Electronic Enthusiasts Network reported (text/Mo Tingting) On June 22, Tianfeng International analyst Ming-Chi Kuo tweeted that Meta cut its 2022 Metaverse hardware shipment forecast by 40%, from the original 10 million- 11 million units dropped to 7-8 million units. He also mentioned that Meta will delay all new headset/AR/VR hardware projects after 2024.

Meta, as a leading company in the VR industry, Guo Mingqi’s prediction made people in the industry worry about the development of the VR industry. The “Metaverse Concept” sector fell 1.55%. Goertek, Weir, Luxshare and other VR industries Shares of companies on the chain also fell.

Interestingly, Ming-Chi Kuo corrected his forecast the next day, saying that the previous forecast was based on investigation and judgment, and was his personal forecast, not official data. The corrected content is: Guo Mingqi predicts that Meta’s Metaverse hardware/headphone shipments will be reduced by 25-35% in 2022. In addition, Guo Mingqi also predicted that the number of orders in the second half of this year will decrease.

Today’s Metaverse is like being in a “turbulent period,” where a gust of wind can cause waves, which then return to calm. Although Guo Mingqi corrected his forecast for the second time, Meta still lowered its order volume overall. This can’t help but make people pay attention. What stage is the VR industry in this year, what is Guo Mingqi’s judgment based on, and where will the Metaverse develop in the future?

Short-term consumption downgrades, Meta has to adapt to the market rhythm

Looking back on 2021, the influx of industry giants and the participation of capital will make the VR industry develop rapidly. Brand manufacturers have also launched different entry-level new products and are developing towards high-performance products. According to IDC’s latest report, global AR/VR headset shipments in 2021 will increase by 92.1% year-on-year to 11.23 million units; the total investment in the global AR/VR industry is close to $14.677 billion, and IDC expects it to increase to 74.3 million in 2026. One hundred million U.S. dollars.

Optimistically, the VR/AR market will continue to grow steadily. After the concept of “metaverse” appeared, Meta was almost the most radical company in the industry. On June 21, Meta showed 4 VR prototypes, codenamed Butterscotch, Starburst, Holocake 2, and Mirror Lake. There are improvements in various aspects such as rate/HD display, HUD, brightness, size, etc. In addition to releasing VR prototypes, Meta has also publicly disclosed its progress in the Metaverse through video on several occasions.

In this case, why did Meta decide to cut orders, and does the VR/AR business bring profits to Meta? The author believes that the reason why Meta decided to cut orders is because Reality Labs has increased losses on the one hand, and on the other hand, it may be because of its reduction in subsidies, which has also lowered market expectations.

In terms of company profitability, Meta has continued to increase R&D investment in the VR/AR business, but the financial report in 2021 is not as good as expected, and the industry that Zuckerberg is devoted to building still failed to achieve profitability. Meta’s Reality Labs division is mainly responsible for researching VR/AR technology, and its VR devices include Meta Quest. The financial report shows that from 2019 to 2021, Reality Labs is in a loss state, and the decline is increasing year by year. The losses in 2021, 2020, and 2019 are about 10.19 billion US dollars, 6.62 billion US dollars, and 4.5 billion US dollars, respectively. The net loss in 2021 is 150% of 2020.

Reality Labs lost a lot of money, and the Oculus VR headset became a product line that turned the tide. In 2021, Oculus VR headsets will bring in $2.3 billion in revenue. Today, Meta announced that it will cut orders. With the decrease in order volume and the increase in R&D investment, the contribution of Oculus VR headsets to Reality Labs may change?

In terms of subsidies, due to inflation and economic recession, American technology companies have opened up and reduced expenditures, including Meta. Recently, Meta decided to cut spending on its hardware and Reality Labs, including slowing down staff recruitment, suspending or postponing the implementation of some projects, and more. In the 2021 earnings report, Meta also mentioned, “While our Reality Labs products and services may require more infrastructure capacity in the future, they do not require a large amount of capacity today, so they are not significant for 2022 capex drivers.”

If the inflationary pressure has not eased, the consumer market will also face the same pressure, and “consumption downgrade” has become a short-term market phenomenon. Therefore, if Meta is decided to cut orders, it is also a way to adapt to the current development rhythm of the VR industry.

Breaking through the technical bottleneck, the future of the VR/AR industry will improve

VR/AR is the entrance to the metaverse, and the current development trend will also affect the future development of the metaverse. Soochow Securities believes that the Metaverse needs to develop at the same time with the improvement of chip computing power, the popularization of software design engines, the facilitation of interactive devices such as XR (VR/AR/MR), and the continuous enrichment of blockchain technology and application ecology. close to the ideal form.

This means that before the official arrival of the Metaverse, VR/AR devices will have to improve their hardware capabilities, coupled with a comprehensive upgrade of software capabilities, in order to promote VR/AR devices from the B-side to the C-side. Industry insiders believe that the VR industry has reached an inflection point, AR equipment has made progress in the B-end, and it is expected that the implementation of C-end consumer products will also accelerate.

From the perspective of the VR/AR industry chain, upstream components include optical and display modules (optical lenses, display screens, cameras, etc.), computing modules (chips, etc.), acoustic modules (speakers, etc.), interaction modules (sensors, etc.), etc. As can be seen from the dismantling diagram of Quest2, chips and display optical modules are important hardware in VR devices. Chips account for nearly 50% of terminal equipment, followed by display modules, including LCD and OLED, accounting for 20%. ——25%, and the proportion of optical modules such as lenses and cameras has also reached 6%——10%.

In view of the future advanced direction of VR equipment, Meta has brought different degrees of upgrades to the prototypes of the four headsets. According to the official introduction, Butterscotch is equipped with a retina screen with a resolution of 2.5 times that of Quest 2; Starburst uses an optical solution of LCD screen + high-intensity backlight, which supports 20,000 nits of brightness. If the research and development results, it may have HDR function; Holocake 2 is a technical solution that uses holographic optics. The biggest highlight is lightweight. From the public prototype, Meta makes the front end of the VR headset the same thickness as smart glasses; as for Mirror Lake, it is still a concept product, and it is expected to use holography. Optical display technology with ultra-high resolution, etc.

The iterative demand for the new headset displayed by Meta focuses on optical display, which is also the most concerned consumer demand for the next-generation VR headset. Michael Abrash, chief scientist at Reality Labs, said, “Mirror Lake shows what the next generation of display systems will look like.” Zuckerberg also said that Meta is also confirming which technology paths are worth studying in depth.

For the above four new products, Meta did not mention the mass production time, and said that it is still far from mass production. It can be seen that technology is still one of the bottlenecks in the development of the VR/AR industry.

At present, a variety of VR headsets and AR glasses have been launched on the market, including Oculus, Steam VR, Vive Port, Pico, Skyworth, etc. But before a consumer market can start, in addition to brand manufacturers, more competitors are needed to join.

In terms of price, terminal prices continue to drop. For example, PicoNeo3, which will be launched in 2021, starts at 2,499 yuan, which is nearly 45% lower than that of PicoNeo2, which was launched a year ago. Compared with its Qiyu 2Pro released in 2020, the price is 49% lower.

In terms of experience, screen resolution, refresh rate improvement, picture quality improvement, and display latency reduction are all important product performances. In addition to the above-mentioned brand manufacturers, the author researched some niche brands in the market and found that many VR headsets still have the problems that the front end of the headset will heat up and the volume is too large. The AR glasses are still in the stage of gradually opening the market, and the application scenarios include business office, AR navigation, etc. The author believes that the premise of the popularity of VR/AR is not only the price drop, but also the convenience of wearing and the richness of the usage scenarios.

Although the VR/AR market still needs to be further opened up, industry insiders believe that in the sluggish market, after Meta has lowered its order volume, the overall order volume is still strong, and we can see the rapid development of the VR industry, predicted by Guo Mingqi. The resulting market “shock” can also reflect people’s attention to the VR industry. When the consumer market gradually picks up, the domestic VR/AR track will become more and more crowded, and participants will have a share of the VR/AR market.

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