[Apple Shockwave](17) Vision Pro, Victory of Apple Semiconductor

Apple Evolves into Spatial Computing Based on Mixed Reality (MR)
Widens Gap with Competitors by Introducing 'R1 Chip'
Apple Silicon Expansion Strategy Leads to New Product Success
Completes Apple Silicon Transition Strategy with 'M2 Ultra'

Editor's Note[Apple Shockwave] is a content series that explores the upheaval caused by Apple entering the semiconductor market. You might wonder why Apple is involved in semiconductors. Apple is no longer just a company that makes smartphones and computers. After long efforts starting from its founder Steve Jobs, Apple has designed world-class semiconductors used in mobile devices. If Intel was the leader in the PC era, Apple has become the top predator in the mobile era semiconductor ecosystem. Amid the global semiconductor supply chain crisis and large-scale semiconductor production line investments, we will carefully examine the upheaval and prospects in the semiconductor market brought about by Apple Silicon to broaden our readers' insights. Apple Shockwave will visit readers every Saturday. After more than 40 installments, it will be published as a book.

"Today marks the beginning of a new era in computing." Tim Cook, Apple CEO

Apple unveiled a new semiconductor for the first time in three years through its new product, Vision Pro, launched in 2015. Tim Cook, Apple CEO, expressed strong confidence in Vision Pro, which was realized through the new semiconductor. This shows his strong attachment to the third new product he has introduced, following the Apple Watch and AirPods.

What draws public attention to Vision Pro, a mixed reality headset revealed at Apple WWDC, is not only its performance but also its price. The device, scheduled for release next year, requires a payment of over $3,500. Why is it so expensive?

[Image source=AFP Yonhap News]

The answer can be found in the specifications Apple revealed. Apart from the software, Vision Pro is said to concentrate the latest technologies in semiconductors and display components. The use of more expensive parts has driven up the price.

The 'brain' of Vision Pro is powered by two semiconductors developed by Apple itself: the 'M2' and the newly introduced 'R1'. The M2 is the latest chip used in Mac computers and iPads. Although the new 'M3' will likely be available by the official release of Vision Pro next year, the M2 remains a powerful system-on-chip (SoC). Apple assigned overall device operation to the M2 and tasked the R1 with handling incoming information. This means two semiconductors with different roles are used simultaneously.

The Core of Spatial Computing: the 'R1' Chip

Apple introduced the term spatial computer through Vision Pro. It feels familiar, similar to the spatial audio service provided through AirPods. The idea is to immerse both sound and visuals into space. How is this possible? It was made possible by a new operating system (OS), software, and powerful semiconductors. Vision Pro would have been impossible without Apple Silicon.

Apple has already successfully experimented with blending reality and music through AirPods. This is the ambient sound mode of AirPods Pro and AirPods Max. This feature allows users to hear surrounding sounds even while wearing the earbuds. Even when using the 'over-the-ear' style AirPods Max, which completely covers the ears, ambient sounds are clearly heard. This was possible because the H1 and H2 chips process sounds captured by microphones and immediately play them back. The overwhelming difference in semiconductor performance is why AirPods Pro 2, priced in the 300,000 KRW range, and AirPods Max, priced in the 700,000 KRW range, sell well.

Building on this experience, Apple uses semiconductor power to implement similar functions in video. The power of Apple Silicon is the foundation that enables Vision Pro to achieve a level of performance and functionality far beyond Microsoft's HoloLens 2 or Meta's Quest Pro.

Microsoft's 'HoloLens 2'

Apple explains that the R1 chip processes information input from 12 cameras, 5 sensors, and 6 microphones to make the content appear as if it is right in front of the user's eyes in real time. The R1 shows new images within 12 milliseconds, eight times faster than the blink of an eye. No other information about R1 has been disclosed yet.

Apple states that the combination of R1 and M2 allows the video captured by cameras to be viewed at real-time levels, preventing motion sickness caused by delayed video.

Meta's 'Quest Pro'

Vision Pro automatically shows the user's eyes when there is a person in front of the user. This is possible despite not using transparent glass because the outer part is a display. Both what the user sees and what is shown of the user's eyes are processed from information input through cameras. The ability to process large-capacity 4K-level video for both left and right eyes is also thanks to the R1. To realize the retina display emphasized by Apple, powerful chip performance is necessary.

This feature is the core that differentiates Vision Pro from other AR, VR, and MR devices. Thanks to the R1 chip processing video in real time, Vision Pro users can avoid the biggest drawback of AR (augmented reality) and VR (virtual reality) devices: motion sickness during use.

Apple Semiconductors Expand into Smartphones, Computers, Earphones, and MR Headsets

So, what about the semiconductors used in competing products to Vision Pro?

Meta's Quest Pro uses Qualcomm's Snapdragon XR2+ 1st generation chip. The Snapdragon XR2+ 1st generation chip in Quest Pro is based on a smartphone application processor. It is the Snapdragon 8 1st generation chip, used in Samsung Electronics' Galaxy S22. The performance of Snapdragon 8 1st generation was inferior even to the 'A14' chip used in the iPhone 12 released in 2020.

Apple CEO Tim Cook is making a V sign with his fingers in front of the Vision Pro. Cook did not show himself using the Vision Pro directly. He also did not appear wearing AirPods.
[Photo by AP Yonhap News]

Apple had already surpassed competitors in the low-power system-on-chip (SoC) field with the 'M1'. Apple's use of 'M2' in Vision Pro is essentially a declaration of intent to dominate the VR terminal market with the most powerful mobile chip currently available.

The 'Quest Pro 2', expected to appear in the second half of this year, is anticipated to use the Snapdragon XR+ 2nd generation chip. Even if this chip uses Snapdragon 8 2nd generation, its basic performance will hardly surpass the M2 released last year. Although Meta CEO Mark Zuckerberg introduced the entry-level MR headset 'Quest 3' before Apple, market and user attention is overwhelmingly focused on Vision Pro.

With a powerful AP as the base and an additional chip, R1, to process information input from various cameras and sensors, it is clear that Meta's device and Apple Vision Pro will start competing with an insurmountable gap.

Moreover, Apple suggested the possibility of interoperability between Vision Pro and various Apple devices such as iPhone, Mac computers, and AirPods. This creates a foundation not only for cooperation with existing devices but also for creating entirely new markets. This is a difficult area for followers to catch up.

The situation has also become complicated for Microsoft (MS), which entered the MR market early by launching HoloLens 2 in 2019. Although MS has taken the lead in the AI era, it is not easy to close the gap with Apple, which dominates the hardware market. MS also made HoloLens 2 using Qualcomm chips, but there is ongoing debate about whether HoloLens 3 will be released. If Apple produces chips using TSMC's latest lines, the performance gap could widen further.

Reference design implemented by Qualcomm's AR platform XR2

The difference between companies that can design semiconductors directly and those that cannot is clearly revealed here. Software performance can only demonstrate its true capability when supported by powerful semiconductors, as confirmed once again through Vision Pro. This is the power of Apple Silicon.

Even before Vision Pro was unveiled, Apple-focused media AppleInsider predicted, "If Apple releases a device that combines virtual reality and augmented reality, Meta's dominance in the VR market could collapse instantly." AppleInsider also pointed out that Meta's reliance on third-party APs, the heart of VR terminals, is a weakness.

It will not be easy for Apple to achieve immediate great success in the MR terminal market. Google and MS also failed to gain traction. Nevertheless, Wall Street has given positive evaluations. Financial experts' reports on Vision Pro are predominantly optimistic rather than negative.

Wedbush Securities raised Apple's target stock price by $15 to $220 after the Vision Pro announcement. Wedbush explained that the reason for setting the highest target price on Wall Street is that Vision Pro's price will drop by 2025, leading to increased product and app sales and significantly improved performance. Wedbush also described Apple's strategy as "playing chess while others are playing checkers," indicating Apple is far ahead of competitors. Credit Suisse and BoA also joined in raising their target prices. Morgan Stanley predicted that the release of Vision Pro would be a 'moon shot' for Apple.

Apple Unveils the 'M2 Ultra'

Apple has also completed the process of excluding Intel CPUs from all its products. The 'M2 Ultra' chip, unveiled alongside Vision Pro, is used in professional 'Mac Studio' and 'Mac Pro' computers. Now, Apple Silicon is responsible for the core chips in all Apple products.