Smart glasses give tech giants dangerous FOMO
30/12/2024 08:20
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Katrina Hamlin
HONG KONG, Dec 30 (Reuters Breakingviews) - Smart
glasses will come into focus in 2025. Meta’s META.O
collaboration with EssilorLuxottica ESLX.PA has become a
bestseller in most Ray-Ban stores across Europe, the Middle East
and Africa, with total sales topping 1 million units, according
to Counterpoint Research. Early success has emboldened rivals to
develop their own specs.
The Ray-Bans, which wrap a mic, audio, camera and artificial
intelligence assistant into a familiar frame, cost some $300
apiece. Unlike bulky virtual or augmented reality headsets that
have failed to win mass appeal, Meta’s devices actually look
like normal glasses, are lightweight – under 50 grams – and
offer useful day-to-day features like real-time translation and
hands-free picture and video capture thanks to in-built memory
and processing power. They also seamlessly connect to a
smartphone, similar to wireless earbuds. That’s all thanks to
the latest AI chipsets, software and batteries; Meta’s Ray-Bans
boast a battery life of four hours, compared with less than one
hour for Snap’s SNAP.N rival product.
Other tech giants are eyeing this space. Baidu 9888.HK
launched glasses powered by its AI bot Ernie in November. Days
later, Reuters reported that Amazon AMZN.O is developing smart
glasses for delivery drivers. Suppliers are ramping up capacity:
specialist lens maker Vuzix VUZI.O reckons it will be able to
churn out as many as 50 million units a year by 2028, up from
around 1 million in 2024. Apple AAPL.O , Samsung Electronics
005930.KS , Xiaomi 1810.HK and Alphabet GOOGL.O itself are
all working on new products, according to media reports.
Profitability, though, may still be out of sight. Financial
details for the snazzy Ray-Bans are not disclosed, but they are
housed in Meta’s Reality Labs division, which also includes
Orion, its augmented reality glasses prototypes. That unit is
forecast to book more than $2 billion of revenue in 2024, per
Visible Alpha forecasts, a 16% increase from 2023.
But while Reality Labs will be the fastest-growing division
for years to come, it is expected to rake in combined operating
losses of $60 billion over the next three years, Visible Alpha
estimates show. Parent Meta has asked the unit to cut spending
by nearly 20% between now and 2026, The Information reported.
There are glimmers of hope. Analysts at Counterpoint
estimate it costs Meta and EssilorLuxottica nearly $135 to make
a pair of smart Ray-Bans, implying a 45% gross margin. That’s
higher than the roughly 30% logged for Apple’s smartwatch, and
close to the estimated 50% earned by AirPods, according to
analysts from Itaú BBA. Bringing down the costs of the processor
chip and battery without compromising on functions and features
will be a challenge but not impossible.
In 2025, that promise will lure more companies and investors
to try and emulate Mark Zuckerberg’s example. However, spotting
a winner will be tough.
Follow @KatrinaHamlin on X
This is a Reuters Breakingviews prediction for 2025. To read
more of our predictions, click here.
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Graphic: Meta’s Reality Labs’ operating loss is still rising
https://reut.rs/3Zi9FWy
Graphic: Reality Labs may be Meta’s fastest-growing unit by
sales https://reut.rs/3B1cF1k
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(Editing by Robyn Mak and Aditya Srivastav)
((For previous columns by the author, Reuters customers can
click on HAMLIN/
katrina.hamlin@thomsonreuters.com; Reuters Messaging:
katrina.hamlin.thomsonreuters.com@reuters.net))