(Mark Kauzlarich/Bloomberg News)

Augmented reality is one of Apple's big new areas of focus, which it highlighted earlier this month at its Worldwide Developers Conference. But how will Apple use AR, which involves using a screen to overlay digital objects onto the real world? A new report from UBS Securities analyst Steven Milunovich offers some interesting possibilities.

Apple has already shown at what AR can do — by demonstrating how to use an iPhone to overlay an interactive game board on a real table, for example. But Milunovich suggested 10 additional applications for Apple's AR play, including some we've already seen come to life, such as gaming and retail. He also sees applications for job training, facial recognition, medical diagnoses and the ability to direct people to safety in case of emergency situations, similar to what Google Glass did to help firefighters find the fastest exit from a building.

Apple did not immediately respond to a request for comment on the report.

Combining various applications also could be useful, Milunovich wrote. “Emergency first aid, a combination of remote healthcare and instantaneous education, could save lives. There are legal issues that would need to be overcome but seem solvable,” he said.

Further down the road, Milunovich said, there could be room for iGlass — that is, Apple's take on a Google Glass-type headset. Could Apple succeed where Google failed? Advances in headset technology, plus some classic Apple design chops, could make the devices more appealing to the non-geek, Milunovich indicated.

The market for augmented-reality glasses is expected to grow over the next several years. International Data Corporation predicted this week that the market for AR and virtual reality will grow from 10 million headsets in 2016 to 100 million in 2021. AR will be slightly behind VR, the firm said, but analysts added that most consumers will probably get introduced to the concept through their smartphones.

The tools for augmented reality that Apple introduced earlier this month open up a range of possibilities to developers and highlight the tech giant's interest in the area, which Apple chief executive Tim Cook once said was “a big idea like the smartphone.” Apple will need to impress with its 10th-anniversary iPhone, Milunovich said, and in a best-case scenario, a truly innovative iPhone would help the company reclaim its mantle for innovation.

But it could face some fierce competition. On Tuesday morning, OnePlus announced its much-hyped OnePlus 5, which sports premium power and Android simplicity at $479. If rumors are true, that's about half the price of what we could see from the next iPhone. It's also far cheaper than the iPhone 7 Plus, which sports the same size 5.5.-inch screen and starts at $769.

Playing up the AR features for the iPhone — using Apple's innovative design techniques — could be one way to further push Apple to the front of the pack, Miunovich said. The smartphone screen could become a tool for making users more aware of the wider world rather than distracting them from it.

"[We] can picture the phone looking like a clear piece of glass when looking through the camera,” he said in the note. “Rather than staring down at a screen while we walk across the street or stand in line, we would be far more engaged with the world around us.”