Meta Abandons In-House Chip Development for Augmented Reality Glasses
Mark Zuckerberg‘s Meta Platforms Inc. (META) has reportedly decided to discontinue its custom chip development for its upcoming augmented reality (AR) glasses. The company has determined that the in-house chip development was proving too costly and not aligned with its current business objectives.
Key Takeaways:
- Meta is abandoning its custom chip development for AR glasses, prioritizing cost-cutting initiatives and focusing on third-party solutions.
- The company will rely on chipmakers like Qualcomm Inc. (QCOM) for its future AR glasses prototypes.
- Despite the shift, Meta is still expected to unveil an experimental prototype of its Orion AR glasses later this year.
Meta’s Strategic Shift: Cost-Cutting and Focus on Existing AI Initiatives
The decision to abandon the in-house chip development project is part of Meta’s ongoing efforts to cut costs and streamline its operations. The company has faced significant financial pressures in recent years, partly driven by the competitive landscape of the metaverse, which Zuckerberg has labeled as his strategic priority.
Meta has previously cut costs through layoffs and office space reductions. In February 2024, the company reportedly chose not to renew its lease for seven floors of office space in Singapore. Earlier, Meta had conducted a series of global layoffs, with a particular focus on the metaverse and silicon units.
While focusing on cost-cutting measures, Meta remains committed to its artificial intelligence (AI) efforts. In April 2024, the company launched its next-generation AI chip, MTIA, directly competing with Nvidia Corporation’s (NVDA) AI offerings in the cloud computing business. The MTIA chip is designed for Meta’s AI workload, emphasizing a balance between computational power, memory bandwidth, and capacity, primarily for scaling recommendation and ranking models.
Second Quarter Earnings and Future Outlook
Meta’s second-quarter financial results were generally positive, with revenue exceeding analyst estimates at $39.07 billion. The company also surpassed expectations with adjusted earnings of $5.16 per share. These figures suggest Meta’s core business, driven by Facebook and Instagram, remains strong. However, it remains unclear how Meta’s shift to third-party chip providers will affect its future financial performance and its ability to compete in the evolving AR market.
The future of Meta’s AR ambitions depends heavily on its ability to successfully navigate the complex landscape of chip development and integration. Relying on third-party chipmakers will introduce its own set of considerations, including potential limitations on customization, control over proprietary technologies, and possible dependence on external suppliers.
This strategic shift is significant for Meta and the broader AR industry. The decision highlights the ongoing challenges in developing AR devices and the importance of finding the right balance between internal resources and collaborations with external partners. The future of Meta’s AR aspirations will depend on its ability to leverage existing technologies, manage costs effectively, and maintain a competitive edge in the constantly evolving world of augmented reality.
