top-tier vendors have sought to utilize trade-ins as a means of easing the burden of acquiring higher-priced phones. For example, right now Apple is offering up to $500 toward the purchase of an iPhone 11 Pro when you trade in an iPhone X Max. And the company will pay for phones all the way down the list to the iPhone 6 ($20).

Many of those trade-in phones go through a refurbishment process and end up in the secondary market. A promise of recouping value incentivizes people to take good care of their phones, as they hope to recoup value from them down the road. The result is better-quality phones flowing into the secondary market, very similar to the way the rise of new-car leasing has led to the greater availability of well-maintained vehicles on the used market.

People laser-focused on new phone shipments often express concern about the sale of used phones negatively impacting the market, and it’s a legitimate concern in a growth-challenged market. But it’s also missing the forest for the trees, as the secondary market drives a wealth of positive outcomes, too. Chief among them: Ecosystem growth. Used and refurbished phones make it possible for more customers to buy phones they couldn’t afford new. In the case of Apple, that means the growth of the iOS installed base, an increasingly important metric as the company focus on selling a wide range of services, from music and TV to games and news. Plus, a used phone is still a new phone to its next owner, and they will do what most people do when they get a new phone: buy new accessories for it. So, for example, that means a large percentage of secondary market phones will have driven the sale of two (or more) cases during its lifetime.

One other interesting fact about used phones: They’re not just for consumers anymore. Research shows an increasing number of companies who buy phones for their employees are utilizing the secondary market, too. Companies that might have opted for a lower-cost, less feature-rich new phone in the past to save money are now actively looking at higher-end used phones, which often include better security and privacy technologies.

Beyond Phones
The industry has largely focused its attention on used phones, but over time I expect interest to grow across device categories. High-end tablets, such as Apple’s iPad, have long been a part of the secondary market, as have both consumer- and commercial-focused notebooks. I expect both categories to also grow in importance over time, and one of the driving factors here will be the rise of Device as a Service (DaaS). I’ve talked at length in the past about this category, where companies move away from simply buying hardware outright and instead pay a monthly fee that includes hardware as well as a bundle of software and services. Implicit in the DaaS model is a faster refresh rate that typically sees companies deploying new hardware every 24 to 36 months. I expect an increasing percentage of companies to shift over to DaaS in the coming years, and the key to success with this model is the provider’s ability to capture the residual value of those reclaimed devices. As DaaS ramps up, we should see an increase in the availability of recent model, well maintained corporate PCs, tablets, and smartphones. As with phones, this will drive a wealth of mostly positive knock-on effects for the market.

In 2020, my colleagues and I will be taking a much closer look at the entire secondary market, inclusive of PCs, tablets, and smartphones. Huge technology and market changes are coming, and we plan to explore their impacts on both the new and used segments of the market. For example, what impact will the shift to 5G smartphones have on the used market? How is the industry dealing with increased incidents of fraud (including sales of used devices as new)? What is the long-term impact of the rising labor costs to refurbish devices? How will the restricted availability of rare earth elements (REEs) critical to device production manifest itself? Each of these could have profound impacts, so we’ll be watching closely. Stay tuned.

New Working Group Could Unlock Smart Home Growth

This week a group of the heaviest hitters in the smart home market including Amazon, Apple, Google, and Zigbee Alliance, announced the formation of a working group called Project Connected Home over IP. The group’s stated goal: to simplify development for device manufacturers and increase compatibility for consumers. Assuming the group achieves that goal, it could be the key to sustained category growth and eventual mainstream adoption of smart home products.

Cooperation is Key
The fact that Amazon, Apple, Google, and the Zigbee Alliance have agreed to work together in the working group is both notably impressive and reflective of the fact that if the smart home market to truly take off, cooperation is imperative. According to Apple’s press release, the working group expects to “take an open-source approach for the development and implementation of a new, unified connectivity protocol.” In an FAQ on the group’s website, it notes that “many Smart Home devices use proprietary protocols today, requiring them to be tethered to a home network using dedicated proxies and translators. By building upon IP, some of these devices may instead be able to connect directly with standardized networking equipment.”

The fact of the matter is, most smart home consumers today have pieced together smart home systems from different vendors, requiring those proprietary network devices. Three years ago, when we moved into a new house, I began experimenting with a wide range of smart home products. As a result, I currently have numerous hubs connected to my router and many apps running on my phone. It’s a hot mess, but I made it work, but that’s because I like being on the bleeding edge. Most consumers aren’t interested in that level of tinkering, and so the hope is that this working group will eventually make such machinations unnecessary

Beyond the Big Three
Everyone knows who Amazon, Apple, and Google are, but unless you follow the smart home market, Zigbee is probably a relative unknown. Zigbee is important because it represents one of the industry’s first attempts to coalesce around a standard protocol. The Zigbee Alliance brands its existing protocol as “the full-stack solution for a majority of large smart home ecosystem providers.” In addition to driving that protocol, the Alliance also certifies products for interoperability. Key Zigbee alliance board members include IKEA, Legrand, NXP Semiconductors, Resideo, Samsung SmartThings, Schneider Electric, Signify (formerly Philips Lighting), Silicon Labs, Somfy, and Wulian. All have agreed to join the working group.

The importance of having these companies, and others, sign up for the working group can’t be understated. While Amazon’s Alexa, Google’s Assistant, and Apple’s Siri are the smart assistants through which most consumers interface with the connected devices, it’s the multitude of products from these other vendors that make a home truly smart. From security cameras to thermostats, lightbulbs to garage door openers, weather stations to irrigation systems and more, each of these devices becomes a key cog in the gears of a connected home. Unfortunately, at present, they don’t always mesh correctly, and that’s been a key inhibitor to the category moving from one focused on early adopters to one that caters to more mainstream buyers.

Current and Future Goals
According to the FAQ, the group expects to leverage development work and protocols from existing systems including Amazon’s Alexa Smart Home, Apple’s HomeKit, Google’s Weave, and Zigbee’s Dotdot. The group expects to bring its first draft specification, along with a preliminary reference open-source implementation, in late 2020. One item of note; The group will focus on new products. In other words, there’s no guarantee that existing smart home products will necessarily support the future standard. Such is the price of progress (and the life of an early adopter). That said, it’s important to note that existing products won’t stop working if a new standard emerges.

Another interesting, if not unexpected, tidbit from the Website notes that the working group does not intend to standardize smart home user interfaces. In other words, there will still be plenty of opportunities for both the platform players and potentially the hardware vendors to innovate and differentiate in the area of interfaces. How these different interfaces eventually evolve to interact with each other is, as they say, a discussion for another day.

All told, this announcement and the details so far are very encouraging. Without such an effort, the long-term growth of the market would be significantly harder to achieve. That said, I expect there to be more than a few bumps along the way, as there always are with working groups comprised of large, opinionated companies with significant investments in their existing technologies. If the group is successful in delivering its first draft specification by the end of next year, an admirably aggressive goal, that will be a very good sign for the industry.

Qualcomm Builds on its AR/VR Silicon Lead with XR2

This week Qualcomm announced the XR2, its next-generation silicon to power what it calls extended reality (XR), which encompasses augmented, virtual, and mixed-reality experiences. The new product brings a long list of interesting new capabilities to the table, but the marquee feature is 5G support. The XR2 builds on the success Qualcomm enjoyed with the original XR1 chip, which is in just about every notable standalone AR or VR headset shipping today. The XR2 further cements the company’s leadership position in an AR/VR market that I believe will eventually play a very important role in our computing lives.

Faster, Better, Stronger
Qualcomm achieved some fairly dramatic performance gains over the XR1 with its new chip. The company says it delivers twice the CPU and GPU performance, four times the video bandwidth, six times the resolution, and 11X the AI performance of the original XR1 chip. The new XR2 will sit at a premium pricing level, appearing in new products next year, while Qualcomm will continue to ship the XR1 for use in more mainstream products.

Powerful silicon is great, but only in the service of real-world performance. Qualcomm says the new product can drive 1.5 times the pixel rate and three times the texel rate for graphics rendering while supporting an impressive 3K by 3K resolution per eye at 90 frames per second. The XR2 can also support 8K, 360-degree video at 60 frames per second. How does this translate into a better experience? I had the opportunity to demo a reference headset with the XR2 and to compare it to a currently shipping product that features the original XR1. The differences were not subtle, and the ability of the XR2 to render much more readable text will be a huge boon to companies using VR for training scenarios.
In addition to improved visuals, the new XR2 platform also enables support for up to seven concurrent cameras and utilizes a custom computer vision processor. Seven cameras mean vendors can create headsets that not only capture a person’s surroundings (for AR use cases in a pass-though mode), but they can also drive accurate real-time tracking of head, eyes, face, and hands. This level of capture can drive more immersive environments, enable improved (controller-free) hand-tracking input, and facilitate the ability to create much more realistic avatars. That last part is key when it comes to driving improved collaboration in both AR and VR, as one of the primary things we’ve lost with voice conferencing is the visual cues people unconsciously share when they are together with others in a real-world meeting. Of course, audio is also incredibly important when it comes to driving emersion, and Qualcomm says it has dramatically improved the spatial sound capabilities of the XR2 utilizing an always-on custom DSP.

Buzzword Compliant: 5G and AI
Qualcomm spent a great deal of time throughout its tech summit talking about its continued work in artificial intelligence (AI), and it brought some of those learning to the XR2. AI drives a wide range of features in the new product, including 3D reconstruction, semantic segmentation, object detection and recognition, object occlusion, depth understanding, hand tracking, voice UI, and real-time audio translation. In other words, it is using AI to drive a more immersive, more natural experience whether the user is in augmented or virtual reality. Qualcomm tells a good story here, and I look forward to seeing real-world examples of these capabilities in action in real products down the road.

Finally, with the addition of 5G, Qualcomm provides headset vendors with the first integrated AR/VR platform to offer the next generation of connectivity. While 5G availability in the real world is still quite limited, as the network build-out continues into 2020 and beyond the high-bandwidth, low-latency of the technology has the potential to unlock some very interesting new use cases for both consumer and commercial users. I will eagerly wait to see how Qualcomm and its partners achieve the always-challenging balance of enabling high-throughput cellular performance while maintaining a reasonable battery life. This feat is even more challenging when the device in question is on your head and not in your hand.

Ecosystem Build-Out and Extending Its Lead
Qualcomm spent a fair amount of time extolling the virtues of its new XR2 product, but it also turned over a large section of its event to some of its key partners. The best silicon in the world isn’t much good if there aren’t hardware vendors to build the headsets, developers to write code, and users to dream up the next generation use cases. We heard from partners including Unity, Mitchell, Accenture, Deutsche Telekom, and Spatial. The latter demonstrated its platform that brings together AR and VR devices to create collaborative workspaces. I had the opportunity to try the demo myself, and as a full-time remote worker I have to say: I’m ready for this future to arrive now.

In the end, Qualcomm offered up a compelling, well-told story around the XR2. What’s equally notable is that, for the most part, few of its competitors are talking much about this space at all. As a result, it feels as if Qualcomm is building a lead that will make it near impossible for other silicon vendors to catch up. That means as this market matures and eventually begins to grow in earnest, Qualcomm will have a strong first-mover position. The wild card, of course, is Apple, which is undoubtedly cooking up its own specialty silicon for future AR products. Until Apple shows its cards, the XR2 is clearly the AR/VR silicon king of the hill.

Varjo Partners with Lenovo, Expands its Industrial AR/VR Ambitions

Earlier this week, the Helsinki-based company Varjo Technologies Oy announced a new partnership with Lenovo, Near-term the will mean “Certified for Varjo” desktop and mobile workstation configurations from Lenovo’s ThinkStation and ThinkPad P Series portfolio that support Varjo’s tethered augmented reality (AR) and virtual reality (VR) headsets. Long term, the deal will enable additional technical and business cooperation between the two companies. It’s just the latest news in a whirlwind year for Varjo, which has announced four headsets in 2019, three focused on driving commercial-grade VR experiences and one that approaches AR in a different way than other products in the market.

Focus on VR
I’ve written extensively about the evolution of VR technology, the growth of the commercial VR space, and the growing number of use cases inside businesses that include training, design, and collaboration. I’ve also run annual surveys asking IT decision-makers about their plans around buying and deploying VR hardware, software, and services. One of the recurring data points I’ve collected: Companies embracing VR technology say they would prefer to do so with hardware designed for work vs. the consumer-grade VR hardware that’s been widely available since the launch of the HTC Vive and Facebook Rift. Those same buyers also said they’d be willing to pay more for such hardware. Varjo clearly saw the same opportunity, and in 2019 it has launched three different VR products.

Back in February, it launched the VR-1, specifically noting that the $5,999 product (plus a yearly $995 service contract) was “designed solely for professionals in industrial design, training, and simulation, architecture, engineering, and construction.” The VR-1 uses a set of ultra-high resolution displays the company says mimics the 20/20 vision of the human eye, and it claims the resulting headset offers a level of resolution 20X that of any other VR product on the market. It accomplishes this by combining two 1920×1080 low persistence micro-OLEDs and two 1440×1600 low persistence AMOLEDs into what it calls a Bionic Display.

Why is this high-resolution so important? One of the key challenges with VR headsets that utilize traditional displays is the limited resolution of those displays can make fine details, including text, very hard to see. That’s not a huge deal if the primary use case is a consumer one that includes playing games and watching 360-degree videos. But if you’re a professional designer creating products, a doctor training to do complex surgery, or experts engaging in high-level simulations, this level of precision is important.

In addition to the high-resolution visuals, the VR-1 also incorporated eye-tracking. This technology is especially important when it comes to training simulations. Not only can apps optimized for this type of VR technology drive a more immersive learning experience, but they can also capture key analytics about the person’s performance in VR.

Although the company only launched the VR-1 in February, in mid-October it announced two new VR headsets: The VR-2 and VR-2 Pro. Both new headsets offer the same resolution as the now-discontinued VR-1, but the company says it improved the visual appearance using an updated Bionic Display that has better calibration between the displays and an improved combiner. In addition, the new headsets natively support Steam VR content as well as support for the OpenVR development platform from Valve. The VR-2 Pro also includes hand-tracking technology from the company UltraLeap. The VR-2 sells for $4,995; the VR-2 Pro for $5,995; both are available on the company’s Web site now.

AR and Lenovo Partnership
In addition to rapidly iterating on its VR products, earlier this year Varjo also announced a new product that targeted augmented reality (or mixed reality) developers. While most of today’s existing AR headsets utilize see-through lenses, the XR-1—due to ship by the end of the year—uses two front-mounted 12-megapixel cameras to pass through a low latency video feed onto its Bionic Display. It then overlays digital objects on top of that, creating 3D objects that don’t have the ghostly appearance common on see-through AR lens. The XR-1 will ship as a developer kit only, and it also offers eye-tracking capabilities. Varjo hasn’t listed pricing yet; it expects to ship the XR-1 by the end of the year.

Varjo’s decision to work with Lenovo makes a world of sense for both companies, even when you consider the fact that Lenovo has similar partnerships with other companies, as well as its own AR and VR products. Varjo benefits from the fact that Lenovo sells a wide range of devices, software, and services to a huge percentage of the enterprise organizations on the planet. Varjo may have great technology, but at present, it’s not very well known, and the Lenovo partnership should open many doors.

By partnering with Varjo, Lenovo continues to push forward its ongoing narrative around being an innovator in the areas of commercial AR and VR. The company has announced its own commercial AR headset (the A6) and AR platform (Think Reality), builds the Oculus Rift S tethered VR headset for Facebook, and continues to sell its own Mirage Solo with Daydream standalone VR headset for use in education. By adding the partnership with Varjo, it further covers the high-end commercial VR segment and cements its reputation for being serious about helping its commercial customers utilize these important new technologies.

Google and Partners Push Chromebooks Beyond the Education Market

There have been several Chromebook-related announcements in recent weeks, signaling that Google and its partners see new opportunities for the platform outside of its traditional stronghold in the U.S. education market. Updated enterprise-focused features, commercial and prosumer-focused hardware, and competition within the silicon space all point to a strong push for Chromebooks in 2020. The question: Is the market ready to buy?

Chromebooks for Enterprise
In late August, Google and Dell Technologies launched updates to their respective Chrome-based offerings. Google announced the Chrome Enterprise Upgrade, which lights up a wide range of capabilities required inside commercial organizations. New features included management capabilities, around user policies, network management, and device reporting. The company also did a major update to the Google Admin Console, increasing the speed and flexibility of the Web interface where IT goes to manage Chromebooks. These upgrades build upon the $50-per-Chromebook subscription model Google launch back in 2017 and work with existing unified endpoint management products such as VMware’s Workspace ONE, Citrix’s Endpoint Management, and others.

Dell’s concurrent announcement: The launch of two new Latitude Chromebooks. The Latitude 5400 Chromebook Enterprise, a $699 Intel-based notebook with a 14-inch display, and the Latitude 5300 2-in-1 Chromebook Enterprise, an Intel-based 13-inch convertible starting at $819. Dell’s seriousness about this segment push was evident by the fact the company announced it would launch the new products in 50 countries. A big part of its strategy: integrating Chrome OS into its unified workspace story.

HP Adds Chromebooks to DaaS
On October 10th, HP announced it was also launching a new lineup of Chrome Enterprise products, noting that its research showed “four out of five businesses are already exploring cloud-native clients like Chromebooks.” HP didn’t announce pricing for the new products, which will ship in late October and November. They include the Chromebook Enterprise X360, a 14-inch, Intel-based convertible, the Chromebox Enterprise G2, an Intel-based desktop for frontline workers, and the Chromebook Enterprise 14A, a 14-inch traditional notebook featuring AMD processors.

Equally notable: When HP launches its new Chromebooks, the company said they would also become available as part of its Device as a Service offering. I’ve written extensively about DaaS, and it is a testament to the slow but steady momentum of that market that HP has opted to expand its offering to include these new Chrome products. The “As a Service” model lets companies contract with a provider—such as HP—to offload device deployment, management, and lifecycle services, freeing up internal IT to focus on bigger picture projects. (It’s worth noting that Dell is also now offering Chromebooks as part of its PC as a Service offering, too).

Google Launches PixelBook Go
Last week at its big Pixel launch event, Google itself announced the PixelBook Go, a standard notebook product that starts at $649 with an Intel Celeron processor, but goes all the way up to $1,399 when equipped with a Core I7 processor, 4K display, 16GBs of RAM, and a 256GB of storage. Google adds an extra layer of security to the device utilizing its Titan C security chip, which validates the OS before bootup, a feature clearly aimed at commercial buyers. The Go joins Google’s existing convertible product, the PixelBook, which it launched in 2017 and sells for $999.

The Go announcement is interesting, as the range of configurations means it can hit a wider range of price points than the original PixelBook. However, it’s a rather staid form factor that seems to indicate that Google isn’t necessarily interested in being at the forefront of Chromebook design. Whether commercial companies will take a leap and buy from Google or stick with their existing providers such as Dell and HP remain to be seen.

Market Readiness
At IDC, my colleague Linn Huang has closely monitored the Chrome market, tracking its strong growth in education and its early forays into the adjacent commercial space. Earlier this year, he ran a survey asking IT decision-makers about their current and future appetite for supporting Chrome inside their organization. Among the U.S. enterprise buyers we surveyed, Chrome makes up about 4% of their total PC installed base today. That same group expects it to grow to 10% of its installed base in the next two years. Among SMB buyers, the current installed base is about 2% of the total, growing to about 9% in two years. So, there is clearly interest and desire to experiment with Chrome among IT buyers.

This interest reflects a larger trend: IT reacting to the changing needs of the workforce. The one-size-fits-all method of IT support is no longer viable in a tight labor market driven by digital natives that enter the workforce expecting more hardware choices and the ability to work wherever and whenever they want. To service these workers, we expect more IT organizations to support a wider diversity of devices and platforms going forward. Chrome is just one of the beneficiaries of this trend.

Supply-Side Rumblings
Finally, we’ve recently begun to hear that several ARM-focused silicon providers are looking closely at the Chromebook market. Those who have been following this space awhile know that the very first Chromebooks shipped with ARM-based processors. Intel moved quickly to embrace the category, and since then its largely owned the entire market. In the last two years, we’ve seen a few vendors introduce AMD-based Chromebooks (including the HP mentioned above).

I’ve long felt that the cloud-based nature of Chromebooks makes them perfect candidates for an LTE modem. Unfortunately, until recently, most Chromebooks vendors—with a few notable exceptions—focused primarily on hitting a low price point, which made the inclusion of a cost-adding modem a tough proposition. I’d very much like to see some next-generation Chromebooks that offer such a connection regardless of whether they include and X86 processor or an ARM-based chip.

With the wide array of new product announcements this year, increasing vendor and silicon competition heating up for next year, new procurement options such as DaaS clearing the way, and increasingly pull from end-users pushing IT forward, I expect Chromebooks to gain more traction in the commercial market in the coming years.