Apple has just opened the next front in the tech wars

People already spend a lot of time staring at their phones, or holding them up to things, including their own faces (selfies, anyone?). But the future Apple envisages involves them doing this even more.

That's one of the key conclusions to draw from the unveiling of the new iPhone 8 and the iPhone X this week. The new devices, through better chips and cameras, contain enhanced functionality for "augmented reality" - technology that overlays digital imagery and video over real life.

For investors in Apple, and the many people who obsess about its future, it could be hugely significant. That's because, according to Macquarie analyst Ben Schachter, augmented reality - or AR - is shaping up to be the next big "platform war" in consumer tech.

The last big platform war, of course, was mobile, and we all know how that played out.

Apple and Google won, with Microsoft, Blackberry and Nokia among the losers. Their dominance has underpinned billions of dollars in profits, and cemented the two companies' status as the most valuable firms on the planet.

In AR, Apple will again be battling Google. But the emergence and growing acceptance of the technology could also provide an opening for Facebook, Microsoft and Amazon, as well as for internet giants from China.

Millions of people have already been exposed to AR : the filters used on Snapchat (and Instagram) are an obvious example. Pokemon Go, the smartphone video game that exploded into popularity last year is another.

But devices specific to it have been underwhelming: Google's expensive Glass headsets never caught on, and are no longer on sale. Sales of Snapchat's cheaper Spectacles are already faltering.

Yet Apple, with its rusted-on base of more than 1 billion users of its devices, could truly bring AR to the masses.

"It's early days and this is just the beginning of the story for AR, but it does have huge potential going forward," says Stefan Marcionetti, portfolio manager at Magellan Asset Management, which holds shares of Apple. "The potential for commerce applications is huge."

Macquarie thinks AR has a much better chance of going mainstream than its cousin virtual reality, because the benefits from using it will be greater than the disruption to lives caused by it.

You won't have to strap a cumbersome new device on to your face to experience it, you just hold up your phone to the world.

Whoever dominates AR is likely to reap significant rewards. Credit Suisse estimates that by 2025, the VR/AR market could be worth nearly $700 billion, and approaching the size of the smartphone industry.

The most obvious immediate application of the AR functionality in Apple's new phones will be in areas like video gaming and entertainment. For example, imagine being at a sporting match, holding up your phone to the action, and having stats and player information being overlayed above it. Or being apple to superimpose a map over the sky while camping.

Augmented shopping

Yet the applications of AR in e-commerce is where it could get really interesting.

For example, imagine being able to hold up your phone to a plate, and see what food looks like before ordering it from a restaurant, or preparing it yourself with the help of a recipe. Or seeing what clothes might look like on you, or how a piece of furniture looks in a living room, before buying it.

The iPhone accounts for roughly two thirds of Apple's business. While these new devices are likely to sell like crazy, the overall base of iPhone users (Magellan estimates this at 500 million) is not growing as fast as it used to be. This is simply because most people, at least in developed markets, have smartphones by now.

So for Apple at the corporate level, it is increasingly about ensuring existing users do upgrade every couple of years to new devices, and then do more stuff on them, including buying software it either makes and owns or takes a cut from.

AR could help it achieve these aims.

This story Apple has just opened the next front in the tech wars first appeared on The Sydney Morning Herald.