Latest CCS Insight forecast shows reasons for optimism
Last week, we published our updated global market forecast for virtual reality (VR) and augmented reality (AR) devices. Although the market has shown signs of volatility, one thing is certain: in the long run, the only way is up for these exciting technologies. Let’s take a look at some of the highlights of our forecast.
In 2019, we expect the VR and AR market to enjoy 21% growth, to slightly more than 10 million devices. This growth rate might seem disappointing considering the huge hype that has surrounded VR and AR technologies, but it should be assessed pragmatically. Right now, there are still just a handful of successful devices, and a lot rides on every new iteration or new model brought to market by the established players Sony, HTC and Oculus.
Sony is on track for a solid 2019, and Facebook’s Oculus devices have also started producing meaningful revenue. But the picture is less rosy for HTC, which, despite leading in the premium end of the market, looks set for less growth in 2019.
The forecast projects that market demand will grow sixfold to 60 million units in 2023. Our optimism is supported by our consumer research of early technology adopters: those who don’t yet own a VR device show a strong willingness to buy an extended reality device within the next three years, particularly as more attractive and affordable products with richer content and experiences become available. This is particularly good news for entry-level devices like the standalone Oculus Go headset, which retails at less than $200.
Our projections are also backed by a growing variety of VR devices. New products are set to arrive in 2020 from Oculus, HTC and others, including the highly anticipated Sony PlayStation 5, which is widely expected to be accompanied by an updated PlayStation VR headset.
A further boost to the VR market is coming from the advent of 5G mobile networks. In South Korea, currently the most advanced 5G market in the world in terms of adoption, mobile operators have successfully positioned 5G as a technology that can deliver an attractive VR experience. We expect operators in other markets to take a page from this playbook and introduce more consumer offerings built on the coupling of VR and 5G in the near future.
China will also play an important role in the growth of the VR market. The Chinese government’s initiative to be a global leader in VR and AR technologies by 2025 will have an impact in the near future. Education is being targeted as one of the major sectors where VR should be adopted. This tallies with our prediction that extended reality will become a standard educational tool in schools in at least two countries by 2025.
When it comes to AR, adoption by business users is picking up, although the numbers are currently very small. We expect about 150,000 AR devices will be sold globally in 2019.
Adoption of AR devices in logistics and remote assistance continues to build and other industries are starting to follow suit, with important vertical markets such as medicine, entertainment and travel beginning to show signs of growth. Importantly, end-to-end AR solutions, consisting of hardware, software and support, are also improving, making adoption much easier than it was a couple of years ago.
The consumer market for smart AR glasses, however, is still a few years away. Some very exciting products are starting to emerge, but they’re generally prototypes or early iterations of future device designs. It will be some time before mass-market products that can deliver significant volume hit the market.
One of the big challenges facing AR technology is component miniaturization. Unlike warehouse workers and other enterprise users, consumers are unlikely to be willing to accept anything heavier than and much different in appearance from traditional eyeglasses in their everyday lives. However, we’re confident that this technology will improve rapidly, and predict that by 2022 a major consumer electronics brand will enter the consumer smart glasses market, opening the gates for strong growth in years to come.
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