Apple will make a big cut in the production of the Vision Pro – 7/3/2023 – Market

Apple has been forced to make drastic cuts to production forecasts for the Vision Pro mixed reality headset, released last month after seven years in development and hailed as the most important product launch since the iPhone.

The complexities of the glasses’ design and production difficulties are behind the lowering of targets, while plans for a more affordable version of the device have had to be delayed, according to several people with direct knowledge of the manufacturing process.

Apple has already signaled that the $3,500 “space computing” head device won’t go on sale until “early next year,” a long gap since its June 5 launch. Analysts interpreted this to have more to do with supply chain issues than giving developers time to build apps for the Vision Pro.

Two people close to Apple and Luxshare, the Chinese third-party maker that will initially assemble the device, said it was on track to make fewer than 400,000 units in 2024.

Several industry sources said that Luxshare is currently the sole assembler of the device. Separately, two China-based sole suppliers of certain Vision Pro components said Apple is ordering just enough for 130,000 to 150,000 units in the first year.

Both projections imply a significant cut in production, from a previous target of domestic sales of 1 million units in the first 12 months. The forecast of smaller volumes reflects Apple’s uncertainty about whether it will be able to scale production, according to analysts and industry experts, after years of missed deadlines for launching the device.

Wall Street analysts’ forecasts for Vision Pro sales vary widely, from hundreds of thousands to several million in the first year.

At the time of the headset’s launch a month ago, Wedbush predicted that Apple would ship around 150,000 units in the first year, while Morgan Stanley’s estimate was around 850,000 and Goldman Sachs believed it could reach 5 million. of shipments in 2024. By comparison, Apple sold 1.4 million iPhones in its first year on the market.

The company, whose market valuation closed above US$ 3 trillion (R$ 14.4 trillion) on Friday (30), three weeks after the Vision Pro was announced, declined to comment on the headset.

Sought by the Financial Times, Luxshare did not respond until the publication of this text.

Among the main obstacles faced is the manufacture of the device’s screens. They consist of two micro-OLED displays – one for each eye – and an outward-facing curved “lenticular” lens. The internal displays offer a higher resolution than anything currently on the market, while the external lenses project the headset user’s eyes to the outside world.

The micro-OLED displays for the prototypes at the demonstration in June were provided by Sony and chipmaker TSMC, according to two people familiar with the production. Sought out, Sony and TSMC declined to comment on any participation in the Vision Pro.

Apple is dissatisfied with the productivity of suppliers, these people said, particularly with the yield of defect-free micro-OLEDs. Displays are the most expensive component of the Vision Pro.

“A lot of this is normal growth issues,” said Jay Goldberg, founder of technology consultancy D/D Advisors. “This is the most complex consumer device anyone has ever made.”

Goldberg said the higher-than-expected $3,500 price tag already implied that Apple had factored in the cost of production inefficiencies, knowing that manufacturing yields are especially low compared to mature products in the company’s portfolio.

“Someone has to pay for this,” he added. “I think Apple went into this with a lot of ‘bad yield’ built into the model. There’s a lot of technology in the Vision Pro, and they knew it would take a while to scale. Apple knows they’re not going to make money on it in the first year.”

Sony was cautious about expanding the market for mixed reality headsets and was reluctant to significantly increase production, Terushi Shimizu, head of Sony’s semiconductor unit, said at a recent media roundtable.

“We’ll be watching to see how much demand increases [por monitores micro-OLED]”, he said. “However, I don’t think we will be aggressive [na produção] on the same scale as image sensors,” for which Sony is building a new factory to increase production of the chips used in smartphone cameras.

Meanwhile, Apple is already working on next generations of the headset, including a more affordable version that should appeal to more mass-market consumers, said two people with direct knowledge.

Apple is working with Korean monitor makers Samsung and LG on these second-generation glasses. To lower the price, the iPhone maker explored using other display technologies, including mini-LED, but two people said Apple insisted on using micro-OLED for even the simplest device, despite so far no supplier having matched your expectations.

The cut in forecasts for 2024 disappointed Luxshare, which has been preparing its capacity to manufacture nearly 18 million units annually in the coming years, said a person close to the automaker.

Analysts said the entire headset production chain in Asia isn’t getting much of a boost from the Vision Pro. “Apple didn’t make a better product than the industry imagined. […] manufacturers’ confidence is not high,” said Eddie Han, an analyst at Taiwan-based Isaiah Research.

Despite the setbacks, market intelligence group Canalys believed that Apple would surpass a user base of 20 million within five years of launch.

“Given the limited production number, it will fly off shelves pre-ordered by loyal Apple fans and high-income users across the US,” said Jason Low, an analyst at Canalys. His current projection is that Apple will produce 350,000 units next year, rising to 12.6 million units five years later.

Translated by Luiz Roberto M. Gonçalves