The field of virtual reality has yet to experience an explosion in 2023. From an international market perspective, Meta (NASDAQ: META) has seen significant layoffs and a decline in sales of its head display device Quest 2, resulting in a 42% year-on-year decrease in revenue from its Virtual Reality Labs business in the first three quarters of this year; Microsoft has disbanded social space teams such as Altspace VR and shifted its focus to generative AI; In the domestic market, PICO, which has the largest market share, publicly announced on November 8 this year that it would adjust its organizational structure and reduce more than 300 employees, accounting for about 23% overall, two years after being acquired by ByteDance; Qiyu VR, incubated by iQiyi and founded in 2016, has fallen into the quagmire of business shutdown this year... Obviously, this has cast another shadow over the already slow developing virtual reality market.
Has the virtual reality industry cooled down? In recent days, when a reporter from China Business Daily raised this issue to relevant companies and multiple practitioners, many respondents admitted that product sales have been declining this year, and industry development still needs some time. In June this year, Apple's long-awaited first head display product, VisionPro, was released and will be available for sale early next year; At the end of September, Meta launched Quest 3. Although Apple's joining and Meta's continuous efforts have brought higher attention to the virtual reality field, the driving benefits in the consumer market and commercial level have not yet been shown.
It should be noted that in the field of virtual reality, there are many abbreviations of terms such as VR (narrow definition of virtual reality), AR (augmented reality), MR (mixed reality), XR (extended reality), etc. Generally speaking, XR is a general term that covers VR, AR, MR, etc. In order to facilitate readers' understanding and align with relevant documents issued by multiple departments such as the Ministry of Industry and Information Technology, this article uniformly uses "virtual reality" to refer to the XR category commonly used in the industry.
Sales decline, overall pressure on the industry
General Manager of VR Gyroscope who has been paying close attention to the trends of the virtual reality industry for a long time; Editor in chief Shan Zi pointed out that "declining sales, reducing costs and increasing efficiency" is one of the key words in the virtual reality industry this year. From 2021 to 2023, Meta's Quest product sales declined mainly due to price launch and poor integration of new products. It is expected that the entire industry will maintain a relatively stable state by next year, and even if Apple's products are launched, there may not be too much explosive growth until the transition from XR or VR products in the previous stage to a new interactive and ecological environment in the next stage.
"The decline in sales this year is obvious to all, but it is a very good starting point. Although sales have decreased, in reality, both technology and products are settling down in the entire industry, and there are still many large companies entering the market. Therefore, give them a little more time," said Case Shanzi.
A source from an agency sales channel told reporters, "Indeed, the shipment data of various brands has not performed well this year." The current severe investment and market environment is an external factor, and almost all industries, including virtual reality, are improving "cost reduction and efficiency increase." For a long time, the commercial value of virtual reality has still been self righteous, relying on capital for a long time. Therefore, when capital shrinks and the economy declines, It is not difficult to understand that the "slimming down" action of virtual reality related businesses in technology giants has followed.
According to Meta's financial report, the company's total revenue for the first three quarters ended September 30 was $94.791 billion, a year-on-year increase of 12%. Meta's revenue structure is divided into two main parts: firstly, the Family of Apps contributed $93.666 billion in revenue, a year-on-year increase of 13%; The second is that the revenue of the real laboratory was 825 million US dollars, but it decreased by 42% year-on-year. When discussing performance, Meta management stated that in the first nine months of this year, the Realistic Lab division reduced the company's overall operating profit by approximately $11.47 billion, and it is expected that the division's operating losses will increase significantly in 2024.
When ByteDance adjusted PICO's business, the PICO team also mentioned in the public statement: "At present, the XR industry is still in the early stage of exploration, and PICO is also facing many challenges in product experience, user habits, ecological construction, etc." Another domestic manufacturer, Adventure VR, according to insiders, because the investment balance of Qingdao West Coast New Area introduced by the end of 2022 has not been realized, And the slow relief actions of the parent company iQiyi have led to a breakdown in the funding chain, unpaid salaries for all employees, and inability to pay compensation for layoffs. As of now, the investors and iQiyi have not responded to this.
According to research data released by market research firm Counterpoint in October, the shipment volume of China's VR market decreased significantly by 56% year-on-year in the first half of this year, marking the end of two consecutive years of growth in the Chinese VR market from 2020 to 2022. Development has once again stagnated, and the decline in the Chinese market is more severe than in the global VR market. According to data from another research firm, IDC, global virtual reality hardware sales decreased by 44.6% in the second quarter of this year, marking the fourth consecutive quarter of decline. Considering that the economic downturn has suppressed demand growth, the sluggish performance of the market is not surprising.
It is worth mentioning that despite the continuous downturn in the consumer market, in recent months, multiple companies in the AR field have completed a new round of financing. Rokid, a domestic AR glasses company, completed a Series C financing of 112 million US dollars with a valuation of 1 billion US dollars in November; In October, Thunderbird launched a new consumer grade AR glasses product and announced the news of obtaining tens of millions of dollars in A+rounds of financing; Industrial AR service provider Liangfengtai announced in September this year that it had completed a C+round financing of 270 million yuan. In the interview, two business leaders from the AR+industrial manufacturing field both mentioned that although there are not many highlights of business progress, the development pace of industrial AR is still relatively stable.
What did Apple's entry stir up?
The most eye-catching event in the virtual reality industry in 2023 is undoubtedly Apple's official entry. In June of this year, Apple released its first hybrid reality product, Vision Pro, at the World Developers Conference (WWDC). The first batch of stock is around 400000 units, and the sales target for 2024 is 1 million units. According to domestic and foreign media reports, the Apple Vision Pro entered mass production in December, and the supply chain is ready to produce 1 million units annually. It will be released in the North American market in January 2024, priced at $3499.
Apple CEO Tim Cook stated that Apple Vision Pro and its Vision OS system have brought a new spatial computing platform. With its ecosystem advantages, Vision Pro can stay in sync with other Apple products such as iPhone, iPad, and Mac, expanding its application scenarios from gaming and entertainment to social, office, and lifestyle fields.
A senior person who has been observing the virtual reality market for a long time said that from the pricing of up to $3499, combined with actions such as naming the first new product "Pro (Professional Edition)", Apple Vision Pro aims to test the market and consumer education, mainly targeting developers, geeks and other customer groups, almost integrating the highest hardware configuration currently available.
As a heavyweight player in the market, Apple has stirred up the industry in at least a few ways. Firstly, it has increased the attention of the virtual reality track, attracting more and more forces to join, including numerous mobile phone manufacturers. In the view of Anshanzi, mobile phone manufacturers are watching and entering the market, and have already made some layout in this field. The possibility of launching related outputs in 2024 or 2025 is very high. Secondly, in terms of technology roadmap and product functions, Apple Vision Pro has to some extent blurred the boundaries between VR, AR, and other terms. It uses video perspective technology (VST), which is different from optical perspective technology (OST). Simply put, AR is achieved through VR, breaking through the traditional VR/AR head display device's focus on gaming and entertainment scenarios in application scenarios, and expanding its functional applications to productivity scenarios such as daily office work and communication. According to a senior figure in the virtual reality market mentioned earlier, many companies are currently following and imitating Apple's path. For example, in the past, many content teams focused on developing features around the controllers of headsets, but now they are turning to gesture operations, and so on. Finally, the development of the native content ecosystem of virtual reality is expected to be further accelerated.
The IDC report points out that although 2023 will be another year of decline in sales of virtual reality head display devices, it is predicted that the market is expected to rebound in 2024, thanks to new hardware products such as Meta and PICO, as well as the entry of Apple Vision Pro into the market and the continuous growth of startups. By 2027, global virtual reality device shipments are expected to reach 30.3 million units. Ramon T. Llamas, Director of Research on Mobile Devices and AR/VR at IDC, pointed out that Apple's entry will bring much-needed attention to this niche market and force other companies to compete in different ways. For some companies, it will inevitably be a direct confrontation with Apple; For other participants, it means they need to establish a moat in specific niche areas. In some cases, both situations may exist.
According to the "Action Plan for the Integration and Development of Virtual Reality and Industry Applications (2022-2026)" jointly issued by the Ministry of Industry and Information Technology, the overall scale of China's virtual reality industry (including related hardware, software, applications, etc.) will exceed 350 billion yuan by 2026, and the sales of virtual reality terminals will exceed 25 million units, cultivating 100 backbone enterprises with strong innovation capabilities and industry influence.
It is evident that national and local governments have successively introduced relevant favorable policies or documents in the virtual reality industry. At the industry level, Apple Vision Pro will officially enter the market in 2024, and Meta Quest is expected to enter the domestic market. In addition, with the increasing number of players, the virtual reality field is expected to usher in a new situation. At the same time, it is worth paying attention to whether the AI big models and generative AI that will become popular in 2023 will open up new market space for virtual reality. Cui Haitao, CEO of Gudong Technology, pointed out that whether it is for the C-end or B-end, it is important to find the essential scenarios and approach customer expectations for cost-effectiveness and user experience. It is not difficult to see that virtual reality, after experiencing several rounds of hot and cold tempering, clearly needs to continue to fight a protracted war.