Magic Leap, the augmented reality company that struggled to turn its headset into a consumer hit, is now going after surgeons and other medical customers as part of a pivot toward health care, defense and manufacturing markets.

Its latest product, an AR headset due midyear called Magic Leap 2, is already being used by companies such as heart-mapping startup SentiAR and the neurotechnology business SyncThink. Other companies getting early access to the technology include Heru, which plans personalized vision-correction applications, and Brainlab, the maker of a mixed reality program for reviewing surgical plans and collaborating with colleagues.

Magic Leap, based in Dania Beach, Fla., had initially raised $3.5 billion from high-profile investors such as Alphabet with the hopes of turning AR into a viable consumer technology. But it scrapped those ambitions and refocused on business customers, hiring Microsoft veteran Peggy Johnson in 2020 to lead the effort.

She raised a further $500 million and narrowed the company’s scope to the handful of markets that may be most receptive to AR — a cousin to virtual reality that melds computer imagery with real-life views. It’s easiest to make inroads with “industries that are used to wearing something on their eyes,” she said in an interview. “If it’s a surgeon, maybe it’s a magnifier or lights. Manufacturing, they’re wearing safety things. So we see acceptance of something on your eyes already.”

The new device has improvements that are key for health care. A larger field of view expands vertically, so a surgeon or doctor can look up at virtual screens and then back down at any holographic images on the patient, Johnson said. There’s also a dimming feature that fades out bright backgrounds, such as a well-lit operating room, to zoom in on the part of a patient’s anatomy that surgeons are operating on, she said. And the device is smaller and lighter, making it easier to wear.

Because of the new features, Magic Leap 2 will be "slightly" pricier than the current version, which ranges from $2,295 to $2,995, she said.

Magic Leap, founded in 2010, came early to an augmented reality market that has been slow to go mainstream. Microsoft joined the fray in later years with HoloLens, and Facebook owner Meta Platforms and Apple are developing AR products. But neither Magic Leap nor Microsoft has disclosed sales figures for their devices.

For now, virtual reality — a more immersive experience — is a far bigger market. Research firm IDC estimates that nearly 90% of headset sales comes from VR rather than AR.

Magic Leap is also going after military and manufacturing customers, but Johnson declined to name clients in those areas. The military applications largely revolve around training, while manufacturing companies want to use the device for such things as education, repairs and remote access to experts, she said. Johnson’s own company used its goggles to set up its manufacturing plants in Mexico for the new hardware when the pandemic halted travel.

Working with the military can be controversial. Microsoft, which has a contract with the U.S. Army to provide a customized version of its goggles, faced employee protests over the $22 billion deal.

Johnson said that using AR for training purposes is appropriate.

"Our interaction has been positive with the Department of Defense," she said. "Right now, we're trying to stay focused, and it is all about training. And I think giving our soldiers the best training possible is a good mission for us to undertake."

Magic Leap hasn’t given up on the consumer market in the long run, she said. Johnson is “absolutely” interested in going after those customers again someday, but she wants to wait for more compelling applications. The technology also needs to get cheaper and small enough to fit into more ordinary glasses, she said.