Apple may leverage augmented reality on the iPhone to help pave the way for a future smart glasses product, UBS said in a note to investors Tuesday.

Apple recently launched its ARKit developer tools, which will allow its partners to build new augmented reality applications for millions of iPhones already in the hands of consumers. It will give Apple an overnight leg up on companies like Google that are participating in the space on a much smaller scale.

Apple hasn't participated in the smart glasses space yet, but the idea is that a user will be able to wear a special pair of glasses that overlays computer images over the real world. You might learn more about a restaurant, perhaps view its menu, by standing in front of it, for example.

Right now, companies like Apple and Google would be forced to create bulky glasses that wouldn't be feasible or comfortable to wear. UBS believes Apple could use AR-ready iPhones to power the experience.

"Advanced sensors and camera capabilities will enhance the iPhone; eventually there could be independent hardware offerings, perhaps iGlass," UBS analyst Steven Milunovich said. "We can imagine a pair of glasses with quintessential Apple design (iGlass), which enable a Hololens-type experience," the company said, referring to Microsoft's bulky alternative.

"However, the amount of compute power and sensors required likely pose a serious design challenge. If Apple could find a way to send massive amounts of data from the eyeglasses to the iPhone where the bulk of the compute would occur, the eyewear could have a more attractive design. The issue then becomes how to transfer massive amounts of complex data between devices quickly."

Milunovich laid out 10 AR use cases ranging from games and entertainment to home improvement and health care/medical diagnostics. It said AR will help Apple retain iPhone users.