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Worldwide headset shipments fell greater than 30% year-over-year in the primary quarter.
Virtual reality (VR) and augmented reality (AR) have been hot buzzwords within the tech market over the past few years. Facebook (FB 1.24%) got the ball rolling with its acquisition of Oculus VR in 2014, Alphabet‘s (GOOG 2.48%) (GOOGL 2.46%) Google introduced low-cost VR for smartphones with Cardboard later that 12 months, and Samsung launched a higher-end VR smartphone experience with Gear VR in 2015.
In 2016, Microsoft (MSFT +1.90%) introduced its HoloLens AR headset, and Google-backed Niantic Labs set the mobile AR market on fire with Pokémon Go. Many similar hardware and software products followed, and an increasing variety of analysts proclaimed that VR and AR would turn into the following big computing platforms.
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But by 2017, much of the euphoria had faded. High-end headsets just like the Oculus Rift and HTC Vive remained pricey and cumbersome toys for tech enthusiasts. Mainstream consumers who dabbled with Cardboard or Gear VR didn’t see compelling reasons to purchase higher-end devices. With a price tag of $3,000, HoloLens remained restricted to developers, and it’s still unclear if a less expensive consumer version will ever arrive.
Worldwide shipments of AR and VR headsets fell 30.5% annually to just 1.2 million units in the course of the first quarter of 2018 in response to IDC’s latest numbers. The firm attributes that massive drop to the unbundling of free VR headsets with high-end smartphones, which was a typical strategy last 12 months. So are the AR and VR markets already dying? Or are they merely taking a breather before higher devices rope in additional consumers?
IDC thinks the AR and VR markets will get well
IDC admits that despite a “poor start” to 2018, it still expects the AR and VR headset markets to “return to growth over the rest of the 12 months as more vendors goal the industrial AR and VR markets.” In particular, it believes that cheaper stand-alone headsets just like the Oculus Go, which does not require a smartphone or high-end PC, will generate more mainstream interest.
IDC believes that Microsoft’s recent Mixed Reality headsets — that are made by OEMs like HP, Dell, and Lenovo — should boost headset sales amongst enterprise customers. In the AR market, IDC thinks headsets just like the HoloLens and Magic Leap’s One “will help drive adoption within the industrial and consumer markets.” It also sees recent developer platforms, like Apple’s ARKit and Google’s ARCore, bringing more apps to AR devices.
IDC believes that AR and VR headset shipments will rise 6% to eight.9 million in 2018, then proceed growing toward 65.9 million units by 2022. Within that total, it expects stand-alone and PC-tethered AR headsets to guide the charge with triple-digit compound annual growth rates between 2018 and 2022.
Image source: Getty Images.
Time for a reality check
IDC’s quarterly shipment estimates are well-respected, but its predictions about future tech trends have been hit-and-miss. After all, this is identical firm that declared in 2011 that Windows Phone would claim 21% of the smartphone market in 2015, followed by BlackBerry at 14%. Both corporations control lower than 1% of the smartphone market today.
As for the AR and VR markets, IDC’s forecast seemingly ignores some red flags. AR headsets are useful for certain staff who can use heads-up displays for real-time information and distant assistance, but only just a few corporations will buy them in bulk like regular PCs or mobile devices. It’s also generally easier to run software on a PC or smartphone as an alternative of putting on a headset and learning recent gestures and commands.
Meanwhile, Google-backed Magic Leap’s disappointing tech demo for its Magic Leap One headset, which featured a crudely rendered golem tossing rocks, was hailed as a possible “death knell” for the AR market by Futurism. In March, Sensor Tower reported that only about 2,000 ARKit-only and ARKit-compatible apps were available in Apple’s App Store.
As for VR devices, Sony (SNE +4.64%) PlayStation chief John Kodera recently stated that the expansion of the VR market remained “below market forecasts” at an investor meeting. Recent price cuts on the Oculus Rift, Vive, and PlayStation VR all indicate that headset makers are eager to sell more devices. Lastly, the unbundling of free VR headsets from smartphones indicates that customers simply aren’t that fascinated with VR apps.
But corporations aren’t giving up
The big drop in headset shipments in the primary quarter is a red flag for AR and VR corporations. I feel AR and VR headsets could still appeal to hardcore gamers and certain enterprise users, but mainstream adoption could remain elusive as PCs and smartphones remain cheaper primary computing devices. Therefore, investors needs to be wary of any company that bets too heavily on the expansion of those two fledgling markets.
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