One of the AR features said to be in development would allow you to take a photo on your iPhone and then change the depth of specific objects. Another feature would allow you to place virtual effects on a person's head.
The AR team is made up of hundreds of engineers working on AR-related features, and Bloomberg reported it's headed by Mike Rockwell, who previously ran the hardware and new technologies groups at Dolby. Rockwell is reporting to Dan Riccio, head of the iPhone and iPad hardware engineering groups.
Reliable Apple analyst Ming-Chi Kuo suggested last month Apple will unveil a "revolutionary" front-camera on the next iPhone that will better recognize 3D objects for facial recognition and AR. Kuo didn't believe the tech will come to the rear-camera until later iPhone models.
Apple's move into AR makes sense. The company has made several large AR-focused acquisitions, including PrimeSense and FlyBy, the maker of AR-camera software. Apple CEO Tim Cook has called AR a better technology than VR and for everyone, not just a niche market.
Bloomberg added Apple is still working on an AR headset, but its release isn't soon as Apple looks to get wearables right.
Apple is believed to launch a new iPhone this fall. Aside from AR, other rumored features include an all-screen design, wireless charging, and an increase in battery life.
Samsung shows off cutting-edge AR/VR projects: