The Information: Apple's upcoming AR/VR headset will require iPhone tethering

Apple completed work last year on the chips, including the key system on a chip (SoC), which has many different components of a device etched on a single piece of silicon, said two people familiar with the situation. The SoC and two other Apple-designed chips for the headset hit a milestone known in the semiconductor industry as tape-out, which means the physical designs of the chips are finished and ready for trial production.It's a key stage in development of the headset, which The Information previously reported was to debut by next year at the earliest, though Apple could push the release back even further. The people said Apple's longtime partner Taiwan Semiconductor Manufacturing Co. is manufacturing the three chips, which are at least a year away from mass production.

More significant are the details of the SoC, which isn't as powerful as the ones made for iPhones, iPads and MacBooks. It lacks the artificial intelligence and machine-learning capabilities, known as Apple's neural engine, which those devices include, one of the people said.Instead, the headset is meant to communicate wirelessly with a host device, presumably a phone, computer or tablet, which will handle the more powerful computing required to display virtual, mixed and augmented reality images, the person said.Apple has designed its chip to perform some functions better than the more general-purpose chips made by third parties. For instance, Apple's chip is better at sending wireless data between the headset and the host, compressing and decompressing video and using power as efficiently as possible to maximize battery life, the person said.

Separately, a second person familiar with the situation said Apple has finished designing the image sensor and display driver. The complementary metal-oxide semiconductor image sensor is the chip that converts photons to electrons for digital processing into an image. Apple's version is unusually large, similar to the size of one of the headset's lenses, as it's meant to capture high-resolution image data from a user's surroundings for AR. TSMC has struggled to produce the chip without defects and has faced low yields during trial production, the person said.