Microsoft’s ambitious attempts to crack the augmented and mixed reality market are running into a wall. The company confirmed that it’s halting HoloLens 2 production, a move that spells trouble for its mixed reality hardware efforts. The HoloLens debuted in 2015 with promises of integrating digital overlays into the physical world. Yet, the tech giant’s lofty goals have hit some serious roadblocks.
Early AR Hype Fades
Initially, HoloLens made waves with mind-blowing demos that left people buzzing. Seeing Minecraft explode into reality on a coffee table? That kind of magic got everyone excited about the future. But the version that shipped didn’t live up to those demos. Instead, the $3,000 device launched with a much smaller field of view and felt far from the sleek, consumer-friendly gadget Microsoft had promised.
Microsoft initially pitched HoloLens as a tool for businesses rather than everyday users, a different strategy from Google’s ill-fated Glass. That didn’t make the hurdles any easier to overcome, as HoloLens’ steep cost and limited applications kept it from becoming a commercial hit.
Financial Trouble in AR
Things haven’t been cheap. Sources speaking with Business Insider estimate Microsoft has poured more than $5 billion into the HoloLens program, with no real return to show for it. By 2022, the company had already stopped work on a planned third version, frustrated by the lack of demand and its underwhelming sales. The numbers speak for themselves: only between 40,000 and 60,000 units were sold, generating around $210 million in revenue, which is small change considering the investment.
The headwinds only got stronger after HoloLens co-creator Alex Kipman left Microsoft amid accusations of inappropriate behavior. His departure signaled a broader shift, and soon after, the company started dismantling the team behind its AR efforts.
Military Contract Dilemmas
Microsoft’s other big AR project, the IVAS headset for the U.S. military, isn’t doing any better. Despite a potential $22 billion contract, the Army has expressed growing concerns about the technology. In testing, soldiers found the bulky design and light emissions from the goggles made them easy targets on the battlefield. One tester even bluntly noted that the devices “would have gotten us killed.”
Microsoft has scaled back on investing in major improvements for IVAS, choosing instead to focus on small updates funded by the military itself. With many of its engineers now working on other projects, it’s unclear how long Microsoft will remain the key player in the Army’s mixed-reality ambitions.
AI Over AR: The New Priority
While AR may be losing steam at Microsoft, AI is getting all the attention. The company is reallocating resources from hardware projects like Surface and HoloLens to focus on artificial intelligence and generative AI models. Microsoft expects to spend close to $100 billion over the next few years on data centers and GPUs, trying to meet its internal goal of acquiring 1.8 million AI chips by the end of 2024.
In an interesting twist, Microsoft is now partnering with Anduril, a defense technology startup founded by Palmer Luckey, to support the IVAS program. Luckey, best known for creating Oculus VR, has made IVAS a priority for Anduril, which has already integrated its Lattice software into Microsoft’s military platform.
Last Updated on November 7, 2024 2:34 pm CET
