Virtual and augmented reality devices — often referred to together as extended reality — have felt more intense pressure from recent macroeconomic weakness than some other categories of smart devices. However, launches of long-awaited products and sustained interest from businesses will help the market record slight growth in 2023. Our newly published forecast — which clients can find here — predicts sales to reach 9.8 million units in 2023, up 6% from 2022 despite the weak start to 2023.
If Apple unveils a headset at its Worldwide Developers Conference next week, which CCS Insight will be attending, as is widely expected, it would be the start of an exciting new chapter for the extended reality market. Apple has the star power to reignite excitement about a technology that has struggled in recent times. A foray into virtual and mixed reality would be the biggest shift in the company’s strategic direction for years and a huge statement of intent to explore the next generation of computing.
Apple’s expected launch would add to the good momentum created by Sony’s PlayStation VR2 device, which launched earlier in the year. The halo effect of Apple and Sony will trigger further awareness and interest in extended reality. We naturally expect other big consumer brands to enter the market — such as Samsung, which helped establish the category in the 2010s. This feeds into our forecast for solid growth ahead, predicting sales to reach 75 million units in 2027.
Although this is good news for the market, these expectations are still lower than those a year ago. Adoption will be hindered by the recent increase in retail prices of leading devices and premium prices expected to come from Apple. These higher prices are understandable: the industry needs to reduce its reliance on subsidized devices to drive sales and start to make money so that it can continue to invest in innovation and develop extended reality further. Still, once consumer appetite is created, we expect more affordable devices will emerge to increase adoption.
A significant driver for the extended reality market remains the robust demand from businesses, even as the current macroeconomic landscape makes some enterprises wary of spending. Businesses continue to invest in spatial computing, with extended reality proving its value in learning, training, meetings and remote assistance — as explored in our blog series on VR at Work. We forecast that enterprises will buy 20% of the extended reality devices sold in the next five years.
At the same time, elegant consumer-centric smart glasses are a puzzle that the industry is yet to solve. Finding a balance between power, capability, comfort and battery life remains challenging. There’s been good progress throughout the hardware stack in building these next-generation devices, but it’ll take a few more years for them to reach mass market scale.
Nonetheless, the outlook for the extended reality market remains positive. Some commentators have declared the metaverse dead and buried, but behind the scenes, we continue to see strong investment from technology leaders. With new extended reality headsets confirmed from Meta and expected from Apple in the coming months, we forecast a revival of spatial computing.
A summary of our latest forecast is presented in the chart below.
Drop us a line if you’d like to talk to us about our forecast for virtual and augmented reality.