Microsoft's AR headset business is in trouble

In the past two years, the R&D team of Microsoft's AR (augmented reality) headset HoloLens has left more than 100 people, most of whom went to the parent company of Facebook, a global online social platform. Meta. In addition, there have been recent rumors that Microsoft may have canceled the consumer-grade XR hardware project developed in cooperation with Samsung. At present, Microsoft is frequently hindered in the AR field, and its development is at a deadlock.

The HoloLens headset, a futuristic AR headset from Microsoft launched in 2015, is a ring-shaped device worn like a crown that uses 3D imagery to overlay digital content on top of the real world, but The headset didn't become a hit.

In January 2015, Microsoft CEO Satya Nadella had high hopes for the HoloLens headset when he first introduced it, calling it "the next big thing." However, now, seven years after launching the headset, Microsoft's strategy to move into AR has been hampered by a combination of technology and a lack of patience from the company's management, and Nadella's vision for the device has yet to materialize.

Over 100 people left the HoloLens team and the AR department was split

More than 100 employees have left the HoloLens team in the past two years, according to LinkedIn profiles and former Microsoft employees. At present, Microsoft has reorganized the HoloLens team of more than 1,000 people and cut research funding for AR projects. That could be because slumping PC sales hit consumer demand for Windows software, leading to lower profits and slower revenue growth for Microsoft in the first quarter of fiscal 2023.

Microsoft is trying to counter its current slowdown in revenue growth by cutting staff costs and more speculative projects. Earlier this year, it was reported that Microsoft had shelved its HoloLens 3 development plans. In addition, there have been recent rumors that it will cancel a consumer XR hardware project with Samsung.

With the departure of Alex Kipman, the original head of the HoloLens team this year, the HoloLens team is split into hardware and software. "We're going to take a software-led approach to our AR strategy," Nadella said at a company meeting in July, leading some employees to question the future of the HoloLens project and Microsoft's hardware strategy.

The HoloLens project, military applications, and other hardware initiatives are being overseen by Microsoft Chief Product Officer Panos Panay. The software business has been handed over to Jeff Teper, the company's executive responsible for Teams, the company's office collaboration product.

The general economic impact of the recession and Microsoft's moves are also related to the poor sales of the HoloLens headset itself. According to international data firm IDC, total sales of the HoloLens headset since Microsoft's HoloLens program was around 300,000 units, while IDC analysts estimate that Meta has sold about 17 million units of the Quest 2 headset, which will launch in 2022. In contrast, Meta's Quest 2 headset is 50 times more than Microsoft's.

While Microsoft is stretched thin in AR, Nadella is still very interested in the metaverse. Nadella meets with executives every two weeks to discuss the issue, according to people who have attended the meeting. Last month, Microsoft announced that it would ship its software products on Meta's Quest headset. Some in the industry believe that Microsoft's move is a bet that Meta will have a greater chance of building hardware products for the Metaverse.

Microsoft's AR development challenges and missed opportunities for AR headset development

In fact, Microsoft's hurdles with the HoloLens headset were evident early in the project. The project leader and former Microsoft engineer Avi Bar-Zeev revealed that when members of Microsoft's video game division brainstormed what the next generation of consoles would look like, they envisioned a product that would eventually replace all other screen devices by using AR technology. , and named the concept product Screen Zero, which is the original idea of ​​the HoloLens headset.

In 2010, Microsoft built a prototype HoloLens that used long wires to connect to computers. In the first demonstration, the person wearing the headset saw hundreds of cubes floating around them.

Alex Kipman, a Microsoft engineer who has led the HoloLens headset project from the beginning, revealed that his initial vision was to make an AR headset that could be independent of a computer, but it was a very difficult task. "We made a lot of mistakes because we had dogmatic and rigid assumptions about what worked and what didn't work," says Avi Bar-Zeev. Current and former employees who have worked on the project for years revealed that making AR headsets and apps It was more difficult than they expected.

Despite the technical setbacks, the HoloLens team also struggled with people and money. Tim Osborne, a retired HoloLens team director, put it this way: "We were way ahead in many ways and had the opportunity to be in a good position in this market, but Microsoft didn't put enough people and money into this project."

There are problems with the formulation of Microsoft's product strategy. Some members of the HoloLens team said that Microsoft's product strategy was unclear and inconsistent.

From C to B has been applied in the field of car and aircraft maintenance

The $3,000 HoloLens headset is too expensive for most consumers, and little is known about its purpose. Therefore, Microsoft has shifted its sales focus to enterprise users.

Microsoft has formed several groups to study new uses for the HoloLens headset, including enabling users to observe the surface of Mars, a feature that led to a partnership between Microsoft and NASA.

Microsoft also held several demos to test the many uses of the HoloLens headset. Employees who participated in a demo on the Microsoft campus revealed that Microsoft asked users wearing HoloLens headsets to look around, and then users could see real-time footage of the HoloLens headset scanning the room, when in fact, they saw It's a digital rendering that Microsoft built earlier.

There were a number of issues with the demo, like the demo furniture being nailed to the floor because even the slightest movement could throw the HoloLens headset wrong. Sometimes changes in natural light can confuse the headset's sensors.

In a presentation for law enforcement, Microsoft showed how law enforcement teams can use the HoloLens headset to identify the location of the gunman, but people involved in the presentation revealed that the device is far from being able to do this in actual scenarios.

Faced with a less-than-expected demonstration, Shaw explains, it’s not uncommon for tech companies to demonstrate the potential use of a product before the technology is fully developed. Sometimes, a feature is ready to be demonstrated, but then due to various, it was canceled for some reason.

After a series of demonstrations, Microsoft began working with some enterprises to conduct practical application trials of the HoloLens headset. In aircraft maintenance, Japanese airline JAL is trying to use them to train flight crews and engine mechanics, while European aircraft maker Airbus Group is trying to use them to help employees through the complex steps of building a plane.

When it comes to car repairs, German car company Mercedes-Benz Group has service mechanics in the U.S. wearing HoloLens headsets to connect remotely with colleagues elsewhere. That way, colleagues elsewhere can see the line of sight of the U.S. branch service mechanic and tell them which parts should be inspected, guiding them through the repair program.

Microsoft has reached hundreds of billions of orders for customized AR headsets for the US Army

Not only does Microsoft sell the HoloLens headset to business users, it also works with the U.S. military. In 2018, Microsoft signed a contract with the U.S. Army for an AR headset worth $480 million (equivalent to about 3.47 billion yuan), and its final value may be as high as $21.88 billion (equivalent to about 159 billion yuan). According to the contract, Microsoft will customize an IVAS (Integrated Visual Augmentation System) headset for the U.S. Army on the original HoloLens 2 headset to help soldiers train and interact on the battlefield.

To do this, Microsoft needs to add more technology than ever to the HoloLens 2 headset for military customization, including cameras, military-grade sensors, radios, and night vision, as well as adding water and shock resistance.

But the IVAS headset revealed a lot of problems in early testing. Former Microsoft employees revealed that during combat exercises if the headset disconnected from the local wireless network, it would cause the built-in weapons tracker to fail. At the same time, it is also difficult to track the movement of the soldier's head, making it difficult to project digital objects on the display. Some former employees also said: "The headset is heavy and uncomfortable, and its screen causes eyestrain. Sometimes, after a few hours of use, the headset overheats."

The U.S. Army announced in October that it would delay testing of the headset by nearly a year. In April, the U.S. Department of Defense Inspector General revealed in a report that because soldiers are reluctant to use IVAS headsets, authorities believe the $21.88 billion investment in the project may be wasted.

Microsoft may have anticipated the poor test results of the IVAS headset, and in the face of such a situation, it is even worried that the US Army may abandon the contract entirely.

In August, the Army unfroze some of the early funding for the contract, saying that the IVAS headset has shown promise, but to correct its shortcomings, they will further delay the wider rollout of the IVAS headset. General Christopher Schneider, the head of research and development for the IVAS headset, said earlier last month that the Army recently completed its first round of testing and that the IVAS headset met most of the standards, but it has shortcomings and needs further improvement.

Is Microsoft's AR project in deep trouble?

Seven years ago, Microsoft had the opportunity to seize the development opportunities in the AR field with its HoloLens headset, but due to technical limitations, unclear product strategy and insufficient funds, the development of its AR headset was unfavorable, and it may be losing its position in the AR headset. competitiveness in the AR market.

AR technology is an important part of the Metaverse, but judging from the current development trend of Microsoft's HoloLens headset, Microsoft has no competitive advantage in this regard. Microsoft's software-led metaverse strategy may bring more possibilities to its development as Microsoft and Meta's software cooperation continues to deepen.

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