Sean Peasgood, President & CEO
Marcel Valentin, Vice President
www.SophicCapital.com
AWE-GMENTED
REALITY The Next Disruptive Computing Technology
June 14, 2017
VR/AR/MR are real technologies that will redefine our world,
how we interact with it, with information, and with each other.
At AWE 2017, the world’s largest augmented reality
conference, we saw numerous headsets and enterprise
applications. Retailers, educators, energy companies,
construction firms, are embracing these technologies, and
enterprising firms are thinking not only about how to create
value propositions for these industries but also how the next
generation of the Internet could be defined. This report details
key industry trends and what larger vendors are doing.
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Why You Should Read this Report
At AWE 2017, we uncovered the following AR themes:
1. Find out how the Internet could evolve;
2. Uncover what we learned at AWE 2017, the world’s largest augmented reality conference, and;
3. Discover what the biggest tech companies are doing in AR and VR.
Introduction
It’s been two years since we attended Augmented World Expo (AWE), the world’s largest
augmented reality (AR) and mixed reality (MR) conference (virtual reality has managed to
creep in too). After spending 3 days immersed in the latest AR/MR head mounted displays
(HMDs), testing the newest applications, and speaking with some of the 5,000 industry insiders
and enthusiasts in attendance, we firmly believe that reality technologies will reshape our world
and how we function within it. Augmented reality will eventually replace our smartphones,
liberating our hands and making us look ahead instead of downwards. Because of this, companies
at AWE 2017 showcased how they plan to capture their share of what could be an industry worth
trillions.
AR is thriving in the enterprise because it reduces costs. Over the 3 days at AWE 2017,
companies presented case studies on how AR improved worker productivity. When a tractor
company adopted augmented reality to inspect its final products, it reduced the time to complete
and document the process by about 40%. In another instance, wiring an airframe was 6 times faster
with AR than the default method. Augmented reality improved inventory picking efficiency by
25% at a warehouse. These stories were not the exceptions. We heard similar stories from numerous
vendors attending AWE.
Consumer adoption of AR and MR HMDs still needs a few years. At AWE 2017, we met
several companies leveraging
smartphones designed with
Google’s Tango AR system.
Retailers are marketing apps
to enhance customer
experiences. And even
though a lot of the content is
captivating and engaging,
holding a smartphone in your
hand to access AR content is
cumbersome. But the
AR/MR developers’
community wants to liberate
our hands to simplify our
AR/MR experiences. This
raises numerous new
technical and social issues
that will have to be defined
and solved. One day, info will overlay our real world via AR/MR glasses.
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Augmented Reality Will Change our World Like the PC Did
PCs, the Internet, and mobile phones were technologies that transformed our lives. The last
generation of the Internet was about digitizing information and databases (i.e. flight schedules,
baseball box scores, etc.) and making them available to the masses. The next generation of the
Internet will be about digitizing every object and superimposing it onto our world. Augmented
reality glasses will enable this vision. It will provide us with layers of predictive information based
upon who and where we are and what we want. Our hands become liberated from keyboards and
touchscreens, increasing our productivity. We’ll no longer search for a Thai restaurant on a specific
app; instead, we’ll tell the glasses to find a Thai restaurant and let it pull in whatever app is suitable
to complete the task and then present the information to us. Even better, it may overhear us say
something the day before like, “I’m craving Thai food,” remember our craving, then automatically
present us with recommendations as we walk around during the next day’s noon-hour.
In prior Sophic Capital reports, we
discussed how AR/MR consumer adoption
would occur once form factors resemble
current, fashionable glasses – that’s
partially correct. Microsoft1 and Meta have
released developer versions of their
HoloLens and Meta 2 (respectively) HMDs.
Vuzix (VUZI:NASDAQ) has had successful
deployments, including one with DHL, and
we saw numerous other companies at AWE
2017 that are winning enterprise contracts. But to date, consumer AR experiences have come from
smartphone apps like Pokéman Go. Why? AR HMDs are bulky and – if we can be honest – look
“nerdy”. It’s one thing to wear an unstylish yet productive HMD in the workplace; quite another to
wear one in public where fashion matters.
Even after OEMs create more fashionable AR and MR HMDs, other socially awkward issues
concerning reality technology adoption remain. We listened to an Intel (INTC:NASDAQ)
strategist describe the potential of using vision for input. With laptops we use mice and keyboards.
With smartphones and tablets we use touchscreens. With AR glasses, we could use hand waves,
voice, and/or eye tracking. But gesturing in public would look odd and draw unwanted attention.
If everyone was speaking simultaneously to uncover information, our world would be noisy. And
eye tracking could strain our eyes as we spend the day with bulging eyes to select options. What
the strategist suggested was that we could use our fingertips to navigate the devices. Our hands
could be by our sides, our laps, or in front of us, and a simple finger wiggle could allow us to select
what we need by either typing or virtual mouse clicks.
1 Microsoft also was granted a U.S. patent for an “augmented display apparatus” for a “wearable food
nutrition feedback system”.
Vuzix’s Blade 3000 AR Smart Glasses are consumer-ready. Source: Vuzix
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Content Developers Needed
Another issue with consumer AR/MR
adoption is the lack of knowledge and
content. Pokéman Go exposed many
consumers to AR technology. But beyond
gaming, many do not see AR’s potential.
Google (GOOG:NASDAQ) Glass (status
unknown) sought to overlay information like
email alerts into users’ realm of vision. But
the $1,500 cost was a budget buster for many
people willing to try it, but that may have
been part of Google’s strategy to ensure early
adopters would invest their time to learn
about AR and its potential. But Google went
beyond Glass and released Tango, an augmented reality computing platform that Lenovo
(0992:HKG) is using in its Phab 2 Pro smartphone and ASUS (2357:TPE) in its ZenFone AR
handset. Tango overlays virtual objects and information atop the surroundings viewed through
these devices, providing deeper experiences for users to engage with. It’s Tango and these handset
manufacturers are educating consumers about AR’s potential.
AR/MR Content Defines our Future Relationship with Info
Augmented reality content is real and awesome. In other Sophic Capital reports, we’ve shared
our experiences with virtual reality content, especially that from the gaming industry. And although
AWE presented new augmented reality hardware, we were awed by the AR/MR content developed
for enterprise workers. We saw jet engine parts assembled by a person who was guided by a second
person located offsite, they connected and viewed the same components through their own pairs of
AR glasses; we experienced a virtual AR office, where Excel and Skype windows were
superimposed in our real worlds; we even spoke with a gentleman whose AR glasses perfectly
restored his centric vision to the point where he can drive at his farm. He can’t drive on public roads
because the Department of Motor Vehicles won’t let him wear his AR glasses for the eye test
required to get a driver’s license. From what industry experts and enthusiasts told us at AWE, AR
content is about to accelerate.
Differences Between Augmented, Virtual, and Mixed Realities
We’ve written a lot about Virtual Reality (VR), since it is
a technology that the gaming and 360° video markets have
embraced. Virtual Reality is our immersion into a computer-
generated environment. We achieve this by strapping on
head-mounted displays (HMDs) that block external audio and
visual stimuli. It is the first “reality” market to gain enterprise
and consumer adoption, so we’ve focused much of our
research on VR. Source: Oculus CV Virtual Reality HMD
Google’s Tango overlays digital content in the real world Source: Google
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Augmented Reality (AR) will be a larger market than VR. AR is overlaying computer generated
images and text in our world. Part of the reason AR will be a larger market than VR is because
many industries and enterprises see AR as a productivity enhancement technology that can reduce
costs, improve safety, and even protect the environment. Another reason why AR will be bigger
than VR is that users remain mobile. With AR, we still see the real world whereas with VR, the
real world is blocked from
our sight and hearing,
rendering users relatively
immobile for safety
reasons. As an AR
application example,
OneSoft Solutions
(OSS:TSXV) has a
Microsoft
(MSFT:NASDAQ)
HoloLens AR application
that energy pipeline
operators can use to spot
pipeline anomalies
detected by OneSoft’s
machine learning software.
Repairing these pipeline
anomalies prevent ruptures,
injuries, and death as well
as stop environmental
disasters from occurring.
Mixed Reality (MR) is a combination of VR and AR. MR HMDs scan the surroundings to
overlay real-time digital content for the user to interact with as though the content really is a part
of the environment. The main difference between AR and MR is that AR applications are passive
such as text overlaid on an appliance, reading an email, or selecting a phone number from a list.
MR, on the other hand, is active such as having generated characters break through a real wall and
placing virtual furniture in a real room.
Augmented Reality Will Be a Big Market
Enterprises see the value of AR technology, and this will drive the AR industry. Although
third-party market AR forecasts vary, their numbers are big. We recommend that investors focus
not on the individual third-party forecasts but on the idea that all have large estimates. Consider the
following numbers:
• Allied Market Research projects a 65.7% CAGR from 2016 through 2022, culminating in a
2022 AR market worth $59.1 billion;
• Gartner forecasts AR HMDs could generate $72 billion of revenue over the next 10 years;
• Global Market Insights pegged the 2015 AR market at $570 million and sees 80.8% CAGR
from 2016 to 2024;
OneSoft Solutions’ HoloLens application. The augmented reality squares on the pipe indicate potential anomalies that could lead to pipeline ruptures.
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• MarketsandMarkets is forecasting a
$117.4 billion global AR market by 2022
and a 75.7% CAGR between 2016 and
2022;
• MarketsandMarkets also stated that the
2015 AR software market was worth
$2.13 billion and could grow to $35.22
billion by 2022;
• SuperData Research sees VR hardware
growing from $3.6 billion in 2017 to
$17.8 billion by 2020;
• Tractica believes that AR’s 342.8 million
monthly active users (MAU) in 2015 will
grow to 1.9 billion by 2022 (Exhibit 1),
and annual AR mobile app revenue rising
from $749 million to $18.5 billion over
the same period. Over the same period,
software and services will scale from $1.3
billion to $19.9 billion;
• Zion Market Research believes the global AR market could reach $133.78 billion in 2021,
growing at an 85.2% CAGR between 2016 and 2021;
• CBInsights see about $2.15 billion global AR/VR funding (Exhibit 2) based on YTD 2017
(May 12, 2017) investments.
Exhibit 1: Consumer Mobile AR Users, Apps, and Downloads
Source: Tractica
Virtual Reality software segments. Source: SuperData Research
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Exhibit 2: 2017 Could Be a Record Year for Financing AR/VR Companies
Source: CBInsights
To Cable or Not to Cable
When will these headsets become untethered? Investors constantly ask Sophic Capital this
question, and it was a point of discussion at AWE 2017. An investor panel composed of Silicon
Valley VCs agreed that cabled VR and AR
headsets are impeding consumer adoption. We
agree and disagree on this point. We agree in
that we are a wireless society, and mobile VR
would facilitate new business cases including:
wide-space gaming, architecture, and retail2
experiences. We disagree in that not all VR
applications need to be high-end quality, which
requires tethering an HMD to a gaming
computer. Google Cardboard’s success is
evidence of this: An untethered VR HMD
driven by a user’s smartphone was how Google
brought VR to the masses.
2 One company we met is focusing an application around the premise that buying goods is an experience.
They are developing a MR application that would allow you to transform a room in your home into a
customized retail space, specific to a brand – in essence, bringing the store into your home.
Source: PCMag.com
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Needless to say, making HMDs wireless is the goal within the VR/AR/MR industries. AWE
2017 unveiled that there is a market for mobile VR, even though users cannot see or hear the real
world. The headsets need to have a sense of presence and the ability to map the real world so that
the user doesn’t trip over a coffee table or step in front of a moving car. We should have 5G
networks by 2020, and they could provide sufficient bandwidth to drive the data required for current
high-end, wireless headsets.
Wireless solutions are interesting but face challenges. One of the biggest issues is keeping up
with the bandwidth demands of an evolving market, such as Kopin’s (KOPN:NASDAQ) Elf VR
which will have three times the resolution of Oculus Rift and HTC Vive. Wireless also imparts
additional costs to HMD design and bill of materials, adds significant weight, power concerns and
potentially reduced battery life. Plus, there is the safety issue of having a battery strapped to the
user’s head (remember those exploding phones)?
AMD’s (AMD:NASDAQ) acquisition of Nitero (terms not disclosed) is further evidence that
the market demands high-end wireless experiences. Nitero’s website states that it provides “60
GHz wireless for AR and VR.” TPCast and DisplayLink are similar technologies which initially
didn’t impress some reviewers but are now gaining traction. The Oculus CV1 and HTC Vive VR
implement 1080 x 1200 pixel resolution at 90Hz frame refresh for each eye, and 60GHz solutions
should be able to remove the cables. However, tomorrow’s technology will be 4K video; 4096 x
2160 pixels (4K by 2K) at 90 to 120Hz frame refresh. HDMI 1.4 allows for a maximum data rate
of 10.2Gb/s. Without getting technical, wireless can’t handle that right now, so we believe that
current Nitero technology may not be able to deliver 4K video. But Nitero’s IP could provide a
foundation for AMD to develop technology to deliver wireless 4K experiences some time in the
future.
Cable or Wireless Won’t Determine a Consumer HMD Winner
Pricing and performance are the major drivers of consumer adoption of VR HMDs – NOT
wired or wireless technology. AR/MR/VR headsets are available at various price points and
performance capabilities (Exhibit 3). In general, lower price devices allow consumers to try VR
without a huge investment. Gear VR has been very successful with over 5 million units sold even
though performance is relatively low. HTC and Oculus have had less success than expected mainly
due to consumer reluctance to spend so much for an emerging technology. High end standalone
devices are interesting, but today’s price points will be beyond acceptable levels for consumers.
However, we believe that Microsoft’s MR devices will hit the sweet spot of low price and high
performance, especially with marketing and sales channels of Microsoft and its partners.
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Exhibit 3: Price/Performance and NOT Wired/Wireless Drive AR/VR/MR Adoption
Source: Sophic Capital
Consumers weren’t ready to invest in high-end AR/VR/MR HMDs. HoloLens’ $3,000 price
tag has driven AR/MR out of the hands of most consumers for the moment. Plus, there isn’t much
content outside of the enterprise. Oculus began accepting DK2 pre-orders on January 6, 2016 at a
price of US$599 (Best Buy now sells Oculus HMDs for US$499.99 or bundled with the Touch
controllers for US$599.98). We thought that it wasn’t a bad price for leading technology, however,
to get a “WOW!” VR experience without distortion, consumers needed US$1,500 high-end gaming
computers to power the headsets. HTC began taking pre-orders for its US$799 Vive on February
29, 2016, which also needed a US$1,000 processing unit. Developers and gamers didn’t balk at the
headset pricing (many complained about the US$399 price that Oculus had originally floated).
They bought HMDs because these people likely already had the supporting PC to drive the VR
headsets. However, these prices were a lot for most consumers. But since then, gaming computer
pricing has significantly declined (a Lenovo IdeaCentre Y700, recommended by Oculus, costs
US$649), making virtual reality more affordable and accessible to consumers.
We’ve written in the past about how we thought Sony’s (SNE:NYSE) PlayStation VR HMD
could be a winning platform. The reason is that PlayStation VR is an addendum to Sony’s PS4
gaming console. As Exhibit 4 shows, PS4 has been the best selling gaming console since it was
introduced in 2013. This tells us that PlayStation VR’s US$400 price point is acceptable to
consumers, especially those who already have a $400 PS4 console. Sony also has the advantage of
an extensive gaming library. And as we stated earlier, content is important for consumer adoption.
And this is why we believe Microsoft’s VR HMDs could be future winners – read on!
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Sophic Capital cost estimate
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Exhibit 4: Top Selling Gaming Consoles by Year (Units)
Source: VGCharts, Sophic Capital
Microsoft Defining the Future of Computing
On October 26,
2016, Microsoft
announced a
team of powerful
partners to bring
its Windows 10
VR HMD to
market. PC
OEMs recognize
that PCs and
tablets aren’t as
popular as they
once were, and
they need a new
computing
platform to grow with. VR HMDs are the computing platform, and Microsoft appears to want to
lead the way. Microsoft announced that Dell (private), Asus (2357:TPE), Lenovo (0092:HKG), HP
(HPQ:NYSE), and Acer (2353:TPE) will build and ship its headsets in 2017. At CES 2017,
Microsoft showcased the first VR prototypes from its partners and suggested a starting price of
US$299. The HMDs can integrate into a Microsoft Surface Studio computer, and Windows 10 will
drive the device. One differentiator is inside/out tracking, something not available on high-end
Oculus or HTC Vive systems. This means that the Microsoft HMD won’t require external sensors
like the Oculus Rift or HTC Vive. It also means that it can track a person’s position in space, unlike
Samsung’s GearVR. The Microsoft HMDs are tethered to a computer, likely to take advantage of
an external power supply and processing power.
Marketing and content are other
reasons why we think Microsoft’s
HMDs could become the next reality
headset winner. Microsoft, Intel, the
aforementioned OEM partners, all
have the resources to promote the
platform to consumers. Net
Applications lists Windows operating
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (YTD) TOTAL
DS 10,991,195 20,776,966 29,508,695 29,663,772 27,573,530 20,620,707 8,759,675 3,012,615 818,084 151,725,239
PSP 9,613,346 9,488,584 12,814,297 14,048,403 9,855,987 9,243,328 7,459,539 4,220,108 2,973,884 391,786 80,109,262
X360 1,178,267 6,801,532 7,879,552 10,913,123 10,160,518 13,253,914 13,808,365 10,677,206 6,239,751 2,600,902 928,456 391,737 35,467 84,868,790
Wii 2,954,781 16,553,289 24,188,263 21,295,417 17,320,956 11,522,685 5,082,024 1,947,850 515,969 74,946 101,456,180
PS3 1,252,040 7,922,055 10,204,758 12,997,974 13,896,438 14,706,691 12,150,117 8,252,038 3,547,908 1,342,092 517,916 71,016 86,861,043
3DS 13,250,062 14,112,182 14,369,898 9,745,610 7,326,085 7,939,845 1,253,596 67,997,278
PSV 481,573 3,674,466 3,204,823 2,419,726 2,681,299 2,041,540 389,707 14,893,134
WiiU 2,247,216 3,113,285 3,674,351 3,459,547 1,525,551 100,601 14,120,551
PS4 4,430,139 14,244,356 17,510,227 17,130,861 4,234,849 57,550,432
XOne 3,075,770 7,905,271 8,631,257 8,306,621 1,642,268 29,561,187
NS 3,488,881 3,488,881
TOTAL 21,782,808 41,273,903 74,677,888 89,018,319 81,883,426 74,335,343 69,988,590 55,175,934 48,425,522 45,045,879 41,953,909 37,854,071 11,216,385
Source: Net Applications
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systems as commanding 90% of the world’s market share. And with this market share comes an
ecosystem of products that are embedded in our personal and business lives: Office, Skype, Internet
Explorer, and LinkedIn. With Microsoft, computer OEMs, Intel on board and a low $300 price
point, we believe it will be difficult to usurp Microsoft HMDs.
AR on the Minds of Big Tech Companies
Until now, companies like Google and Microsoft have been at the forefront of developing and
promoting AR to the masses. But Facebook (FB:NASDAQ) and Apple (AAPL:NASDAQ) have
become more vocal about the technology.
The “Camera” is Facebook’s AR Platform
During Facebook’s F8 global developer conference, CEO Mark Zuckerberg detailed how
augmented reality is one of the company’s next big bets. Using cameras across Facebook’s
applications was “Act 1”, in Zuckerberg’s words. Act 2 is giving developers new AR tools to build
on the camera. Many people are familiar with Facebook’s AR smartphone applications: face masks,
those computer-generated hats and animal faces that overlay your face as you communicate with
friends over Messenger, and art frames. Although Facebook seems content to continue building
these types of mobile smartphone AR content, Mr. Zuckerberg expanded his AR vision to where
people share information by leaving digital messages in bars or notes on a refrigerator.
The Apple of My Eye
In our VRy Interesting VR report published January 10, 2017, we revealed an Apple
(AAPL:NASDAQ) patent that may have been for an AR HMD. The patent shows that Apple is
using an external display for internal and external viewing modes. It’s unclear about whether the
patent is for AR, VR, or MR.
Since then, rumours built speculating that Apple is working on AR. The Financial Times
reported “that Apple is stepping up its efforts in AR eyewear, according to people with knowledge
of its efforts.” Bloomberg wrote that “Apple is working on a set of smart glasses, reports
Bloomberg. Citing sources familiar with Apple's plans, the site says the smart glasses would
connect wirelessly to the iPhone, much like the Apple Watch, and would display "images and other
information" to the wearer.”
We believe Apple could be a leader in AR
even though it could be years behind
Google and Microsoft in development.
Where Apple holds an advantage is in
consumer design - building aesthetically
pleasing devices. Apple is fashionable.
Apple is reliable. The company has not
always been first to market with innovation:
Xerox invented a $300 mouse that Steve
Jobs refined to a $15 price; Korea’s Saehan
WE WILL “HAVE AR EXPERIENCES
EVERY DAY, ALMOST LIKE EATING
THREE MEALS A DAY. IT WILL BECOME
THAT MUCH A PART OF YOU.” APPLE CEO TIM COOK SOURCE: Bloomberg
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Information Systems massed produced its MPMan portable digital music player long before we
heard of the iPod; and Microsoft had tablets before Apple. Where Apple excels is evolving
electronics into functioning, stylish, high-end hardware that appeals to the masses. AR glasses that
look like glasses instead of bulky helmets is a key factor for consumer adoption, and Apple’s history
of sleek consumer design may give the company an advantage over rivals. Consumers also see
Apple as a luxury brand, enabling the company to command higher prices earlier in the adoption
cycle.
Google Leverages Its Expertise in Machine Learning for VR
Google (GOOG:NASDAQ) CEO Sundar Pichai gave a keynote speech that outlined the
company’s vision for AR and VR. Google revealed a Qualcomm-based reference VR design to
hardware OEMs looking to get into this space. The new VR headset is self-contained and doesn’t
rely upon a smartphone to provide the
screen, unlike prior Google offerings like
Cardboard and Daydream View. The
HMD doesn’t require an external
computer and uses inside/outside
mapping to navigate, relying upon
machine learning rather than GPS or an
external sensor apparatus. Both Lenovo
(0992:HKG) and HTC (2498:sTPE) are
apparently ready to build the device, and
they should be available later this year.
Mr. Pichai also announced that ASUS
would produce a second-generation
Tango phone. Tango is Google’s
augmented reality computing platform.
Lenovo released its PHAB 2 Tango
phone at the end of 2016. Several handset
OEMs already offer Daydream-
compatible phones.
Simply Amazong!
Amazon appears interested in VR and AR’s potential with its customers. We’re not sure what
Amazon is up to, although the Mixed Reality opportunity listed below mentions the responsibility
to, “Build customer facing VR and AR applications across multiple platforms” and mentions high-
end tethered HMDs Oculus and PlayStationVR. The VR Tech Lead (top red circle below) states
that the role requires “design and develop new systems which will bring a unique shopping
experience to new devices.” We’re speculating here, but similar VR shopping platforms immerse
shoppers into virtual stores that can range from wide selections of clothing to arranging furniture
and decorating a room. With AR, we’ve seen applications that disclose information when the user
looks at merchandise. Perhaps Amazon is exploring a similar concept, since Amazon shoppers are
currently limited to 2D storefronts and text product descriptions.
Handset OEMS are aboard with Google’s new VR HMD design concept. Source: Google
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Microsoft’s Surprise
In a research paper with little fanfare, Microsoft (MSFT:NASDAQ) unveiled an AR
prototype that looks like a “normal” pair of glasses. This is not Microsoft’s first foray into
augmented reality; the Company’s HoloLens has gained traction in the developer community. But
the new prototype represents a step to make an
HMD as innocuous as regular reading glasses,
and we believe this is critical for mass consumer
adoption. This is not easy technology to
develop, and Microsoft Research is frank in the
challenges they face – “There’s still a lot of
work to be done.” For those wanting a better
understanding about the technical hurdles
required to develop an AR HMD would benefit
from reading Microsoft Research’s paper.
Amazon VR and MR career postings.
Microsoft’s prototype AR glasses
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A Great HMD “IMMY” Opinion
IMMY (private) is unique in that they have focused their technology around the optics to
create an AR/VR headset that closely mimics the human eye. Their Company invested over ten
years developing its distortion-less optics,
solving the problem of projecting an image
onto a curved surface. IMMY’s, Natural Eye
Optic™ (N.E.O). replicates the human vision
system, providing the most natural and
comfortable viewing experience possible.
IMMY’s N.E.O. technology eliminates the
limitations of existing optics technologies, thus
delivering a large field of view, 3D AR/VR
capability in a lightweight, wearable and
mobile form-factor.
The Biggest Company You May Not Have Heard of
Have you ever heard of JD.com (JD:NASDAQ)? Us neither, which is why we were shocked to
find out that it is China’s largest retailer – both online and offline. In 2016, JD.com did $37.5 billion
in revenue. At AWE 2017, we listened to a Company executive detail how customer experience is
paramount to success. And part of JD.com’s strategy is to leverage technology to deliver
compelling customer experiences. JD.com streams a live VR shopping channel via a mobile app.
And now, JD.com is focusing on providing more digital experiences to customers. There is a
problem, however. Retail experiences need retail products, and this requires digitizing those
products so they can be imported into VR and AR. JD.com has over 200 million SKUs. Digitizing
all those products would take forever, so the Company hosted a competition to discover companies
that could develop technologies to rapidly digitize those SKUs. Stay tuned.
The Smallest Company Doing Big Things
At AWE 2017, we met Amber
Garage, a company that is doing
to AR what Google’s Cardboard
did to VR – bringing the
technology to the masses. Google
did this by creating an inexpensive,
smartphone-based VR HMD
constructed from cardboard. Amber
Garage has created HoloKit, which
we think of as Cardboard’s AR
cousin. HoloKit is made from
cardboard and, similar to Google’s
Cardboard, Amber Garage’s
HoloKit is an open-source design,
so anyone can build one. Using a
Tango-based smartphone installed
in HoloKit, we watched a solar
IMMY's Mark 1™ AR/VR Glasses
HoloKit Founders
AWE-GMENTED REALITY
Sean Peasgood: www.SophicCapital.com June 14, 2017 - 15
system of planets swirl around the floor. It worked and was better than some of the content we saw
with HMDs costing thousands. HoloKit should help bring AR experiences to consumers who have
never tried it before.
Conclusion
VR/AR/MR are gaining importance. At AWE 2017, we saw numerous headsets and enterprise
applications. Retailers, educators, energy companies, construction firms, are embracing these
technologies, and enterprising firms are thinking not only about how to create value propositions
for these industries but also how the next generation of the Internet could be defined. AR/MR will
change our world on a scale similar to how smartphones and the Internet did. This could spawn
hardware, software, solutions, apps, and advertising markets collectively worth trillions of dollars.
We believe that VR/AR/MR will be an investment theme for many years to come.
Acronyms Used in this Report
AR augmented reality
AWE Augmented World Expo
HMD head mounted display
MR mixed reality
VR virtual reality
AWE-GMENTED REALITY
Sean Peasgood, www.SophicCapital.com June 14, 2017 - 16
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