The landscape of consumer technology is rapidly evolving, especially with the rise of augmented reality (AR). In the first half of 2024, the domestic sales of consumer-grade AR devices soared by an impressive 49% year-over-yearThis growth not only highlights a solid market acceptance of AR technology but also indicates that the AR industry may be gearing up for a significant breakthrough.
The merging of artificial intelligence (AI) with AR technologies is seen as the next potential blockbuster in the consumer electronics sectorAmong the various portable wearables, AR glasses are considered the optimal platform for deploying AI functionalitiesHowever, this symbiosis faces several hurdles, including high technical costs, user privacy concerns, and the need for standardized technologiesSuch challenges require collaborative efforts from industry players to address them effectively.
Surging Sales of Consumer-Grade AR Devices
Over recent years, advancements in technology have paved the way for the consumer-grade AR market to enter a period of rapid development
The first half of 2024 has witnessed a noteworthy surge in sales, making it a spotlight in the tech industry.
According to a report released on August 26th by RUNTO Technology, titled "China VR/AR Devices Retail Market Monthly Tracker," the total sales volume of consumer-grade XR (including both AR and VR) devices across all channels in China reached 261,000 units, reflecting a year-on-year decrease of 20.4%. Among these, AR devices constituted the primary growth driver with a 49% increase in sales.
The AR market has consistently demonstrated stable growth in the first half of this yearRUNTO's online monitoring data reveals that from January to June, monthly sales of AR products were on the rise compared to the same period last yearNotably, June alone recorded a remarkable 60% surge in sales, achieving a monthly total of 22,000 units—the highest in the first half of the year.
This upward trend not only illustrates the vast potential of the AR market but also signifies the current development trajectories within China's AR industry
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The notable uplift in AR sales can be attributed to various converging factors.
Firstly, advancements in display and interaction technologies, such as the maturity of Micro OLED and Birdbath solutions, along with the rapid penetration of Micro LED and optical waveguide technologies, have significantly enhanced the user experienceSecondly, the growing number of AR technology applications across different sectors has increased public awareness and interest in AR products.
Additionally, leading companies in the sector, like XREAL, have been releasing innovative AR products tailored for a range of scenarios and needs, such as split-type and all-in-one AR glasses, meeting diverse consumer demandsFurthermore, several AR firms have secured substantial funding, facilitating both technological R&D and marketing outreach.
In contrast, the VR (virtual reality) market shows signs of stagnation
Since the latter half of last year, AR sales have outstripped those of VR in online marketsBy the first half of this year, AR held a 55.5% share of the overall XR online market, compared to just 30.6% during the same time last yearNotably, VR sales decreased by 41% year-on-year in the first half of 2024, starkly contrasting with the booming AR market.
This discrepancy arises primarily from differences in application scenarios and the maturity of the respective technologiesVR requires the creation of a fully virtual environment, demanding higher computational power and advanced display technologies—factors that limit its further developmentOn the other hand, AR, with its inherent flexibility and ability to integrate with the real world, finds a broader range of applicable scenariosTechnologically, AR has made noteworthy progress in miniaturization and integration, whereas VR still faces challenges in achieving greater portability and accessibility.
Currently, the domestic AR market is characterized by a distinct trend of consolidation among leading players
RUNTO's online monitoring data shows that in the first half of 2024, the "Four Little Dragons" of AR—Thunderbird Innovation, XREAL, INMO, and Rokid—accounted for a cumulative market share of 89.2%. Among them, Thunderbird Innovation led with a 37.3% online market share, followed closely by XREAL with a 32.3% market share.
Clearly, the progress in AR technologies, expanded applications, along with policy support and investor interest, have collectively spurred rapid growth within the AR market.
Competition Among Leading Enterprises
In the new round of competition within the consumer-grade AR market, domestic leaders like XREAL are continuously redefining market expectations and consumer perceptions of AR through the rollout of innovative new productsThis competition not only aims at capturing market share but also showcases the innovation and potential inherent in the industry.
The first half of 2024 witnessed a wave of new AR product launches from several leading companies, including Thunderbird Innovation, XREAL, INMO, and Rokid, all of which unveiled their latest offerings
Thunderbird Innovation showcased the Air 2s "Tantalizing Mirror," while XREAL introduced the Air 2 Ultra and the Beam Pro spatial computing terminalINMO launched the Air 2 and INMO GO, and Rokid presented the AR Lite spatial computing kit—each representing the forefront of current AR technology.
Taking XREAL as an example, the company has focused on consumer-grade AR glasses since its inception in 2017. It has continually invested in key technological areas such as display, sensing, and interactionOn July 31, XREAL launched the Air 2 Ultra in the domestic marketThis model features dual environment sensing hardware and software SDKs, enabling high-precision, low-latency 6DoF spatial positioning and gesture interaction, heralding a new chapter in AR interaction experiences.
Additionally, XREAL released the Beam Pro, a spatial computing terminal that operates on Nebula OS, specifically designed for spatial computing, capable of presenting vast mobile app content on a spatial large screen, seamlessly transitioning from 2D to 3D
This device not only offers high portability but is also compatible with the Android ecosystem, providing a top-tier spatial experience while doubling as an image collection and shooting tool.
In terms of market expansion strategies, XREAL adopts a multi-faceted approachIt emphasizes the needs of B2B clients, offering customized services that meet high standards in device management, after-sales support, and technical assistanceConcurrently, it actively explores the consumer market, enhancing user experiences to promote the wider adoption of AR glassesCollaborating with global operators, XREAL has successfully penetrated multiple international marketsAccording to IDC, in 2023, XREAL's Air series of AR glasses held a commanding 43% share of the global consumer-grade AR glasses market, ranking first.
XREAL’s ecosystem development strategy encompasses a "3+1" approach that maximizes the utilization of existing spatial imaging and mobile ecosystem content while providing SDKs to lower development barriers, thus encouraging more developers to participate in building the AR ecosystem and co-developing native AR content.
In its AI integration efforts, XREAL balances exploration with cautious evaluation, embedding AI into aspects such as gesture control and environmental perception to enhance AR glasses' performance and user experience.
However, domestic AR companies also face significant challenges
The high application of advanced technologies may lead to increased product costs, creating pricing issues for price-sensitive consumersMoreover, AR, as an emerging market, necessitates considerable investment in consumer education and market cultivationLastly, with the rise of AR technologies, many international giants are now positioning themselves in this domain, leading to intensified international competition for companies like XREAL.
As a leader in the AR sector, XREAL has established a competitive advantage globally through continuous technological innovation and market expansionYet, in light of advancing technologies and intensifying competition, XREAL must persist in its focus on R&D, market education, and ecosystem development.
The Inevitable Trend of AI + AR?
Amid the digital revolution, the integration of AI with AR is driving a new wave of transformation in the consumer electronics field
The evolution of technology, from smartphones to smart glasses, continually broadens the boundaries of human interaction with the digital realm.
AR, as a portable and wearable device, provides a more natural and intuitive interaction method, thereby emerging as an ideal platform for implementing AICurrently, the application scope of AR glasses has expanded from simple viewing and information display to complex scenarios including information retrieval, meeting notes, navigation, gaming, and more.
Technologically, AI + AR glasses can offer richer interaction experiences, employing technologies such as voice recognition, gesture detection, and eye-tracking for multi-modal interaction with usersInternational giants like Meta and Google, along with domestic firms like XREAL and Thunderbird Innovation, are actively developing and rolling out AR glasses equipped with AI functionalities.
While the AI + AR glasses market remains in its nascent stage, the potential of AI technology, combined with the portability and multifunctionality of AR glasses, positions it as the next potential blockbuster in the consumer electronics marketplace
Especially with the maturation and cost reductions of optical waveguide technologies, lighter and smarter consumer-grade AR glasses are anticipated to accelerate adoption, catalyzing growth in the consumer market.
RUNTO predicts that the total sales of AR devices across all channels will reach 281,000 units in 2024, marking a nearly 40% year-on-year increaseIt is foreseeable that "AI + AR" will become the linchpin driving product development.
Domestic suppliers are set to benefit from this trend, particularly those operating at the core of the supply chainXREAL views AR glasses as one of the ideal platforms for the application of AI technologies, enabling users to access first-person visual and auditory information for more direct human-computer interactionFor instance, the Beam Pro, which encompasses a "mobile application ecosystem + limitless home entertainment streaming + spatial imaging" is deemed XREAL’s exploratory practice in the AI + AR realm.
RUNTO posits that the fusion of AI and AR will expedite the transition of smart glasses from merely audio-visual entertainment devices to sophisticated tools capable of performing smartphone functions—enhancing the performance and user experience of AR glasses while broadening their application scenarios.
Nevertheless, the path to developing AI + AR is littered with challenges