New forecast shows enterprise adoption is finally taking off
The current health crisis will dent sales of VR devices to consumers, but it’s also prompting more businesses to adopt VR and augmented reality (AR) technologies, collectively known as extended reality. These are the findings of our latest market forecast, published today and available to our clients here.
We expect fewer than 9 million extended reality devices will be sold globally in 2020, up just 22% from a weak market in 2019. But the outlook beyond 2020 is more promising, with sales accelerating to reach 69 million units in 2024. This total will be made up of 55 million VR and 14 million AR devices.
Consumer demand for VR devices outstripped supply in the first quarter of 2020, as people rushed to buy entertainment gadgets for themselves and their families at the start of the lockdown in many countries. Sadly, for the leading device-makers this coincided with disruptions to their supply chains, particularly in China. The Oculus Quest headset, which has suffered shortages since its launch in May 2019, was a particularly sought-after device and has been regularly out of stock throughout the stay-at-home period.
Unfortunately, as the lockdown period ends in many parts of the world, manufacturers are only just starting to be able to meet demand. This comes in the context of a macroeconomic slowdown and low consumer confidence, which we expect will dampen demand. However, we continue to believe early technology adopters’ interest in VR is strong, particularly for games and videos, and sales will pick up in 2021, supported by the arrival of new devices.
We expect VR market leader Facebook will refresh its competitively priced and highly popular Oculus Quest headset in the next 12 months. We also expect Sony to reveal its next-generation PlayStation VR headset, following the recent unveiling of the PlayStation 5 console.
But there’s another dimension to the pandemic’s effect on the market for extended reality products. The unanticipated disruption to businesses has led to a sudden rush in demand for these devices.
Over the past three months, many companies that had been evaluating extended reality for their business operations have made quick decisions to embrace the new technology. The market has shifted from interest in what transformational improvements extended reality can bring, to implementing out-of-the box technology solutions that keep the lights on and deliver business continuity to production lines and other operations.
There are many examples of such adoption, including manufacturers using remote prototyping, product demonstrations and remote field service to maintain equipment, companies training their workforces through extended reality, hospitals deploying devices to allow remote care of patients in infectious wards, and universities teaching medical students at home.
We’ve identified three specific areas where engagement with extended reality technology has emerged strongly: remote assistance and field service, training, and healthcare. We expect sales to enterprises and the education sector will double this year to about 560,000 units worldwide. More importantly, there’s solid appetite from multiple industries, suggesting growth will continue strongly over the next year, despite the stinging effect of a global recession, with sales more than doubling in 2021, and reaching 8.3 million units in 2024.
Innovation is blossoming in the field of extended reality. Telecom operators around the world have noticed the positive effect of the technology in attracting customers to 5G networks in South Korea and China, a trend we assess in detail in a report available to download here.
VR and AR headsets that are tethered to a smartphone or come with integrated 5G are an emerging class of device that we believe have great potential. Sales of 5G smartphones are projected to surpass 1 billion in 2024, so operators only need to tempt a small proportion of their customers to boost the overall adoption of extended reality.
In the next three years, we expect VR devices will dominate sales of extended reality devices that are tethered to a smartphone, as these devices have a clear use in people’s minds: games, video, entertainment, education. However, we believe the likes of Apple, Facebook, Huawei, Microsoft and Samsung continue to carry out extensive research and development work to produce smart AR glasses. Developing lightweight and attractive smart glasses that people are happy to wear every day will take time, but we expect big consumer brands will help shape this market in 2023 and beyond.
The chart below is taken from our new forecast. If you’d like to know more about our projections, please get in touch.
Join our free-to-attend webinar on 25 June at 5:00 PM BST as Leo Gebbie (Senior Analyst Wearables and XR) and Ben Wood (Chief of Research) examine the opportunity for network operators presented by a combination of extended reality and 5G. Click the image below to sign up.
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