Apple has quietly pulled back from its ambitious push into augmented reality, signaling a more cautious approach to its flagship $3,500 device. The company, which had hoped to revolutionize the virtual reality market with its high-end, "spatial computing" headset, is scaling back production of the product. According to sources at Luxshare, the Chinese manufacturer responsible for assembling the flagship device, Apple has instructed them to reduce production. Assembly has been cut from 2,000 units per day to just 1,000, and there are indications that the manufacturing of the product may come to an end as soon as November.

Despite the initial hype surrounding this flagship product, which was unveiled as a game-changing AR device, sales have not met expectations. Apple CEO Tim Cook himself acknowledged that the device is not designed for mass-market adoption. Instead, Cook referred to it as an "early-adopter" product, aimed at consumers eager to explore the future of technology today. In an interview in late October, Cook explained that the flagship product is intended for a niche group of tech enthusiasts rather than the broader public.

However, the device's underperformance in the market has been striking. Industry analysts from Counterpoint Research estimate that only around 370,000 units of the flagship product have been sold in the first three quarters of 2024. By contrast, Meta’s Quest headsets, priced at a fraction of the flagship device’s cost, have sold millions. The Quest 3, for example, retails for $500 and has outsold Apple’s offering by a significant margin, with sales topping 9 million units in the same period.

The low sales figures have caused Apple to reassess its strategy. Sources familiar with the company’s supply chain suggest that production cuts could extend beyond just the end of 2024, with plans to reduce the overall number of units manufactured. Apple had initially projected that demand for the flagship product would warrant a much higher production volume, with some reports suggesting the company expected to produce up to 8 million units over the device’s lifespan. However, this estimate has now been revised down to a mere 4 million units for the next-generation, more affordable version of the product, which is expected to launch in 2025.

Apple’s strategy has shifted in response to these disappointing numbers. While Cook has defended the flagship device, arguing that the product is part of a longer-term vision for augmented reality, it’s clear that the company has had to temper its expectations. The company had initially been banking on the product to drive innovation in the emerging AR space, but it appears that the high price point, coupled with user complaints about comfort and usability, has hindered its appeal.

Customer feedback has been critical, with many users complaining about the discomfort of wearing the device for extended periods. Some have noted issues with the small display, which has caused eye strain, and a few have reported frequent software bugs and even freezing. These early adopters, while intrigued by the potential of spatial computing, have found the device’s execution to fall short of expectations.

As Apple looks to the future, the company is now focusing on a more affordable, scaled-down version of its flagship product, expected to launch by the end of 2025. This more budget-friendly model is intended to be less feature-heavy, which could make it more appealing to a wider audience.

Apple’s retreat from its flagship product is a reminder of the challenges faced by tech companies in their pursuit of disruptive innovation. While the device may have generated significant buzz initially, it has struggled to find a sustainable market, and Apple is now recalibrating its strategy. The company’s cautious approach moving forward could pave the way for a more accessible AR product that appeals to a broader user base.

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