Facebook (FB) Signs Agreement With AR Display Maker Plessey

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Facebook FB is making a big push into augmented reality (AR) after striking a deal with British device manufacturer Plessey Semiconductors Ltd. The financial terms of the deal were not disclosed.

Per the deal, Plessey’s LED manufacturing operations will be dedicated to helping Facebook prototype and develop new technologies for potential use in the AR/VR space for the next several years.

Notably, Plessey specializes in manufacturing microLED displays for AR headsets and heads-up-displays.

Facebook’s Growing Initiatives in AR

Facebook is working on an all-day AR wearable as its long-term vision expected for release between 2023 and 2025.

From smartphones to smart glasses, there will be about 2.5 billion AR-friendly gadgets in use by 2023, according to Digi-Capital report. By that time, the AR market will be worth around $70 billion, the firm calculates.

Facebook, Inc. Price and Consensus

Facebook, Inc. Price and Consensus

Last month, Facebook acquired computer vision startup, Scape Technologies Ltd. in a move to build out its AR capabilities. Scape has reportedly built a localization engine that’s designed for city-scale augmented reality. Using a cloud-based Visual Engine, the technology can build and reference 3D maps in the cloud, allowing devices to tap into a unified perception of the world around them.

In September 2019, Facebook worked with a company called Luxottica Group SpA that owns brands such as Ray Ban and Oakley, to build AR glasses that might one day be able to replace smartphones. Last year, details of one of Facebook's patents were released, which provided a more specific overview of how its AR glasses would work.

We believe that Facebook’s ongoing research efforts and demonstrated success with Oculus Quest make the social networking giant one of the companies best-positioned to make consumer-ready AR glasses a reality.

Other Players Contributing to AR Development

Several companies are developing AR wearables to gain advantage of the massive growth potential in its global market, which is expected to see compound annual growth rate of 152% between 2019 and 2024, per the Mordor Intelligence. In fact, Allied Market Research estimated that the combined market for AR and VR will touch $571 billion by 2025-end.

There were reports that Apple AAPL had expressed an interest in acquiring Plessey to push its AR dreams. Apple is reportedly planning to release a combined AR/VR headset by 2021 or 2022, followed by a pair of AR glasses in 2022 or 2023.

Apple also acquired display producer LuxVue, which owns patents relating to microLED usage, and operates a secret facility believed to be used for developing microLED.

The company had introduced AR software development tools called ARKit in 2017 and followed it up with ARKit 2.0 in 2019. Such development tools help start-ups build AR applications. And it won’t be a surprise if Apple comes up with its own AR product.

Meanwhile, Himax Technologies Inc. HIMX develops products such as liquid crystal on silicon (LCOS) and depth-sensing cameras. These products play a crucial role in the AR market. In order to block light in AR/VR headsets, LCOS chips are used. Depth-sensing cameras are used to measure distances to place digital objects.

Several AR devices including Google Glass and Microsoft’s first HoloLens use Himax’s products.

Snapchat parent Snap’s SNAP AR ecosystem includes lenses, games, and experiences, while it also continues to sell Spectacles AR glasses. At the end of the fourth quarter, more than 735,000 lenses had been created by Snapchat members through Lens Studio, with Community lenses achieving significant popularity.

Facebook’s agreement with UK display-maker Plessey could be pivotal in fighting competition when AR wearables become market-ready in the coming years.

Currently, Facebook carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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