Thoughts on AR and Smartphones

Apple’s recent announcement at WWDC 2017 of ARKit has suddenly sparked a new interest in AR, and just a few days ago, Google responded with their ARCore API which does basically the same things. These APIs promise to bring sophisticated AR to all owners of compatible smartphone, dramatically enlarging the addressable market. This has excited pundits and developers alike, and it is now very likely that we will see AR breaking out of the early adopter market and into the early majority.

I would like to jot down my thoughts on this, regarding how innovation tends to happen, and also regarding how this affects the smartphone market as a whole.

The innovation trajectory

Innovation usually starts out as basic research or a new invention somewhere in a lab setting, with specialised and extremely expensive equipment. Then it becomes a specialised instrument that is somewhat cheaper, but still  very hard to use, catering only to the enthusiasts. Finally, it becomes cheap and easy enough to use for the majority of the market, leading to an explosion of usage.

If you look at the PC market for example, it started out when computers like the ENIAC were first invented. Then after revolutions in semiconductors, the computer became cheap enough for enthusiasts to own and tinker with, but still the people who used them were tinkerers. This was the era of the Apple II, Commodore and Amiga. Then as the IBM PC and clones came out, the price came down whilst performance improved dramatically and application software became available, making the PC both useful and affordable thus bringing it into the mainstream.

What we are seeing with ARKit very much mirrors this. We started out with work that was done in the labs, and we recently started to see implementations that require special headsets and powerful PCs connected to them. It was clear at this point that these devices would not go to the mainstream, and the developer community in general did not yet think that it was a market worth pursuing. With ARKit, we are likely to see an IBM PC moment where AR goes mainstream on devices that are affordable and where the developers are also excited to reach large audiences.

One interesting thing to observe is, although the innovation in the lab tends to follow a steady path, the introduction into the mainstream can feel very abrupt, caused by new products being introduced into the market. ARKit is one of these examples. Windows 95 is another. So is the iPhone of course. Sometimes the company introducing the product if far ahead in technology, but this is not necessarily the case. Looking at Windows 95, one could argue that you could be technically behind, but still make a huge and abrupt impact to the market. Judging by how quick Google was to introduce ARCore, it would be fair to say that Apple’s ARKit team was not also necessarily ahead of Google’s, but simply had the right marketing priorities in place.

Implication for smartphone sales

Until very recently, the general narrative was that innovation in smartphones had winded down, and that there was increasingly little to differentiate the new high-end flagships from the models from previous years, or those from mid-tier vendors. However if ARKit and ARCore become mainstream and are adopted by major developers, this changes the whole game. Apple’s ARKit reportedly only works with A9 chips and above, which means that any models prior to the iPhone 6s are not eligible. The iPhone 6 which was introduced in 2014 will not be able to run ARKit apps and neither will the iPad Air 2 (also introduced in 2014). The situation on the Android side is even more dire (as usual) with only the Pixel (introduced in late 2016) and the Samsung Galaxy S8 (introduced in 2017) being eligible to date. Therefore these two platforms may become a strong differentiator for the newest and greatest models, and drive customers who would have otherwise have been content with an old or midrange model to look upmarket.

This has quite a few implications.

  1. Since we know that the high-end smartphone market is generally dominated by Apple and Samsung, this trend will strongly favour these two companies.
  2. Regarding the iOS vs. Android balance, in the high-end (dependent on country) this often is tipped towards iOS. Therefore, we might see a rise of iOS market share.
  3. The interesting thing is that since ARCore currently only supports the Pixel and the Galaxy S8, and since sales of the Pixel are minuscule to date, in reality the vast bulk of ARCore capable smartphones will be Samsung models. As a result, depending on how Samsung plays its cards, it may be possible for Samsung to exert a huge amount of power over Google. Samsung might customise or add proprietary features and APIs to ARCore that would take advantage of the specific hardware on their devices (which might be Samsung silicon), and since the bulk of the market will be Samsung devices anyway, the developers might bite this time. Samsung has been flexing its muscles looking for a chance to break away from Google’s control for quite some time (Tizen, Samsung Pay, security features, etc.), so it would be interesting to see how they plan to take advantage of this situation.

According to Clayton Christensen’s theories on integration and modularity, markets where customers are still looking for innovation should generally favour integration due to the capabilities that this makes possible, and in the smartphone market, the integrated players are Apple and Samsung (Sony is also interesting in that it is integrated around the hardware that matters most – the imaging sensors). It will be interesting to see how this all plays out.