Intel to sell a controlling stake in its AR business, still promises smart glasses

Intel is reportedly preparing to sell the majority stake of its augmented reality (AR) business, which sits under the company’s New Devices Group. The AR division is valued somewhere in the neighborhood of $350m. Intel will maintain a minority stake in the business, but wants to outsource operations and sales to better positioned consumer-facing companies.

As revenues at Intel have flattened, the company is looking for new devices to run on its chips. But the planned sale of the AR business, which will be called Vaunt according to sources, can be seen in the context of a wider shift away from consumer products and specifically wearables – which a few years ago was considered an up-and-coming device market and an opportunity for Intel to move its business beyond PC chips.

The latest news follows massive layoffs in Intel’s wearables department in 2017, followed by a string of reversals for the company in the AR and VR space. Now it looks like the AR and VR headset market is a bust, too.

Intel acquired eyewear maker Recon in 2015 to bolster its position in the AR and VR space, but in the summer of 2017, reports revealed Intel had shuttered Recon after laying off about a third of its workforce. Some of the remaining Recon employees are now part of the Vaunt division and worked on Intel’s AR glasses.

Around the same time, Intel announced it would close its VR headset initiative, called Project Alloy, too. Project Alloy was a VR headset reference design that Intel had hoped third party manufacturers would use to build out their own VR headsets. But lack of interest for the designs left Intel without much reason to continue to support the project.

Despite those strategic moves, Intel promises it will release its first pair of AR glasses to the public later this year. The AR glasses, built by Taiwan-based Quanta Computer under the internal project name Superlite, projects imagery directly onto the user’s retinas, displaying contextual information onto the surrounding areas. The glasses use a laser-based projector to bounce images off the lens of the glasses and into the eyes of the user at 400 pixels by 150 pixels of resolution.

The so-called smart glasses pair with a user’s mobile phone via Bluetooth. The glasses’ main function so far is to deliver push notifications and incoming calls, much like the function of a smart watch. Intel will launch an early access program for developers later this year, which could spur more exciting innovations for the glasses. The massively funded Magic Leap launched the developers’ version of its own AR glasses, without a price, in December and may well dominate this space due to the rave reviews that its light field approach have received, compared to this reflection approach.

Intel’s Superlite glasses can still be seen as an important evolution in the smart glasses space. The glasses are sleek, relatively lightweight at 50 grams, and supposedly can be worn all day without much notice or strain on the user’s behalf. They can support prescriptions, too, and are without a doubt an improvement on Google’s first AR glasses, called Google Glass. The smarts of the glasses are built into tiny modules located on the arms of the eyeglasses, near the hinges, and the visual display appears in the lower right corner of the user’s field of vision. And unlike Google’s initial offering, there’s no camera built in, no buttons to push, no swiping to be had and no microphone.

Magic Leap, Google, Apple and Amazon are all after the same pot of AR gold. Google recently announced its efforts in AR glasses – a resurrection of Google Glass – will pivot towards business customers. Microsoft’s HoloLens is also targeting business communities, along with medical and academic use cases.

Amazon and Apple are reportedly both working on consumer-facing AR glasses, which means Samsung is probably considering doing so, too. Snapchat, LG and Xiaomi are reportedly also developing their own AR glasses.

Of course, while Intel often invests in end products in order to kickstart a new segment, it is not a consumer-facing company but a chipmaker. Its real goal is to sell chips to makers of smart glasses and other AR/VR devices, not to make its own for the longer term. Intel chips are part of Microsoft’s HoloLens AR glasses, and the chip firm is now supplying technology for VR via its RealSense 3D camera tracking technology, and its image processing Movidius chips, to other headset makers. Intel also announced this week that the company is partnering with Olympics Broadcast Service (OBS) and 10 other broadcasters around the world, including NBC in the US, to produce 30 games in 360-degree video.

Still, the market for these devices is still tiny. Goldman Sachs estimates the AR and VR hardware market will reach only $110bn by 2025, with the software market reaching $72bn. By contrast, the smartphone hardware market will reach $425bn in 2018, according to IDC.