Apple is truly the iPhone company right now. But that could change soon.

The iPhone business accounts for a whopping 68% of Apple's total revenue, which should frighten Apple just a little bit. If something happens to the iPhone — rival phones get better, or a better mobile technology comes around — it could jeopardize the biggest source of Apple's income.

That's why Apple is investing in so many different cutting-edge technologies right now. Apple needs a hit, and it needs one soon. Thankfully, of all the "next big things" on the horizon, only one technology has the ability to surpass and actually replace the iPhone — and Apple is already investing in it.

It's augmented reality.

Microsoft HoloLens MixedWorld RGBMicrosoftMicrosoft's HoloLens is an augmented reality headset.

In augmented reality, a person wears a device over their face to let them see virtual elements layered on top of the real world. So you can still see the area around you, but you might see floating digital objects in your field of view like apps, games, or notifications.

(This is different from virtual reality, where the headset is designed to completely immerse you in a virtual world.)

One notable company that's invested in augmented technology is Microsoft. Last January, the company revealed its HoloLens augmented reality headset, which promises to revolutionize how people do work, play games, and so much more.

With HoloLens, you can design 3D objects in a full 3D space using simple gestures like pointing and pinching.

Microsoft HoloLens holo studioMicrosoft

You can also play 3D games right in your living room, with convincing visuals and sound effects that make it feel like there are actually robots flying around your living room.

microsoft hololens project x rayMicrosoft

But here's where the applications get really interesting.

You can surf the web or watch Netflix from anywhere in the house — without the need for a TV or computer.

Netflix HoloLensMicrosoft / Miguel Susffalich

In fact, if you want to watch TV from a stationary point in your house, augmented reality can put a TV on your wall, and you can resize it however you like.

HoloLens can also offer interactive real-time communication. You can chat with friends, sure, but it has even more useful applications. 

Let's say you want to fix the pipes beneath your sink. Just Skype with an expert plumber — or maybe just your dad — and they can walk you through what you need to do, even using their smartphone or tablet to draw instructions for you and see what your HoloLens sees.

Microsoft HoloLens Skype RGBMicrosoft

Microsoft has demonstrated several times how you can play virtual games like "Minecraft" in real world spaces, like on the coffee table in your living room. But one HoloLens developer has also shown the potential for streaming games from a game console: Let's say you want to play your favorite video game, but someone else wants to use the TV. That's okay, just pause your game and continue playing anywhere else in the house via your HoloLens.

Augmented reality has limitless applications — and that's partly because it's not bound to a tiny screen, or pocket-sized hardware. Once augmented reality headsets get smaller, stylish, and offer battery life without being tethered to a power source, it truly has a chance to replace the smartphone — and Apple's iPhone.

But that's why Apple is investing in this technology. Last May, Apple acquired an augmented reality company called Metaio, which built mobile augmented reality applications that let you, for example, see what it's like to have different pieces of Ikea furniture in your home. And last year, Apple hired one of the engineering leads on Microsoft's HoloLens. So it's clear Apple is at least interested in augmented reality, if not working on its own AR product right now.

Besides the applications, there's one other reason Apple is investing in augmented reality, which can't be stressed enough: it's downright magical. Sure, you might look a little dorky wearing a headset, but you won't feel dorky when you're using applications and playing games like never before — as if these virtual elements came to life and jumped right into your living room. That's why others like Microsoft and Google have invested in AR: the applications are endless, but the experience itself is otherworldly.

Augmented reality might not be ready this year, or next year, or in the next five years. But once it is ready, you could summon all your favorite smartphone applications wherever you are, without worrying about losing or breaking those fragile pieces of glass we keep in our pockets. The iPhone will probably always exist, but augmented reality will be able to do everything an iPhone can do, and then some.