IDC predicts slow sales for virtual, augmented reality headsets

Amidst tough economic environment and rising prices, research firm International Data Corporation (IDC) predicts that augmented reality (AR) and virtual reality (VR) headsets will decline by 12.8% in FY-2022-23, dropping to 9.7 million units. 

That may be bad news for tech players like Apple, Meta, HTC and others who have their line-ups in the coming months. HTC has already said it will announce a lightweight AR/VR headset in just a few weeks at CES, set to give a tough competition to Meta Quest Pro. And Apple is expected to jump into VR / AR by revealing its own high-end headset next year. 

On a positive note however, the research firm said that growth is expected to return in 2023 as shipments are forecast to jump 31.5% year over year. Sustained growth of more than 30% is also forecast for the next few years culminating in 35.1 million units shipped in 2026, it said. 

When looking at companies that operate within the market, IDC says Meta has long dominated the industry due to the reasonably priced Quest 2, which has captured 84.6% of the global AR/VR headset market during the first three quarters of 2022. The next closest competitor listed was ByteDance's Pico, with 7.4% share over the same period. The top three list is rounded out by DPVR (1.8%), HTC (1.1%), and iQIYI (0.9%). However, IDC says each of these companies will face challenges next year as Sony's next-generation headset launches and Apple also enters the market. 

"With the Quest 2 price increase and premium pricing expected for the PSVR2 and Apple's headset, consumers will likely be more reticent with their spend in the near term," said Jitesh Ubrani, research manager, Mobility and Consumer Device Trackers at IDC.  

"However, commercial growth will outpace the consumer segment in the coming years as businesses deploy VR headsets for training and other use cases and as new headsets begin to bleed into the AR territory by offering pass-through capabilities," Ubrani added. 

Despite a struggling 2022 with losses incurred, Meta’s CTO and Reality Labs head Andrew Bosworth said in a blog post earlier this week that the company is currently putting “about half” of Reality Labs’ operating expenses toward AR. That said, IDC believes AR is facing the heat as large brands such as Shadow Creator, Mad Gaze, and even Microsoft have struggled to sustain growth. While challenges will occur, IDC also says this will create opportunities for next-generation headsets as well as new competitors to enter the AR market, although this is likely to happen in 2024 at the earliest and 2025 in earnest. Ramon T. Llamas, Research Director, Mobile Devices and AR/VR at IDC, says AR will become more advanced and sophisticated, leading to a more seamless transition and wider utilisations across the board. "Augmented reality has long been the domain of standalone headsets geared towards commercial use, helping to transform the way companies train their workers," he said.