When Apple held a corporate retreat in California’s Carmel Valley about five years ago to discuss its next major product, Jony Ive, its longtime design chief, captivated a room of the company’s 100 top executives with a concept video as polished as an Apple commercial.
The video showed a man in a London taxi donning an augmented reality headset and calling his wife in San Francisco. “Would you like to come to London?” he asked, two people who saw the video said. Soon, the couple were sharing the sights of London through the husband’s eyes.
The video excited executives about the possibilities of Apple’s next business-altering device: a headset that would blend the digital world with the real one.
But now, as the company prepares to introduce the headset in June, enthusiasm at Apple has given way to skepticism, said eight current and former employees, who requested anonymity because of Apple’s policies against speaking about future products. There are concerns about the device’s roughly $3,000 price, doubts about its utility and worries about its unproven market.
That dissension has been a surprising change inside a company where employees have built devices — from the iPod to the Apple Watch — with the single-mindedness of a moon mission.
Some employees have defected from the project because of their doubts about its potential, three people with knowledge of the moves said. Others have been fired over the lack of progress with some aspects of the headset, including its use of Apple’s Siri voice assistant, one person said.
Even leaders at Apple have questioned the product’s prospects. It has been developed at a time when morale has been strained by a wave of departures from the company’s design team, including Mr. Ive, who left Apple in 2019 and stopped advising the company last year.
An Apple spokeswoman declined to comment on the company’s plans for future products.
Apple’s headset is considered a bellwether for virtual and augmented reality. For more than a decade, tech leaders have been hyping it as the next wave of computing after the smartphone. Apple’s chief executive, Tim Cook, told university students last year that in the near future “you’ll wonder how you lived your life without augmented reality, just like today you wonder: How did people like me grow up without the internet?”
But the road to deliver augmented reality has been littered with failures, false starts and disappointments, from Google Glass to Magic Leap and from Microsoft’s HoloLens to Meta’s Quest Pro. Apple is considered a potential savior because of its success combining new hardware and software to create revolutionary devices. Still, the challenges are daunting.
Meta, Facebook’s parent company, has plowed billions of dollars into trying to build a virtual reality business. The experience has been humbling. It has sold about 20 million of its $400 Quest 2 headsets since 2020 and recently cut the price of the Quest Pro, its premium device, to $1,000 from $1,500 amid lackluster sales.
By comparison, Apple sells more than 200 million iPhones annually with an average selling price of more than $800.
Unlike the iPhone, which incorporated many existing technologies, virtual reality is requiring Apple and others to design new chips and wearable displays, said Matthew Ball, author of “The Metaverse: And How It Will Revolutionize Everything.” “The difficulty of the problem has been far greater than anyone expected,” he added.
Uncertainty about the potential of Apple’s project has led some people who have worked on it to speculate that the company could delay its release, especially in light of the shaky economy, these people said. The company has postponed other new products in the past, including AirTags, the coin-size location tracking devices, which Apple withheld for more than a year as it addressed privacy issues. But at this point, headset manufacturing is underway for a planned reveal in June, the people said.
Apple is projected to ship fewer than 500,000 headsets in a year, according to Counterpoint Research, a market research firm. By comparison, the company was expected to ship about 40 million Apple Watches after its debut. The modest expectations for the headset speak to the challenges in a category where sales declined 12 percent last year to $1.1 billion, according to NPD Group, a market research firm.
Seeking to define a nascent market is an aberration for Apple.
“Apple is always pretty good at coming into a market when the market is already established and changing that market,” said Carolina Milanesi, a consumer tech analyst for the research firm Creative Strategies. “This is not the case for Apple VR and XR. There’s still a lot of learning.”
Some internal skeptics have questioned if the new device is a solution in search of a problem. Unlike the iPod, which put digital songs in people’s pockets, and the iPhone, which combined the abilities of a music player and a phone, the headset hasn’t been driven by the same clarity, these people said.
The product is being birthed during a period of limbo. This year, Mr. Ive’s successor overseeing industrial design, Evans Hankey, departed. With design’s leadership in flux, Mike Rockwell, an engineer, has been leading development of the device.
The headset looks like ski goggles. It features a carbon fiber frame, a hip pack with battery support, outward cameras to capture the real world and two 4K displays that can render everything from applications to movies, two of the people said. Users can turn a “reality dial” on the device to increase or decrease real-time video from the world around them.
The New York Times has previously reported on some features, as have Bloomberg and The Information.
The headset is expected to cost about $3,000, three of the people said. And it is considered a bridge to a future product, such as augmented reality glasses, that would have broader appeal but require technical breakthroughs.
Because the headset won’t fit over glasses, the company has plans to sell prescription lenses for the displays to people who don’t wear contacts, a person familiar with the plan said.
During the device’s development, Apple has focused on making it excel for videoconferencing and spending time with others as avatars in a virtual world. The company has called the device’s signature application “copresence,” a word designed to capture the experience of sharing a real or virtual space with someone in another place. It is akin to what Mark Zuckerberg, Facebook’s founder, calls the “metaverse.”
The device will double as a tool for artists, designers and engineers, tracking them as they draw freely in space in image-editing applications and tracking hand gestures for the editing of virtual reality films. Lastly, it will function as a high-resolution TV with custom-made video content from Hollywood filmmakers such as Jon Favreau, the director of “Iron Man.”
Apple is expected to pitch its device as something different from those that Meta has introduced. During an interview last year with the Dutch publication Bright, Mr. Cook said he avoided using the term “metaverse” because it was foreign to the average person.
The headset’s price and applications suggest that it will appeal more to businesses such as design firms than to many of the one billion iPhone owners. Apple has enriched itself by selling expensive smartphones but always balanced price with utility.
Mr. Ball, the author of “The Metaverse,” compared the company’s strategy with this device to Tesla’s strategy with the Roadster, its initial $100,000 electric vehicle. Eventually, Tesla followed it with lower-priced cars with broader appeal.
Ms. Milanesi said Apple’s experimental approach with the goggles appeared to be more like its execution of the Apple Watch than its introduction of the iPhone. Apple initially portrayed the watch as a miniature extension of an iPhone. After learning what consumers were doing with the watch, the company marketed it more as a fitness accessory akin to a Fitbit.
“It’s not very Apple-like,” Ms. Milanesi said. “But Apple is a very, very different company.”
