Good News/Okay News for Apple Vision Pro

Vision Pro Update
US Market Demand Slowing Significantly, Global Release Schedule Forecast, Interpretations for Supply Chain...

A lot of tidbits in Ming-Chi Kuo's latest research note about the Vision Pro. First, he notes that demand for the device in the U.S. has "slowed down significantly" with shipping times back under one week. Such "equalizing" happens with all Apple products, of course. But this does feel rather quick – the device is just under one month old. It also feels a bit like because demand was perhaps higher than expected (or feared) to start thanks to both Apple and XR enthusiasts, the normalization may be a bit more than, well, normal because this device is just tough. Both in price and, frankly, experience (once the novelty wears off).

Still, what does this mean for actual sales? Hard to know for sure – no numbers out of Apple, of course, which is not surprising, but if they were gangbusters, we'd probably get a press release as we have with other products in the past! – but tracking the change in estimates is interesting, if imprecise:

U.S. shipments are expected to be 200,000–250,000 units this year, better than Apple’s original estimate of 150,000–200,000 units, but this is still a niche market.

That's just the U.S. and the device remains U.S.-only for now, but as Kuo notes, that's likely to change soon thanks to the supply and softening U.S. demand. The hold up may actually be localized software tweaks rather than anything else. He expects some international launches before WWDC in June. I suspect we'll hear dates of upcoming launches sooner rather than later to prime those markets.

Everything about Vision Pro since pre-order has been in line with previous expectations, with only the higher-than-expected number of early adopters and the production expansion by suppliers exceeding expectations. However, Vision Pro is still a niche product based on current demand and production levels (2024 shipment estimation up to 650,000–700,000 units vs. 500,000 units previously).

That's worldwide, of course. So if we believe those numbers are close enough, that would mean roughly $700M - $875M in Vision Pro revenue in the U.S. (not including accessories, of course) and (presuming the pricing is similar worldwide), $2.3B - $2.5B in revenue overall. That's not nothing. And for most companies, it would be an incredible business.

But for context, Apple's total revenue in 2023 was $383B. Of that, iPhone revenue was $201B for the year. Mac revenue was $29B. iPad revenue was $28B. It's hard to know what Apple Watch's revenue was as it's bucketed into "Wearables" with AirPods, HomePods, etc. (It's also likely where Apple will put Vision Pro revenue this year, I imagine.) That overall number was $40B in revenue for 2023 (estimates have Apple Watch contributing roughly half of that number, at $20B).

In other words, in year one, Vision Pro may be a business roughly 1/10th of the iPad and Apple Watch businesses (with the big caveats that the Vision Pro will have been U.S.-only for a large portion of the year – likely half, given Apple's fiscal calendar, which runs October to September – and won't have been in market at all in the first quarter of said fiscal calendar, so it's not exactly apples-to-apples). The first year of iPad revenue was $5B (iPhone didn't get broken out until 2009). So it's roughly half of that, with again, all those caveats (and the fact that the Vision Pro starts at $3,499, whereas the iPad started at $499).

Anyway, again, assuming these numbers hold any weight, the Vision Pro will end its first year as an interesting, but relatively small business for Apple. It's a decent starting point, but you have to believe that Apple could launch nearly anything these days from a decent starting point given all their product, distribution, and marketing muscle. All that really matters is what happens in year two and beyond. Including, of course, to the price!

For now, my advice: content, content, content, content, content, content.

One thing that does matter in year one. That return rate. Seemingly good news there from Kuo:

According to my survey of the repair/refurbishment production line, the current return rate for Vision Pro is less than 1%, with no anomalies.

That would seem to contradict earlier reports – which were varying degrees of anecdotal. Still, it's interesting/curious that Kuo's survey is putting this number out there and not Apple in some fashion. I would have guessed that if the return numbers were better than what was being touted in those early headlines, Apple would figure out a way to subtly combat that perception – unless they could not (i.e. the numbers were true enough). They would not do this via Kuo, so it's still not clear what to believe here, IMO. This is something though:

It is worth noting that 20–30% of the returns are due to users not knowing how to set up Vision Pro.

There's no way returns of say, the iPhone, are driven by that! Vision Pro is a bit laborious to set up but not that bad. So I suspect it's more around the entire process of putting the thing together and on – which is sort of a pain! In some cases, literally! And yes, maybe some folks putting it on and realizing that, while perhaps pretty cool, Vision Pro is just not for them. Not yet, anyway.