Things Are Finally Going Well for Extended Reality

Solid growth in 2021 in both consumer and enterprise spaces

Strong demand for Facebook’s Oculus Quest 2 headset and keen interest by enterprises in extended reality technology are fuelling market growth. Sales of virtual and augmented reality (VR and AR) devices are set to rise 45% to 10.7 million units in 2021, and to continue to grow strongly over the next five years, reaching 70 million units in 2025, at the manufacturer value of $21 billion, according to our latest forecast.

Curiously, the market for VR and AR devices is growing, not despite the pandemic but thanks to it. Economic uncertainty is persistently high, but we see a lot of interest in this technology at a time when physical distancing has become the norm. It has provided a lifeline to businesses to continue serving their customers amid operational challenges and allowed people to keep themselves entertained.

Facebook’s success with the Oculus Quest 2 is undoubtedly the main driver of higher adoption of VR in 2021. The Quest 2 has hit a sweet spot where an excellent experience meets an attractive price. Its all-in-one design means that no other devices are needed, and above all, the headset is affordable enough to attract new customers to the technology, including both gaming enthusiasts and more-casual users. Facebook’s extensive advertising reach and deep pockets help as well, warding off rivals that can’t afford to sell their products at the same price.

The enterprise market also remains hot. Many more companies are looking at extended reality as part of their speedy digital transformation, in the wake of the pandemic. Interestingly, businesses that started using extended reality for tasks like remote assistance are increasingly looking to expand its use to other applications and business operations, such as product development and training.

Sales of extended reality headsets to enterprises tripled in 2020 and are on track to grow by another 74% to 1.4 million units in 2021, before doubling again in 2022 when economic conditions improve further. Enterprises are expected to grab more than 30 million extended reality headsets cumulatively in the period from 2021 to 2025.

Although growth is already happening, another, still nascent, segment is expected to contribute in the future. We expect new and exciting products like AR smart glasses to capture the imagination of consumers over the coming years, and predict that by 2023, major consumer brands including Samsung, Facebook and Apple will stake claims on this emerging opportunity.

We expect to see 15 million such devices sold in 2025, ramping up much as other technologies did: smartwatches went from less than a million units to more than 25 million within three years, showing that consumers worldwide are open to embracing new technology that offers something new and exciting.

A summary of CCS Insight’s new forecast is presented in the chart below. Subscribers can access the full material here.