Microsoft ceases production of the units but indicates in a statement it remains ‘fully committed’ to its IVAS program with the US DOD.
Microsoft on Tuesday confirmed it is no longer producing the HoloLens 2, the company’s second-generation augmented reality headset first launched five years ago at Mobile World Congress (MWC) in Barcelona.
At the time of launch, analysts predicted the new device could build momentum for augmented reality (AR) technology, which had so far failed to get serious traction. This is something that, for the most part, has not materialized.
A Microsoft spokesperson said the company has also “signaled a last time to buy for customers and partners. Support for HoloLens 2, including security updates, will end on Dec. 31, 2027.”
The spokesperson added that Microsoft “will continue to invest in mixed reality opportunities with first-party software solutions and services, partnering with the broader mobile phone and mixed reality hardware ecosystem. In addition, we remain fully committed to the IVAS program with the US Department of Defense.”
The IVAS program was launched three years ago. Microsoft said in a blog at the time that “the United States Army announced that it will work with [it] on the production phase of the Integrated Visual Augmentation System (IVAS) program as it moves from rapid prototyping to production and rapid fielding. The IVAS headset, based on HoloLens and augmented by Microsoft Azure cloud services, delivers a platform that will keep soldiers safer and make them more effective.”
Beginning of the end
Early last year, the company, facing macroeconomic uncertainly and slowing growth, confirmed it was laying off 100 employees working on its HoloLens, Surface laptop, and Xbox products, which essential closed down that division.
Anshel Sag, principal analyst at Moor Insights & Strategy, said the decision to cease production is a “formal acknowledgment of something that most of the industry had already been quite aware of for a while. Microsoft had significant layoffs in the Mixed Reality division and jettisoned the MRTK (Mixed Reality Toolkit) framework that powered much of the HoloLens’ software.”
It was pretty clear, he said, that “Microsoft was no longer investing in AR from a hardware side and only wanted to be a software provider, being a launch partner for Apple on Vision Pro, and also having productivity tools and gaming for Meta Quest.”
Who picks up the slack?
According to Sag, “Microsoft’s strategy has long been hardware agnostic thanks to its approach to OpenXR and embracing more open-source software, so many of Microsoft’s partners could potentially port some of their work to other enterprise AR platforms out there. The biggest problem I see is that there aren’t many standalone AR platforms out there that are a likely successor to the HoloLens 2 other than the Digilens ARGO.”
Digilens, said Sag, is “both a waveguide supplier and a headset maker, and seems to have gained a lot of momentum recently with many of Microsoft’s past partners, and I believe is best positioned from a hardware and software perspective to help past HoloLens 2 customers. Not only that, but at AWE 2024 this year, Digilens was the first to demonstrate Google’s Gemini running on any AR headset.”
While other companies like RealWear and ThirdEye do exist, he said, “they are less powerful platforms and may deliver a different kind of experience than HoloLens wearers are expecting. RealWear is assisted reality using a monocular LCD, and ThirdEye uses waveguides with see-through AR, but it only features an XR1 chipset that will likely need remote rendering for improved graphics.”
Enterprise AR use case shows real promise
Scott Bickley, research practice lead at Info-Tech Research Group, described the move by Microsoft as “ unfortunate, because the augmented reality use case for enterprise purposes in the industrial space held real promise. In my opinion, the R&D justification was built atop much broader and deeper virtual reality use cases that were never grounded in ‘reality’ to begin with.”
It may, he said, also “be a blessing in disguise if the alternatives can meet this need and emerge from the Social Media space at a more realistic price point, such as the Quest series of products from Meta, priced in the hundreds of dollars vs $3,500 for a HoloLens.”
To date, said Bickley,” the adoption of HoloLens is pathetic, with maybe a couple hundred thousand units sold across all generations of the product. Stack that against an investment likely in the hundreds of millions of dollars, maybe even a billion, and the ROI just never materialized.”
The need for augmented-reality-based solutions in the manufacturing and industrial space is a real gap,” he said, “however, that use case alone was not enough to power continued R&D costs from Microsoft.”
