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Forecast: AR/VR headset sales to return to growth

June 20, 2024

Global shipments of augmented reality and virtual reality (AR/VR) headsets declined 67.4 per cent year over year in Q1 2024, according to data from the International Data Corporation (IDC) Worldwide Quarterly Augmented and Virtual Reality Headset Tracker.

The decline in shipments was expected as the market transitions to include new categories such as Mixed Reality (MR) and Extended Reality (ER). Despite the decline, the average selling price (ASP) rose to over $1,000 as Apple entered the market and incumbents such as Meta focused on premium headsets such as the Quest 3.

IDC recently revised its taxonomy, incorporating two new categories: MR which occludes the user’s vision but provides a view of the real world with outward facing cameras, and ER, which employs a see-though display but mirrors content from another device or offers a simplistic heads-up display.

Meta again led the market in Q1 2024 in terms of share, while Apple’s recent entry into the market enabled it to capture the second position. ByteDance, Xreal and HTC rounded out the top 5. Both the Quest 3 and the Vision Pro helped educate users and enticed developers to create mixed reality content, blending the digital and physical worlds. Unfortunately, this has come at a premium for users.

“With mixed reality on the rise, expect strictly virtual reality headsets to fade in the coming years as brands and developers devise new hardware and experiences to help users eventually transition to augmented reality further down the line,” said Jitesh Ubrani, research manager, Worldwide Mobile Device Trackers at IDC. “Meanwhile, extended reality displays are set to garner consumer attention as they offer a big screen experience today while incorporating AI and heads-up displays in the near future.”

Although ASPs for the overall market crested above the $1,000 mark, this is not representative of all products.

“ASPs for augmented reality (AR) headsets have almost always been above this price point, but ASPs for VR, MR, and ER headsets have typically been lower,” said Ramon T. Llamas, research director with IDC’s Augmented and Virtual Reality team. “Apple’s Vision Pro drove ASPs higher for MR headsets, but the addition of lower cost devices from Meta and HTC have kept those ASPs from going much higher. Meanwhile, there were many devices for VR and ER priced below $500.

“Looking ahead, we anticipate ASP erosion across all products,” Llamas added. “Because the overall market is still in its early stages with more expensive first- and second-generation devices, prices will be high even as early adopters buy them. In order to reach scale in the mass market, vendors will need to reduce prices on later and upcoming devices.”

IDC forecasts headset shipments will return to growth later this year with volume growing 7.5 per cent over 2023. Newer headsets and lower price points will help with the turnaround expected later this year. Beyond that, headset shipment volume is expected to see a compound annual growth rate (CAGR) of 43.9 per cent from 2024–2028.

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