In one of my previous articles, I discussed the potential of Project Titan becoming the next big thing for Apple Inc. (Nasdaq:AAPL). But new reports now say that Apple has laid off or assigned new roles to hundreds of the project's members as the company shifts its attention from straight manufacturing to partnering with automakers to integrate software, information systems, or self-driving capabilities in future auto models.

Also Read: TSLA Stock: NVIDIA Powered Computer Vision System Will Drive Tesla Motors Inc

Unlike a company like Alphabet Inc (Nasdaq:GOOGL) which is quite clear with its self-driving car ambitions, Apple is anything but an open book .While the prospects of automakers coming up with high-end ''Applefied'' luxury models remains a distinct possibility, the current road map is not as clear-cut as the previous one. Previously, Apple had set a tentative late-2017 deadline to determine the feasibility of developing an autonomous driving system. But that now hangs in the balance. Then there's the question of how many automakers will agree to convert to the Apple ecosystem. Licensing self-driving technology might seem like an easier option but that means that the company will have to compete with well-established players such as Mobileye (NYSE:MBLY). Moreover, self-driving software is currently a rather small market--Mobileye, the market leader in this segment, has TTM revenue of ~$300M.

Despite its generous capital return program, Apple is still sitting on a huge cash pile worth more than $200B, so it can conceivably acquire a major automaker instead of trying to do everything in-house. Apple though is not known to be fond of making large acquisitions.

Currently, it would not be a stretch to say that Apple's pipeline of future products appears rather fuzzy. Or does it?

Soft iPhone Outlook

Although there is no concrete data available yet, current indications are that iPhone 7 sales are flat-to-lower compared to iPhone 6. The Fiksu iOs tracker puts iPhone 7 adoption at 2.9% while 7 Plus has an adoption rate of 1.4%. That's a far cry compared to iPhone 6 and 6 Plus which had an adoption rate of 6.3% and 1.7%, respectively, at the same stage of their life cycle. Apple's iPhone install base, however, has nearly doubled over the past two years so the actual difference in absolute numbers might not be as big as that data suggests.

The iPhone has been facing increasing competition, especially from Chinese manufacturers such as Xiaomi, Oppo, Vivo, and Huawei, and might soon have to contend with Google's Pixel. This does not augur well for Apple in the long-term since the Middle Kingdom has consistently been its fastest growing market. In fact, the situation is quite dire and UBS recently warned that Chinese devices perceived as comparable in quality and functionality to the iPhone could depress iPhone 7 sales in the country.

With a tepid outlook for the iPhone, what will be the next big thing to come out of Cupertino?

Virtual reality and augmented reality

U.S. tech companies have lately been investing heavily in virtual and augmented reality, two technologies that have been slated to become as disruptive as mobile.Facebook (Nasdaq:FB) bought Oculus in a $2 billion deal while Google snapped up Magic Leap for $542 million. Meanwhile, Microsoft is set to start shipping its delightful HoloLens in late November. Sony Corp (NYSE:SNE) has its Playstation VR while HTC has Vive.

And now there's growing evidence that Apple could be developing a VR headset. The company has filed patents and even poached VR/AR experts, including the COO of the company that designs the iPhone 7 GPU. There is no word yet regarding Apple's date of launch, which is hardly surprising given the company's secretive nature when it comes to pipeline projects. But given the flurry of VR/AR activity in Silicon Valley, it might not take more than a year before the company's VR/AR device hits the market.

But what's the potential market for VR/AR? According to Digi-Capital, the current market is pegged at just $4B, but is expected to grow exponentially over the next couple of years to hit $150B in 2020.

Source: Digi-Capital

Digi-Capital and many VR/AR experts expect AR to take the lion's share of the market. And that's a good thing for Apple because Tim Cook recently said that he prefers AR to VR, saying the emerging technology is more commercially viable because it allows the user to be more present.

Mr. Cook's comments make sense because whereas VR is great for games and 3D films and offers a more immersive experience than AR, the technology might have rather limited real-life applications since the user would bump into things if they were to use it on the streets. Meanwhile, AR allows the users to enjoy the experience while going about most normal activities. This can potentially increase its real-life applications including use in voice calls, games, consumer apps, film/TV streaming, web browsing and theme parks.

Investor Takeaway

The good thing for Apple is that that VR/AR are emerging technologies and the potential market could really take off in a few years. Apple is usually not the first to the market with most new technologies but is usually able to quickly cut itself a respectable niche due to the company's dedication to quality and providing a superior consumer experience. You can expect that the company's VR/AR devices will continue this legacy.

In the meantime, Apple's ability to return to growth might be dictated by how fast its Services business matures, as I explained here.