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Metaverse Devices and Semiconductors
VR/AR Devices-Tech companies are racing to launch the most compelling headset
Designing a new hardware platform is challenging, especially considering VR/AR devices are used to support a new generation of human-machine interaction which happens in an immersive, three-dimensional world. We are still in the early stages of interface design, and VR/AR device performance will improve significantly over the next decade with new technology and rapid evolution in design iterations.
We can draw a comparison to the success of smartphones whose golden era in 2010 was supported by the development of many different technologies, from high-speed mobile internet (4G), semiconductor technology migration, to display technology. The success of AR/VR will also depend on the development of technologies that will make a compelling, practical end device possible.
Global AR/VR headsets shipment is expected to reach 42 mn units by 2025, or US$12.6 bn market, representing 48% shipment CAGR and 36% revenue CAGR over 2020-25. (IDC, CS estimates, 2021) We expect the adoption of AR/VR devices to increase, driven by improvement in hardware performance, development in software ecosystem and platforms, and new applications for AR/VR devices.
We see two main groups of players in the hardware space for metaverse devices. One group is large technology companies like Meta, Microsoft, Apple, ByteDance, etc. The other group is start-ups or smaller tech companies like Magic Leap, HTC, realwear, etc.
Oculus has been one of the most successful hardware products in AR/VR devices. The Oculus Quest 2 continues to be a key unit driver of the industry. Before the launch of Oculus Quest 2 in 4Q20, the industry struggled to get traction with various headset designs.
Sony PlayStation VR
Sony’s PlayStation VR2 system and PS VR2 Sense controllers at CES (Consumer Electronics Show) 2022 is a tethered headset leveraging computing power from the PlayStation to power the headset. Sony aims to increase the penetration of this new generation VR in PlayStation since the first generation only recorded around 6% penetration in PS4.
AR headset HoloLens 2 was released in 2019, and HoloLens 3 is expected to be released in 2024. The company currently focuses on enterprise applications with the HoloLens, considering the high price of the HoloLens 2 (US$3,500). However, given the strong content portfolio of Microsoft, we believe it has the right resources to enter the consumer VR/AR space. Key applications of the Hololens include manufacturing, engineering, healthcare and education.
Improvement in Semiconductor Technology to enable user experience breakthrough
Connectivity – Wifi 7: The industry is on track to deliver wifi 7 products in 2023. High-speed WiFi 7 technology will provide 30Gbps data transmission speed, which is 3x faster than the WiFi 6 (adopted by Oculus Quest 2). This will enable higher resolution and real-time experience on VR/AR devices. MediaTek and Broadcom are industry pioneers for WiFi 7.
Performance/power efficiency – foundry node migration: Migration in semiconductor technology will allow companies to design faster chips with lower power consumption and higher transistor density. This is crucial for high-performance graphics on portable devices. VR/AR workloads are challenging as they are compute-intensive, complex concurrencies and real-time.
The Qualcomm Snapdragon XR2 5G Platform is the core chip that currently powers the majority of the standalone VR/AR devices in the market, supporting 8K 360° video, 5G connectivity and seven camera inputs. IC design companies will continue to work with foundries to improve the performance of future platforms.
Cloud computing infrastructure: The metaverse has enormous potential to further expand or divert screen time (Americans average 10+ hours/day on media, including 3+ hours on TV) (CS estimate, 2022) and drive more bandwidth consumption. Internet traffic is already 80% video and has been growing at a 30% CAGR. (CS 2022) Building the metaverse will require powerful graphics and cloud computing infrastructure to house such a complicated platform and contents. We therefore see structural demand to invest in the build-out and upgrade of data centres, benefiting companies like Nvidia, AMD, etc.
Eye tracking, environment reconstruction- CIS (CMOS image sensor): Companies like Will Semi develop CIS solutions for VR/AR devices. Image sensors are required for eye-tracking, motion tracking as well as recreating environments in VR devices. Will Semi's CIS is already adopted in the Oculus with around US$10 content per box. (MS, 2021)
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