Top Apple analyst warns Vision Pro demand fell much faster than anticipated

Ming-Chi Kuo, an Apple analyst with connections into its Asian supply chain, wrote on Tuesday that his channel checks with component manufacturers reveal that the tech giant is grealty tempering its expectations and now expects to sell between 400,000 and 450,000 units this year. 

“Demand in the U.S. market has fallen sharply beyond expectations,” he posted to Medium, adding the market consensus had been between 700,000 and 800,000.

Since Apple doesn’t publish a forecast for Vision Pro sales, and did not respond to a Fortune request for comment, it’s difficult to verify his claims.

However, the viral excitement surrounding Vision Pro’s launch in early February and its claim of launching a “new era of spatial computing” have tempered considerably. 

First time I tried Vision Pro: Damn this display is amazing and the eye tracking is like magic and this feels very future and also it’s a little heavy

Second time: immersion factor is still so high. Special videos are hit or miss, you gotta get the distance right. And wow this… https://t.co/iqSvs1e8LD

— Marques Brownlee (@MKBHD) January 16, 2024

Garry Tan, CEO of Silicon Valley’s best-known startup accelerator Y Combinator, posted on Wednesday about his frustration with using Vision Pro while working.

“Do people at Apple actually even dogfood this?” he wrote, using a tech industry term for developers testing out their own products.

If Apple loses a tech expert like Tan, then, to borrow his words, “it’s not going well.”

The XR space is struggling to gain mainstream traction

The field of extended reality (XR), an umbrella term encompassing all forms of the technology including MR and VR, has struggled to carve out a niche for itself beyond the very earliest adopters. 

The gains headsets provide have not been sufficient for mainstream buyers to justify the steep upfront cost of purchasing a Sony PlayStation VR or Meta Quest. 

As long as interest was muted, third-party developers were often hesitant to invest the extra resources to design even ported applications and software, let alone bespoke ones that would fully exploit the hardware’s capabilities.

And as long as there was no compelling content they couldn’t already find elsewhere, consumers had little reason to care.

Demand for the Quest, formerly sold under the Oculus brand, has been so tepid compared to the $45 billion in accumulated metaverse losses that Meta boss Mark Zuckerberg decided to license his operating software to other headset manufacturers to spur growth of the overall XR ecosystem.

It was hoped that Apple, with its instant brand recognition and enormous market influence, would end the chicken-and-egg dilemma that has long handicapped the industry.

This is crazy:
New Vision Pro app releases have plummeted…

We always talk about the “chicken or the egg” problem for XR apps & hardware…

…it does not appear that the AVP v1 (aka dev kit) has ignited the XR app ecosystem as we might have hoped pic.twitter.com/4JpHE56aEz

— Troy Kirwin (@tkexpress11) April 17, 2024

But the device has been criticized for being excessively expensive and uncomfortable—YouTube reviewer Marques Brownlee emphasized three times how heavy it is.

In a worrying signal that Apple has not yet succeeded in convincing people that developing tools for their headset is worth the effort, data indicates the cadence of new releases for Vision Pro apps is also steadily dropping.

“The challenge for Vision Pro is to address the lack of key applications, price, and headset comfort without sacrificing the see-through user experience,” Apple analyst Kuo warned. 

There was some silver-lining news, however.

Even as Meta forecast on Wednesday that annual operating losses at its Reality Labs segment would increase “meaningfully” year over year as it keeps investing, it said divisional sales jumped by nearly a third thanks to sales of Quest headsets.