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Apple has assembled a large team working on augmented and virtual reality, reports the Financial Times, having built several virtual reality headset prototypes already. The new technology could some day rival Facebook's Oculus Rift and other players in the virtual reality space, as Apple looks to move past the iPhone.

Apple is said to have formed its VR team through acquisitions and poaching from camera startup Lytro and the Microsoft Hololens project. There are reportedly prototypes of possible headset configurations that have been created over the last several months, but it's not clear what type of product may actually be released in the future.

Following several patent filings over the last decade, Apple had hired Doug Bowman, a leading VR researcher, to work on the project. Furthermore, Apple CEO Tim Cook,has publicly express interest in the VR space, saying on the company's earnings call earlier this week: "It is really cool and has some interesting applications."

Apple has completed acquisitions of VR companies like PrimeSense, Metaio, Faceshift, and Emotient. Apple has also just purchased Flyby Media, a startup that worked on augmented reality technologies for Google's 3D positioning technology Project Tango.

The team working on VR inside of Apple is reportedly kept under tight lock, with hundreds of engineers on the project.

It's clear that Apple is trying to find its next breakout product, now that the iPhone's growth is starting to slow. There have been a bevy of reports over the last year that Apple has been experimenting with technology like an all-electric vehicle and new television set-top box. Now add VR to the list.

To gain a number one spot in the VR space, Apple would have to take down a big player. Oculus has been one of the most regarded companies in the VR space. It was acquired by Facebook for roughly $2 billion in 2014 and has garnered the excitement of Facebook CEO Mark Zuckerberg who said it will "enable even more useful, entertaining and personal experiences."

The Financial Times reports there was a small VR team under late Apple co-founder Steve Jobs during the last decade. It was ultimately shuttered after failing to gain steam, thanks to immature technology. Now with the project reinvigorated under Cook, Apple is still seeking further acquisitions in optical technologies to enable it to complete its project.

Analyst firm Digi-Capital predicts revenue from AR and VR could hit $150 billion by 2020, with AR taking the lion's share around $120 billion and VR at $30 billion.

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