In one market after another, Apple Inc.'s (AAPL) - Get Report top-notch chip, hardware and user interface design work has been paying dividends lately.

And if a recent Bloomberg report is right, Apple is now applying those talents towards developing an augmented reality (AR) headset that might be the company's best shot at launching a new mass-market hardware product.

But Apple's reported timetable for bringing a high-volume consumer AR headset to market does raise some questions about whether Alphabet Inc./Google (GOOGL) - Get Report , Facebook Inc.  (FB) - Get Report or startup Magic Leap will launch one sooner. If they do, it certainly wouldn't be disastrous for Apple's AR efforts, but could make for an interesting fight.

About a year after first reporting that Apple is thinking about creating AR "smart glasses" that would pair with iPhones and place images and other content in a wearer's field-of-view, Bloomberg reports Apple aims to have the technology needed for its AR headset ready by 2019, and to ship it in 2020. The device will reportedly be powered by a new Apple chip and run on a new OS that's internally called rOS.

Apple is still working out the details of "how users will control the headset and launch apps," and that touch panels (used by Google Glass), Siri commands (a no-brainer) and head gestures are among the ideas being considered, the news service says. Applications being tested by engineers are said to include mapping, texting, virtual meeting rooms and 360-degree video playback.

The report comes shortly after Apple (via iOS 11) rolled out its ARKit platform for iPhones and iPads running an A9 processor or something faster. Inc. (AMZN) - Get Report , Ikea, Edmunds and plenty of other developers have embraced ARKit, which allows digital content to be overlaid on imagery taken in by an iOS device's rear camera, and is fairly resource-efficient. Google has unveiled a similar platform for Android devices called ARCore, but for now ARKit has a lead in terms of availability and developer support.

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It also comes about a month after Tim Cook once more sang AR's praises in an interview, but qualified his remarks by declaring the technology needed to bring a quality AR headset to market isn't yet here. "The field of view, the quality of the display itself, it's not there yet."

The challenge here isn't just in creating a quality headset display, but also in creating a chip that's powerful enough to deliver good AR experiences on that display while still being small and power-efficient enough to go into a headset that supports all-day battery life and doesn't feel bulky. Microsoft Corp.'s (MSFT) - Get Report HoloLens AR headset provides good performance/image quality but also has field-of-view and battery life limitations and is meant for indoor use.

As Apple (from all signs) works to bring a consumer AR headset to market, it has several competitive strengths it can leverage:

  • Great engineering and design/user interface talent. The Apple Watch serves as a good case study for how these strengths can help field a market-leading wearables product. Apple put a lot of thought into crafting an interface for devices sporting miniscule displays, and the S-series chip modules that power Apple Watches allow them to deliver adequate performance and battery life in spite of their tiny form factors.
  • Hardware/software/services integration. Controlling both chip and OS development has done wonders for the performance and battery life of iOS devices, and should also be a boon to Apple's AR headset work. And much like the Watch, Apple's ability to enable tight app and service pairing with a smartphone line that sees over 200 million units sold annually is bound to be a big selling point for its headset.
  • Developer support. It's safe to assume that as soon as an Apple AR headset is launched, iOS developers will race to roll out compatible apps that integrate with their existing iOS apps. Here, there's clearly some potential for ARKit apps working hand-in-hand with headset apps.
  • The Apple brand. No company on the planet can create hype for a new consumer electronics product quite like Apple. And a fervently loyal iOS user base has time and time again shown itself willing to try out new Apple devices.

For now, it's best to be a little skeptical of assertions that AR headsets will "succeed" or "replace" smartphones as the main computing device relied on by consumers, at least during the next several years. Even if all the current limitations of AR headsets are addressed, there are bound to be many times -- especially in indoor settings -- when consumers will prefer not to wear a headset, and there are still likely to be many app experiences that work better on a device with a 5 inch-plus touchscreen.

That said, the potential of AR headsets -- thanks to their ability to provide advanced computing experiences without needing to be pulled out of a pocket or held in one's hand -- to replace smartphones as a user's main computing device in some situations gives them a long-term potential that easily dwarfs the smartwatch's. That's likely one reason why Cook and other Apple execs have spoken about AR's potential in such glowing terms.

But rivals have plans of their own. Though the original Google Glass failed due to bad marketing, privacy worries and display/performance issues, it did give Google a foundation for future AR work. And over the last couple of years, Glass has seen a rebirth of sorts, as firms such as Boeing and GE come up with business uses. Between Google's recent efforts to step up its hardware work, its control of Android and its possession of services such as Google Maps, Gmail and Google Assistant, the search giant could still be a major AR headset player in time.

Meanwhile, though Facebook's Oculus unit is best-known for its VR headset work, Mark Zuckerberg has stressed that Facebook also wants to launch an AR headset in time. And while it faces some obvious questions about future developer and smartphone support, startup Magic Leap has been working on an AR headset that delivers high-quality imagery with the help of a proprietary "photonic lightfield chip."

Overall, however, the many strengths that Apple possesses in the fight, together with how seriously it seems to take AR, leave it pretty well-positioned to succeed. Just as long as its pursuit of perfection doesn't result in its first headset being too late to the party.

Jim Cramer and the AAP team hold positions in Apple, Alphabet and Facebook for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL, GOOGL or FB? Learn more now.

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, which Cramer manages as a charitable trust, is long FB, AAPL, and GOOGL


Editors' pick: Originally published Nov. 10.