Virtual Reality: How Apple, Meta may ‘save’ China’s suffering virtual reality market

China’s virtual reality (VR) market has encountered a significant setback, with shipments plummeting by 56% year-on-year (YoY) in the first half of 2023, marking the end of a two-year growth streak, according to the latest data from Counterpoint’s China eXtended Reality (XR) research service.
This decline, more severe than the global VR market’s 39% YoY drop in the same period, has relegated China’s share of global VR shipments to just 10%, a substantial drop from its former 20%-30% market share in the smartphone industry.
The waning demand in China can be attributed to several factors. Firstly, leading VR player Pico’s scaled-back marketing efforts since 2023 have impacted sales, following its acquisition by ByteDance in 2021. The absence of compelling applications and a robust content ecosystem in the Chinese VR industry also hinders adoption.
The competitive landscape reflects consolidation, with Pico holding a dominant market share of approximately 50%, although it too experienced a YoY decline of over 50% in H1 2023. Sony managed a 19% market share following the success of PSVR 2, though a slowdown is anticipated in the second half of 2023. DPVR leads in the enterprise segment due to competitive pricing but faces challenges as digital transformation spending slows.

Buzz about Apple Vision Pro

Despite the gloomy sales figures, Apple’s upcoming MR headset, the Vision Pro, has generated immense buzz in the Chinese tech industry, inspiring local companies to invest in R&D and bridge the technological gap with Apple.
Chinese smartphone OEMs are alsoreportedly re-evaluating their stance on AR/VR headsets, as they face the risk of falling behind in the “spatial computing” era. Internet giants like Tencent are re-entering the arena, with Tencent reported to be in discussions with Meta regarding a partnership to localize the Quest VR and integrate Meta’s content ecosystem in China.
China’s augmented reality (AR) companies are experiencing robust YoY growth in the AR glasses market, driven by the emphasis on Mixed Reality (MR) features by Apple’s Vision Pro. In the software domain, Apple’s Developer Lab in Shanghai has started hosting Chinese developers, invigorating the Chinese application ecosystem for MR headsets.
However, the Vision Pro’s $3,500 price tag and unique user experience pose challenges for Chinese hardware players. Meta’s Quest 3 headset, based on Qualcomm’s XR 2 Gen 2 platform, presents a more attainable benchmark for Chinese companies in the short term, with opportunities for improvement.
The competition between Apple and Meta is expected to expedite a deal between Tencent and Meta in the Chinese market, enhancing the sales and adoption of XR products in China.