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Apple's mixed reality headset development taken over by Chinese supplier

Apple's VR or mixed reality headset

A new report says Apple will rely upon Chinese company Luxshare, not its usual Taiwanese suppliers Foxconn or Pegatron, to develop its first mixed reality headset.

Apple generally relies upon its longtime Taiwanese supply chain to develop and release first-generation products. However, if a new report is to be believed, Apple will use a Chinese supplier instead.

According to the report from Nikkei Asia, Luxshare is taking over the development team in Shanghai that was previously owned by Pegatron. This information was shared by five anonymous sources familiar with the matter.

The report refers to Apple's new products as augmented reality headsets, not mixed reality. However, it seems they are referring to the headset expected to be announced at WWDC, not a device like Apple Glass.

Pegatron had been working with Apple, the report states, but it has been on and off for four years. The company became skeptical about Apple's headset plans and exited the project to focus on other applications, according to a supply chain executive.

The shift to Luxshare isn't a complete surprise, as the company already helps build iPhones, Apple Watch, and AirPods.

Four people familiar with Apple's plans also shared that Foxconn would be developing the cheaper second-generation headset in parallel. The supplier will focus on automating mass production and improving production rates to help lower costs.

The report continues to explain the cost of parts being ordered by Apple, with displays running $150 for each eye, versus the $60 cost for each iPhone display. This is, in part, why the headset is estimated to cost between $3,000 and $5,000 — an estimate shared before.

"Apple's first generation of AR devices will be extremely expensive, and really only can attract those passionate tech geeks or premium customers," an executive with knowledge of the development told Nikkei Asia. "But Apple hopes to push the price down in the second generation of devices, which is in parallel development, to a more affordable price, like a high-end Mac computer, and hopes to attract a bigger user base."

Apple is expected to reveal the mixed reality headset during WWDC in June. The first generation is expected to be expensive and focused on developer use.