Apple (NASDAQ: AAPL) launches its HomePod next month, the company's response to the growing market for smart speakers powered by virtual assistants. Investors haven't heard much about the device ever since it was unveiled over the summer at WWDC. Judging by Apple's continued unwillingness to share detailed financial results for Apple Watch, shareholders should similarly expect Apple to include HomePod sales in its broader "Other Products" category, with an occasional announcement of a significant statistic or milestone.
That's where third-party estimates come in. Fubon Securities analyst Arthur Liao expects Apple to sell 4 million HomePods in 2018, according to The Nikkei Asian Review.
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A healthy start
At $350 per HomePod, that estimate would translate into $1.4 billion in revenue. While that's modest in the context of Apple's overall business, it would still represent a healthy start for Apple entering an entirely new product category. It's too early to get a sense of what the HomePod's cost structure will look like, and management hasn't discussed it on any conference calls yet, either.
The smart speaker market is expected to jump to 24 million units in 2017, according to Strategy Analytics. That would represent massive growth over the estimated 5.9 million units shipped in 2016, and the market researcher believes that more product choices as companies jump in will drive consumer adoption. First-party speakers like Amazon.com's Echo or Alphabet's Google Home are expected to dominate the market in the foreseeable future, but third-party devices that integrate virtual assistants -- like Samsung's Harman Kardon Invoke that uses Microsoft's Cortana, or the Sonos One that uses Amazon Alexa -- should start to gain share in the years ahead.
Can you see me now?
It's never too early to speculate on future Apple products, even though the first-generation HomePod hasn't even launched yet. The second-generation HomePod is now expected to include 3D sensing and Face ID, according to the report. Contract manufacturer Inventec Appliances, which is expected to manufacture the HomePod, told investors on an earnings call that companies are starting to design smart speakers with facial and image recognition.
"We see trends that engineers are designing smart speakers that will not only come with voice recognition but also incorporate features such as facial and image recognition," President David Ho said. "Such AI-related features are set to make people's lives more convenient and to make the product easier to use."
Ho did not refer to Apple specifically, but Apple is pushing facial recognition technology forward in a big way with its TrueDepth system and Face ID biometric security. Apple's offerings differ dramatically from existing technologies that essentially analyze 2D images instead of creating a 3D depth map of a user's face. Yuanta Investment Consulting analyst Jeff Pu doesn't expect 3D-sensing HomePods to arrive until 2019.
Apple's product cycles are now sometimes 18 to 24 months for less-important products like Apple Watch or iPad, so it's feasible that Apple wouldn't release a second-generation HomePod until 2019, when the supply chain for 3D-sensing components is more mature. As the industry ramps production capabilities, those gains should probably be allocated to the 2018 iPhones and iPads first anyway.
Now Apple just needs to make Siri competitive.
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